Adani Group acquires Holcim's stake in Ambuja, ACC for $10.5bn
Swiss cement giant Holcim has decided to exit India by selling its business in the country to Gautam Adani-led conglomerate for $10.5 billion. Holcim's decision to quit India is part of its plan to reduce its participation in carbon-intensive cement production. The company has a 63.19% stake in Ambuja and a 4.48% stake in ACC, while Ambuja owns 50.05% of ACC.
Why does this story matter?
India's cement market is fickle. It is highly competitive, price-sensitive, and fragmented. However, compared to the global average, India's cement consumption is considerably low. In other words, it has significant growth potential. As Holcim tries to reinvent itself in key markets in North America and Europe where cement is slowly becoming less popular, this has opened an opportunity for Adani to takeover another industry.
Holcim owned 31 cement-making facilities in India
Holcim's decision to exit India has surprised many as it owned 31 cement-making facilities that have the capacity to produce 70 million tonnes. However, this falls in line with the company's previous exits from Brazil and Indonesia as it tries to diversify into building product areas. The firm's 'strategy 2025' involves making sustainable building materials. The manufacture of cement is a carbon-intensive industrial process.
Adani Group, as promoters, will infuse $3bn of equity
Adani Group's acquisition of Holcim's business in India will make it the second-largest cement maker in the country. The deal is worth $10.5 billion and is backed by Deutsche Bank and Standard Chartered Bank. The Adani family will infuse $3 billion of equity as promoters, while banks will provide the rest. This is India's largest-ever transaction in the infrastructure and materials space.
Adani made an open offer to buy additional 26% stake
After announcing its decision to buy Holcim's stakes in Ambuja and ACC, the Adani family made offers to buy 26% of public shares each in both companies. The offer was made through its Mauritius-based subsidiary Endeavour Trade and Investment. The aggregate consideration for the offer is Rs. 31,139 crore, making it one of the largest open offers ever in India.
The transaction will be tax-free: Holcim
Adani Group's acquisition of Holcim's business in India will be a tax-free transaction, said the latter. The transaction is expected to be completed in the second half of 2022.
