Billionaire Gautam Adani on Sunday won the race to acquire Swiss cement major Holcim's stake in Ambuja Cements and its subsidiary ACC for $10.5 bn (around Rs 81,361 crore), including the open offers.
The Adani family, through an offshore special-purpose vehicle, announced that it had entered into definitive agreements for the acquisition of Holcim Ltd’s entire stake in two of India’s leading cement companies -- Ambuja Cements and ACC -- the Adani group said in a statement.
The group outbid Ultratech and JSW group to enter the cement industry and also emerge as the country's second-largest cement manufacturer, with 70 million tonnes of capacity annually.
Holcim owns 63.19 per cent in Ambuja Cement and 4.48 per cent in ACC.
Ambuja Cement, in turn, owns 50.05 per cent in ACC.
The Adani family will make an open offer to buy 26 per cent in these two companies from non-promoter shareholders, as per market regulator, the Sebi's norms.
The value for the Holcim stake and open offer consideration makes this the largest ever acquisition by Adani, and India’s largest ever M&A transaction in the infrastructure and materials space.
"Our move into the cement business is yet another validation of our belief in our nation's growth story," said Gautam Adani, chairman of the group.
"Not only is India expected to remain one of the world's largest demand-driven economies for several decades, India also continues to be the world's second largest cement market and yet has less than half of the global average per capita cement consumption.
"In statistical comparison, China’s cement consumption is over 7x that of India’s.
"When these factors are combined with the several adjacencies of our existing businesses that include the Adani Group's ports and logistics business, energy business, and real estate business, we believe that we will be able to build a uniquely integrated and differentiated business model and set ourselves up for significant capacity expansion.” Adani added.
An Adani group statement said with India’s cement consumption at just 242 kg per capita, as compared to the global average of 525 kg per capita, there is significant potential for the growth of the cement sector in India.
The tailwinds of rapid urbanization, the growing middle class and affordable housing together with the post-pandemic recovery in construction and other infrastructure sectors are expected to continue driving the growth of the cement sector over the next several decades.
The two companies are among the strongest brands in India with immense depth of manufacturing and supply chain infrastructure, represented by their 23 cement plants, 14 grinding stations, 80 ready-mix concrete plants and over 50,000 channel partners across India.
Both Ambuja and ACC will benefit from synergies with the integrated Adani infrastructure platform, especially in the areas of raw material, renewable power and logistics, where Adani portfolio companies have vast experience and deep expertise.
This will enable higher margins and return on capital employed for the two companies.
The companies will also benefit from Adani’s focus on ESG, Circular Economy and Capital Management Philosophy.
The acquisition is a big win for Gautam Adani, chairman of the Adani group, who started his journey as a diamond sorter in his teenage years in Mumbai.
Later, Adani went to Gujarat and set up Adani Enterprises in 1988.
Soon after the economic liberalisation, Adani won the mandate to set up Mundra Port in 1995.
Since then, the group forayed into various sectors including ports, power, renewable energy, infrastructure, food products and airports.
Adani is ranked at the top among India's richest, as per Bloomberg Rich Index.
Aditya Birla group’s Ultratech had sought additional time to close the deal by promising to sell its overlapping plants in Gujarat and Madhya Pradesh.
The Adani group, on the other hand, had assured to close the deal as early as possible to the bankers – making them win the transaction, a banking source said.
JSW group chairman Sajjan Jindal had recently said his group has offered $7 billion to Holcim for its Ambuja stake which includes $4.5 billion of his own money and $2.5 billion investment from the private equities.
Holcim was planning to exit India following intense scrutiny of its India operations by the Competition Commission of India (CCI) which opened its second investigation against the company in December 2020.
An appeal filed against an earlier penalty imposed by the CCI is currently pending in the Supreme Court.
Holcim’s exit will also be India’s biggest outflow of foreign direct investment.
The FDI exit was biggest after Cairn Energy’s exit from India in 2010, when it sold Cairn India to Vedanta Group for $4.48 billion.
Ambuja Cement shares closed at Rs 359 a share on Friday while shares of its subsidiary, ACC closed at Rs 2,114 a share.
Ambuja’s total market value as on Friday was Rs 71,250 crore.
"Holcim's global leadership in cement production and sustainability best practices brings to us some of the cutting-edge technologies that will allow us to accelerate the path to greener cement production. In addition, Ambuja Cements and ACC are two of the strongest brands recognised across India.
When augmented with our renewable power generation footprint, we gain a big headstart in the decarbonization journey that is a must for cement production.
This combination of all our capabilities makes me confident that we will be able to establish the cleanest and most sustainable cement manufacturing processes that will meet or exceed global benchmarks.
“I am delighted that the Adani Group is acquiring our business in India to lead its next era of growth,” said Jan Jenisch, CEO of Holcim Limited.
''Gautam Adani is a highly recognized business leader in India who shares our deep commitment to sustainability, people and communities.
"I would like to thank our 10,000 Indian colleagues who have played an essential role in the development of our business over the years with their relentless dedication and expertise.
"I am confident that the Adani Group is the perfect home for them as well as our customers to continue to thrive.” he said.
The acquisition is subject to regulatory approvals and conditions.