Photo: Bloomberg
Photo: Bloomberg

Competition Appellate Tribunal stays sale of Lafarge India assets

Compat issued the stay on the asset sale while dealing with an appeal by Dalmia Cements

Mumbai/New Delhi: The merger of global cement giants Lafarge and Holcim in India hit a roadblock on Wednesday with the Competition Appellate Tribunal (Compat) staying the sale of 11 million tonnes of cement capacity held by Lafarge India Pvt. Ltd, following an appeal by cement maker Dalmia Cement (Bharat) Ltd.

“In the meanwhile, operation of order dated 2nd February 2016 passed by the Competition Commission of India (CCI)... shall remain stayed," the Compat order passed by its chairman G.S. Singhvi said. LafargeHolcim has been asked to reply to Dalmia’s plea by 9 May, when the case will be taken up for hearing.

The French firm Lafarge and the Swiss firm Holcim, which had been rivals one time, merged in July last year to form the world’s largest cement company LafargeHolcim. However, the combined entity had to get approval from competition regulators in individual geographies.

In India, the anti-trust regulator CCI asked LafargeHolcim to sell some of its assets to complete the merger. In a revised order on 2 February, the CCI had approved the new divestment plan of LafargeHolcim which included the sale of three cement plants and two grinding stations of Lafarge India with a total capacity of around 11 million tonnes per annum.

Following the CCI order, the company went ahead and invited bids for the sale. The deadline for submitting the non-binding bids was 12 April.

The CCI order in February was the second one after its original order on 30 March 2015 asking LafargeHolcim to divest two of its plants could not be executed as the Mines and Mineral Development and Regulation (MMDR) Act did not permit the transfer of mines at the time of the sale of a cement asset.

But on 5 April, Dalmia filed an appeal before Compat challenging the validity of the February order “on the ground that CCI has no jurisdiction to approve a new approval after a final order approving a combination subject to modifications has been passed under Section 31 of the Act," according to a statement emailed by law firm Luthra and Luthra, which is representing Dalmia.

“It also challenged the extension of the 5% restriction in the initial order applicable to the sale of the two plants to the sale of entire India business—which has barred many existing players from bidding for Lafarge India’s shareholding," the statement said.

In its 30 March 2015 order, CCI had barred anyone with more than 5% share in the relevant markets from bidding for the assets up for sale. The two assets that were put up for sale initially were in Chhattisgarh and Jharkhand.

“We cannot comment with regards to the proceedings. LafargeHolcim remains fully committed to dispose its entire interest in Lafarge India in compliance with the CCI order," a LafargeHolcim spokesperson said.

On Wednesday, Mint reported that Blackstone Group and JSW Cement are among private equity funds and cement makers that have submitted bids for LafargeHolcim’s 11 million tonne cement assets in India. Other cement companies that have submitted non-binding bids include Ramco Cements Ltd and Ireland’s CRH Plc.

Financial investors that have thrown their hat in the ring include Aion Capital Partners, Advent International, the Carlyle Group and the Piramal Group, the people said, adding that some of these potential buyers are bidding as part of a consortium.

LafargeHolcim’s India presence comprises cement capacity held under three subsidiaries: Lafarge India Pvt. Ltd, ACC Ltd and Ambuja Cements Ltd. After the divestment of Lafarge’s 11 million tonnes, the merged entity would have a total capacity of about 60 million tonnes.

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