Ambuja Cements, Orient Cement shares jump up to 10%, ACC in red after merger announcement: Here's what brokerages say

Cement stocks

The shares of Ambuja Cements and Orient Cement jumped in trade on December 23 on bullish brokerage calls after the firms announced that board has approved the scheme to merge the two Adani Group companies. ACC shares meanwhile slipped into the red.

Ambuja Cements shares sharply rose more than 4 percent to trade at Rs 563.50 apiece, the highest level seen by the stock in more than a month. Orient Cement shares jumped nearly 10 percent to trade at an one-month high level of Rs 179 apiece. The two cement stocks have now extended gains for the third consecutive session.

ACC shares meanwhile fell nearly 2 percent to trade at Rs 1,752 apiece in the morning.

What Ambuja-ACC-Orient merger means for shareholders?

Ambuja Cements said that after the merger, the eligible shareholders of ACC will receive 328 shares of Ambuja Cements for every 100 ACC shares they own. Hence, the share swap ratio for Ambuja Cements-ACC merger stands at 328:100.

The eligible shareholders of Orient Cement will receive 33 shares of Ambuja Cements for every 100 Orient Cement shares they own. Hence, the share swap ratio for Ambuja Cements-Orient Cement merger stands at 33:100.

The record date for the merger schemes are yet to be announced.

Morgan Stanley on Ambuja Cements:

Morgan Stanley remained 'Overweight' on Ambuja Cements, with a target price of Rs 650 per share. This implies an upside potential of more than 20 percent from the previous closing price of Rs 539.95 apiece.

The international brokerage said that the cement major's share swap ratio of 328:100 with ACC and 33:100 with Orient Cement is neutral for ACC minority shareholders and a positive for Orient's minority shareholders.

According to the company, synergies will drive operational efficiencies, unlocking at least 100/t in cost improvements, it said, adding that this is being viewed as a positive development as it removes the overhang of managing multiple listed.

CLSA On Ambuja Cements and ACC:

CLSA said that the amalgamation of ACC and Orient Cement with Ambuja Cements is expected to deliver around 10 percent value accretion for shareholders. It noted ACC's sharp discount and prolonged underperformance versus Ambuja support value accretion for Ambuja shareholders.

It kept an 'Outperform' call of the shares of Ambuja Cements, with a target price of Rs 680 per share. This implies an upside potential of nearly 26 percent from the stock's previous closing price.

The international brokerage meanwhile kept a 'Hold' call for the shares of ACC, with a target price of Rs 2,035 per share. This implies an upside potential of more than 14 percent from the stock’ previous closing price.

Emkay sees this transaction as neutral with a slight negative bias for ACC shareholders while mildly positive for Orient shareholders

JPMorgan meanwhile said that pan-India operations should help Ambuja Cements optimise costs and improve sale of more premium brands over time company expects to operate both the Ambuja and ACC brands post merger.

Follow all LIVE updates from the stock markets here.