Home / Companies / Blackstone and JSW among bidders for Lafarge’s India assets

Mumbai: Blackstone Group and JSW Cement are among private equity funds and cement makers that have submitted bids for LafargeHolcim Ltd’s 11 million tonne cement assets in India, according to two people directly familiar with the process.

Other cement companies that have submitted non-binding bids include Ramco Cements Ltd and Ireland’s CRH Plc., the two people said on condition of anonymity.

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

“The initial bids have been submitted independently. However, JSW Cement is open to partnering with any of the firms which qualify in the first round, including Piramal. These discussions will be held post the first round," said a third person familiar with the discussions, also seeking anonymity.

LafargeHolcim, the world’s largest cement company, formed after the merger of one-time French and Swiss rivals, is selling its interest in Lafarge’s assets to comply with competition rules in India. LafargeHolcim was asked to sell some assets by the Indian antitrust regulator to complete the merger in India.

While Tuesday was the deadline for submitting the bids, those coming in till the end of the week may be considered, said one of the two people cited above.

LafargeHolcim did not respond to an e-mail seeking comments on Tuesday. E-mailed queries to Ramco Cements, Advent International and Carlyle also remained unanswered. Blackstone Aion Capital, Piramal Group and CRH declined to comment.

“We do not wish to comment on market speculation," said a JSW Group spokesperson.

The plan to sell all of Lafarge India’s assets came after an earlier deal to sell two cement units to Birla Corp. in a 5,000 crore transaction fell through because of restrictions related to the transfer of mines. On 16 March, an amendment to the Mines and Minerals Development Act was passed by the Lok Sabha, which will make it possible for companies to transfer a mine asset linked to a cement unit at the time of a sale.

While the amendment has been in discussion for the last few months, LafargeHolcim decided to divest its interest in Lafarge India to quicken the closure of its global merger in India.

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.

Lafarge India’s cement assets are the third large chunk of cement capacity to go on sale in recent months.

Reliance Infrastructure Ltd agreed to sell its cement assets to Birla Corp. for 4,800 crore on 5 February. In the same month, UltraTech Cement Ltd agreed to buy Jaiprakash Associates Ltd’s cement plants across five states. The deal, valued at 15,900 crore, was pushed by lenders to Jaiprakash Associates who have been trying to get the company to pare debt.

In the case of Lafarge, the deal value is likely to be about 10,000 crore, Mint reported on 9 February. Bidders may be willing to pay a premium since this is the last big transaction in the cement space for now, Mint reported.

“These assets are definitely good and have better profitability than the other assets that have been sold recently. The Lafarge brand also commands a premium as compared to other cement firms in the eastern region, which is also one of the reasons why everyone has been aggressively bidding for this asset," said Sandipan Pal, an analyst at Motilal Oswal Securities Ltd.

According to a 17 March report by JPMorgan, the exit of distressed players and the ensuing consolidation will lead to better pricing power in the sector. “The industry is witnessing significant market consolidation in calendar year 2016 with the exit of three major cement players viz. JPA (Jaiprakash Associates), Reliance, Lafarge—10% of industry capacity," noted the report.

“M&A activity in the current round has been driven by large domestic players in contrast to foreign players pre-2010. Asset divestments have seen strong buyer interest and transaction valuations have not been cheap despite current low returns," it added.

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