BackThree contenders submit binding bids for LafargeHolcim assets
CRH, HeidelbergCement India and Barings Private Equity Asia have submitted the bids for the 5 mtpa assets
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Mumbai: Three firms, including a private equity investor, have submitted binding bids to acquire LafargeHolcim’s cement assets in Jharkhand and Chhattisgarh which the company has put on sale to address anti-competition concerns. The deadline for submission of bids expired this week.
Irish cement maker CRH Plc., HeidelbergCement India Ltd and Baring Pvt. Equity Asia have submitted the final bids for the assets with a combined capacity of 5 million tonnes per annum (mtpa), two persons familiar with the development said on condition of anonymity.
“The bids have come in the range of ₹ 4,100 crore to close to ₹ 5,000 crore and final round of negotiations have begun," said one of the two persons.
The asset sale has been necessitated by the $60 billion global merger of Lafarge SA and Holcim Ltd to form the world’s largest cement maker.
The company has to divest some assets in India to address anti-competition concerns.
Officials at LafargeHolcim declined to comment on the ongoing divestment process.
In an emailed response, Baring PE Asia said, “As a matter of policy, we don’t comment on market rumour." Emails sent to CRH and Heidelberg on Friday had not received responses at the time of going to press.
As a precondition to clearing the Indian leg of the merger, the Competition Commission of India (CCI) directed Lafarge to sell the two assets in Chhattisgarh and Jharkhand to companies that own less than 5% market share in the eastern region.
These include a cement plant in Sonadih (Chhattisgarh) and a grinding unit in Jojobera (Jharkhand), with a total capacity of about 5 mtpa. Cement manufacturers have been keen to acquire assets in east India to strengthen their presence in a region where demand for the building material is high and production capacity relatively low.
A valuation of ₹ 4,100 crore for the assets seems to be reasonable, said a cement industry analyst with a domestic securities firm.
However “ ₹ 5,000 crore would be a very high price given the asset will not carry the premium the cement sold under the Lafarge brand enjoys currently," said the analyst, who requested anonymity because he isn’t authorized to speak to reporters.
Lafarge and Holcim on 10 July announced the completion of their merger, with the new entity named LafargeHolcim. In a statement, the combined entity said it would complete the required divestment transactions in Europe, US, Canada, Brazil, India, the Philippines, and Mauritius in the coming months.
CRH and Baring aren’t strangers to Lafarge and Holcim.
In February this year, CRH, with its subsidiaries, acquired some global cement assets of Lafarge and Holcim for an enterprise valuation of €6.5 billion. The acquisition strengthened its presence in important markets across North America, western, central and eastern Europe and provided it new platforms for growth in emerging markets.
Baring has earlier been an investor in Lafarge India Pvt. Ltd. In June, Lafarge said that it will acquire Baring’s 14% stake in Lafarge India for €270 million.
In May 2013, Baring paid €200 million to acquire the stake in Lafarge India. The cement firm raised this capital to commission a 10 mtpa plant in Rajasthan.
The list of contenders for Lafarge India’s assets has dwindled. When the process began in May, at least 10 firms had expressed interest in acquiring the assets.
“After vetting the asset, we decided to stay out of the transaction, and the value of the deal has been going up," said one of the person involved in the process, who requested anonymity.
Amritha Pillay contributed to this story.
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