Mumbai: The board of directors of UltraTech Cement Ltd, a unit of the Aditya Birla Group, and affiliate Samruddhi Cement Ltd agreed to merge to create the country’s largest cement firm with a 20% market share and total capacity of 48.8 million tonnes per year.
Samruddhi shareholders will get four UltraTech shares for every seven shares owned in Samruddhi, the Aditya Birla Group said in a statement.
“The merger is to be undertaken through a court approved scheme of amalgamation... The appointed date for the merger is 1st July 2010,” the statement said.
Future plans: A construction site in Noida. The merger will achieve the group’s objective of consolidating its cement business. Mint
Sunday’s announcement is the second step in the process which started on 3 October, when the Aditya Birla Group-owned Grasim Industries Ltd announced the spin-off of its cement business into Samruddhi, a wholly owned subsidiary, to eventually consolidate its cement business under UltraTech. The merger will achieve the group’s objective of consolidating its cement business into a single entity, thereby creating a platform for pursuing aggressive growth, chairman Kumar Mangalam Birla said, according to the statement.
“The Samruddhi demerger is already in the Madhya Pradesh and Gujarat high courts. It will take another four to six months for the courts to give us the go-ahead. We will then list Samruddhi, possibly in March, for about four to six months. Only after this will we merge it into the new UltraTech,” a senior Aditya Birla Group official said on condition on anonymity.
At the end of the merger, the promoter group through Grasim will hold 60.3% of UltraTech, compared with the 65% its owns in the company in its current form. Shareholders will hold 39.7% in the company.
Gaurav Dua, head of reserach at local brokerage Sharekhan Ltd, said the share swap favoured UltraTech.
“I had expected 1.5 shares of Samruddhi for each of UltraTech so this is better than my expectations for UltraTech. I would prefer UltraTech now because of the company’s potential going forward,” he said.
K.C. Birla, chief financial officer of UltraTech, said the combined profitability and cash flows post merger will help the firm increase market share.
“The financial indicators post merger will support UltraTech to maintain its credit rating. We expect UltraTech’s stock to be rerated on completion of the merger process,” he said in the statement.
UltraTech shares have risen 28.6% in the past six months to Rs729.95 in Mumbai trading. The benchmark Sensitive Index climbed 38.4% during the same period.
(‘Bloomberg’ contributed to this story.).