Mumbai: French cement company Lafarge SA said it agreed to acquire the ready-mix concrete business of engineering and construction firm Larsen and Toubro Ltd for Rs 1480 crore, acquiring a presence in the value-added end of the booming cement market .
The Indian ready-mix business, worth around Rs 4,000 crore annually, is expected to grow significantly. Ready-mix concrete is a mixture of cement, water and other ingredients. L&T had decided to spin off this business in December. Subsequently, the company decided to sell this business and invited bids for the same.
“Lafarge was the first in its industry to move into aggregates and concrete in a significant way, over 10 years ago..... With this acquisition, we are taking a pioneering step in the emerging Indian market,” said Bruno Lafont, chairman and CEO, Lafarge in a statement issued by the company. Lafarge’s statement said the acquisition would be “accretive to Lafarge earnings per share from 2009.”
L&T spun off its cement business into a separate company in 2004 and transferred a majority stake in this to the Aditya Birla Group. This company has since been renamed UltraTech Cement Ltd and L&T continues to hold 11.49% stake in this. However, the engineering firm retained its RMC business.
L&T dominates the business in India with a fourth share of the market -- a capacity of 4 million cu mt.
Lafarge entered India in 1999 after acquiring Tata Steel’s cement business. It subsequently acquired Raymond Ltd’s cement business in 2001. The company has a capacity of six million tonnes but has plans to double this by 2010 through greenfield ventures.
Lafarge is the world’s biggest cement maker. Its sales for the quarter ended March were 4 billion euros and net profit, 150 million euros.
Swiss firm Holcim Ltd, which has grown through larger acquisitions at the cement end of the business, was also reported to be in the race for L&T’s RMC business.
Lafarge and Holcim, the second biggest cement company are in a global race to claim market share in faster-growing economies such as India.
Bloomberg contributed to this report