Holcim announces merger with Ambuja Cements

Cement giant Holcim announced on Wednesday that it would increase its stake in Ambuja Cements Ltd as part of a restructuring of its operations in India.

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Holcim will increase its shareholding in Ambuja to 61.39 percent from the current stake of just over 50 percent, the Zurich-based firm added. Ambuja Cements will issue 58.4 crore shares to Holcim in a proposed merger swap ratio of 6.6 Ambuja shares for 1 ACC share.

Ambuja will in turn acquire Holcim's 50.0-percent stake in ACC Ltd. Both Ambuja and ACC will continue to operate as separate entities.

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"The transaction is expected to be neutral on Holcim's earnings per share in the first full year following the completion of the transaction and accretive thereafter", said Holcim chief executive Bernard Fontana.

According to terms of the deal, Ambuja Cements will acquire a 24-percent stake in Holcim India for Rs 3,500 crore and Holcim India will be merged into Ambuja via an all-stock merger.

Citi has been appointed as advisor to Holcim while Axis Capital is the advisor to Ambuja Cements.

CNBC-TV18’s Sajeet Manghat reports a lot of bankers involved in the deal argue that the it is not a premium deal. However, from the perspective of a Ambuja Cement’s shareholder, the cost of this deal is around Rs 14, 600 crore when the current market cap of ACC is around Rs 23. 000 crore.  That means that the deal is at a premium to the current market price and the Indian shareholder is paying a much higher premium.

But from the perspective of a Holcim shareholder, the 9.76-percent stake in Gujarat Ambuja being valued at Rs 11,000 crore will be cancelled and the net cash and stock that he receives is at the same price at which the 50-percent stake is valued today.

(With inputs from Reuters)