Adani Group wins the race to acquire Holcim's stake in Ambuja, ACC, increasing the value of Ambuja C
Shares of Ambuja Cement rose 10% in early trading on Monday after Adani Group bought a majority stake in Holcim's India operations, a Swiss multinational. The two publicly traded cement businesses Ambuja Cements and ACC, which belong to Holcim, will be purchased by Adani Group in a $10.5 billion deal. Along with Adani Enterprises, firms including the Sajjan Jindal-led JSW Group, Dalmia Bharat, UltraTech Cement Ltd. of the Aditya Birla Group, and ArcelorMittal were said to be competing for the Indian assets of Holcim Group.
Through its subsidiaries, Holcim owns 54.53 percent of ACC and 63.19 percent of Ambuja Cements (of which 50.05 percent is held through Ambuja Cements). A necessary open bid must be made by Adani Cement to purchase an additional 20% of Ambuja Cement.
It is the largest acquisition by Adani and the largest M&A deal in India's history in the infrastructure and materials sector because the value of the Holcim interest and the open offer consideration for Ambuja Cements and ACC is $10.5 billion.
The chairman of the Adani Group, Gautam Adani, stated that although India continues to be the second-largest cement market in the world, its per capita consumption is less than half of the average for the entire world. India is also predicted to remain one of the largest demand-driven economies for several decades. In terms of statistics, China consumes more cement than seven times as much as India. We believe that by combining these elements with the numerous business relationships we already have with the Adani Group's ports and logistics, energy, and real estate businesses, we will be able to create a distinctively integrated and distinctive business model and position ourselves for significant capacity expansion.
Ambuja intends to increase its current 31 mtpa grinding capacity to 40 mtpa during the next two years. The north accounts for around 42% of its grinding capacity, with the west, east, and central regions accounting for the remaining 28%, 26%, and 5%, respectively.
Similar to ACC, which will increase its current 35 mtpa grinding capacity to 40 mtpa by the first half of 2023. Following the conclusion of the ongoing expansion, ACC's grinding capabilities in the east, south, and center regions will range from 23 to 27 percent, while those in the north and western regions will be 15 and 10 percent, respectively.
"This deal will potentially change the fortune of the sector for the better!" said analysts at centerPhillipapital. "As the deal closes, and ACC and Ambuja Cements become direct, and most importantly, identifiable individual promoter-controlled entities and Adani emerges as the second-largest player in the Indian cement industry."
Philip Capital, a foreign research organization, stated: "In addition to maintaining our buy rating on ACC and upgrading it to buy, we have increased the target price on Ambuja Cement to Rs. 440 per share. The research company maintained its estimates for Ambuja & ACC." According to CNBC-TV18, it raised the target multiples for ACC from 13 to 15 and Ambuja Cement from 16 to 18, respectively.