Cement, PE firms line up for Lafarge assets

Mumbai: Six foreign and domestic cement companies, along with a private equity firm, have expressed interest in buying the assets that Lafarge SA is divesting in India before it closes its merger with Holcim Ltd. The bids were in excess of ₹ 4,000 crore.

The deadline for submitting non-binding bids for the assets expired on Saturday. Ahead of that deadline, six cement firms put in their bids, said two bankers directly involved in the process. Two other bankers said that Blackstone Group LP had also put in a non-binding bid.

“Saturday was the last day to submit the non-binding bids for the assets and six cement firms, most of them from southern India, have bid for the assets,” said the first banker.

“Blackstone has submitted a non-binding bid. They have looked at cement assets in India in the past as well,” said another banker quoted above.

On 7 April 2014, Lafarge and Holcim announced a $60 billion global merger.

As a precondition to clearing Indian leg of the union, the Competition Commission of India (CCI) directed Lafarge to sell two of its assets in Chhattisgarh and Jharkhand.

These are a cement plant at Sonadih (Chhattisgarh) and a grinding unit at Jojobera (Jharkhand), with a total capacity of approximately 5 million tonnes per annum.

In its directions, the CCI said Lafarge should sell its assets “to relatively smaller players, having an installed capacity of less than 5% of their total capacity in the relevant geographic market”.

The restriction did little to dampen interest, said the bankers. “Most of the bids have been in the range of ₹ 4,100 crore to ₹ 5,000 crore—the upper end of the valuation coming from global firms,” said a banker quoted above.

According to the bankers, the non-binding bids have come in from Shree Cement Ltd, Chettinad Cement Corp. Ltd, Heidelberg Cement India Ltd, The Ramco Cements Ltd and CRH Plc of Ireland.

Mint could not ascertain the name of the sixth bidder from the cement sector.

“We have bid for the asset at the last moment and will carry out due diligence if we qualify,” said H.M. Bangur, the managing director of Shree Cements.

Emails sent to the Chettinad Cement, Ramco Cements and CRH Plc on Monday remained unanswered. Calls to a spokesperson of Heidelberg were not answered. A call and an email to Blackstone on Tuesday evening were not answered.

While Lafarge did not reply to an email, Holcim declined to comment on the ongoing process.

The Lafarge assets attracted keen interest from an industry that has continued to consolidate over the years. But larger companies such as Aditya Birla Group’s Ultratech Cement Ltd kept out of the process owing to the conditions laid down by the CCI.

“Eastern India is a region where the potential demand for cement has always been considered to be high and the total cement capacity in the east is lower than other regions in the country,” said Nitin Bhasin, head of research at Ambit Capital, explaining the interest in Lafarge’s assets.

Eastern India has seen a fair share of deals in the last few years, all involving global private equity (PE) fund Kohlberg Kravis Roberts (KKR)-backed Dalmia Cement (Bharat) Ltd. In February, Dalmia Cement increased its stake in OCL India Ltd from 48% to 74.6%.

In December 2014, it acquired the entire stake in Bokaro Jaypee Cement Ltd for a total enterprise valuation of ₹ 1,150 crore. It had earlier acquired the assets of Calcom Cement India Ltd and Adhunik Cement Ltd.

With the non-binding bids in, Lafarge is likely to shortlist bidders by mid-June, said the bankers. The deal is likely to be concluded by July-end.

pooja.s1@livemint.com