CNBC-TV18 Exclusive: ACC, Ambuja Cements to merge, say sources

LafargeHolcim, the parent company of ACC and Ambuja, is mulling a merger of the two cement majors, sources told CNBC-TV18.LafargeHolcim owns 63 percent in Ambuja Cements. In November last year, the parent company had increased its stake in ACC and Ambuja Cements by 4 percent and 2 percent respectively.

The merger has been on the cards since 2013, when LafargeHolcim opted for a major rejig. The parent company took a stake in Ambuja Cements, which in turn owns a 50.05 percent stake in ACC.LafargeHolcim said it did not wish to comment on speculation, but sources tell CNBC-TV18 that the merger is likely to happen in the next one year. There is no clarity yet on the merger ratio.In June last year, LafargeHolcim struck a deal to divest assets previously under Lafarge India. LafargeHolcim had agreed to sell Lafarge India Pvt Ltd to Nirma Ltd for Rs 9,400 crore including debt, as part of a deal to complete the India leg of the global merger of Lafarge and Holcim. Given that ACC has an EBITDA of Rs 300 per tonne and Ambuja has an EBITDA of nearly Rs 800 per tonne, ACC would be a bigger beneficiary should the merger go through.

Navin Sahadeo of Religare Capital Markets said the merger would help unlock synergies. He said merging the companies would significantly help in terms of fixed cost rationalising and volume swapping.

Rakesh Arora, an independent analyst, said the merger would be logical in terms of synergy of cost branding, logistics, distribution, and tax savings. He said that it doesn’t make sense for HolcimLafarge to have two to three companies in India.