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Lafarge firms up entry into India: Tisco accepts deal for cement division

The board of directors of Tata Iron and Steel Company Limited or Tisco today accepted Lafarge's offer to acquire its cement division in eastern India.

Lafarge, the world leader in construction materials, has offered the cement division a business value of Rs 5.5 billion (subject to variation in the value of net working capital).

The company plans to enhance the division's production capacity through process improvements and distribution logistics optimisation, a media statement issued by Lafarge said.

This will be the second largest business deal after the business deal valued at Rs 6.05 billion between AES and Orissa Power Generation, industry sources said.

The Lafarge-Tisco transaction is subject to necessary approvals as well as satisfactory agreement of all terms and conditions relating to the acquisition.

This acquisition marks the entry of Lafarge in the Indian cement industry at a time when the industry is consolidating, the process being driven by large local players. The Tisco deal is the first instance of acquisition of an Indian cement operation by a multinational corporation.

DSP Merrill Lynch acted as Lafarge's merger and acquisition advisor for the transaction.

Lafarge is active in 65 countries. The group employs 65,000 people generating sales of $11 billion and operating nearly 100 cement and grinding plants.

Tisco is the flagship company of the Tata Group, the largest industrial group in India.

Tisco's cement division, which has a capacity of 1.73 million tonnes, produces premium-quality Portland slag cement for markets in the eastern Indian states of West Bengal (principally Calcutta) and Bihar, as well as high-grade ordinary Portland cement for the central Indian state of Madhya Pradesh.

Tisco cement has particularly strong market positions in Calcutta and Bihar.

Lafarge's cement division's operations are located in two states. The cement plant is located in Madhya Pradesh and the slag cement grinding facility is located in southern Bihar, near Tisco's plant.

The transaction also entails a long-term supply contract for Tisco's high-quality slag which the cement division had been using for its Portland slag cement.

The Indian cement market is the fourth largest in the world at more than 80 million tonnes, enjoying an average growth rate of 8.5 per cent over the past five years. Similar growth rate is anticipated in the medium term. Thus it is estimated that India will consume 180 million tonnes of cement annually by 2008.

The acquisition forms part of Lafarge's development programme in emerging economies, particularly the Asia-Pacific region, and shows that India has a key role assigned to it in Lafarge's growth strategy.

UNI

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