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MUMBAI : Adani Group has taken the lead in the race to buy Switzerland-based Holcim’s India arms—Ambuja Cements Ltd and ACC Ltd—with a war chest of $13.5 billion for the deal, two people with direct knowledge of the matter said.

“Adani appears to be ahead of others in the acquisition race for Ambuja and ACC," one of the two people said, requesting anonymity. Adani Group’s promoter entities may spend up to $11 billion to buy Holcim’s stake in Ambuja Cements and ACC, including a premium to the market price, one of the two people said, requesting anonymity.

Holding the edge
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Holding the edge

Since the acquisition will involve a change in ownership, separate open offers for public shareholders of the two companies will be mandatory.

“The group will invest an additional $2.5-3 billion to launch the open offers for the public shareholders post the promoter stake buyout. Discussions for financing the acquisition have been almost finalized," said the first person.

The acquisition of Holcim’s assets in India will give billionaire Gautam Adani, the world’s fifth-richest man, a substantial share in the Indian cement market as the government embarks on a massive 7.5 trillion capital expenditure plan in the current fiscal to spur growth. The spending is expected to boost demand for building materials, including cement.

If Adani wins the race for Ambuja and ACC, the conglomerate will jump to the No. 2 position in the cement sector with a combined production capacity of 67 million tonnes per annum (mtpa).

An Adani Group spokesperson declined to comment, while emails sent to the spokespeople for Holcim, Ambuja, ACC, Ultratech and JSW Group remained unanswered.

Ambuja Cements is valued at 72,515 crore, with Holcim owning 63.19% of the company, while ACC has a market cap of 42,148 crore, with the Swiss company holding 54.53%.

Adani Group has already started preparing for its mega foray into the cement business by hiring people, creating subsidiaries and setting up operational facilities, the two people said.

“Adani is keener than other contenders for Ambuja and ACC because owning a cement business fits into the group’s strategy for its large realty and infrastructure projects businesses," said the first person.

To be sure, Adani Group has already formed a subsidiary under Adani Enterprises Ltd called Adani Cement Industries in June last year.

In Gujarat, Adani plans to set up a fly ash-based cement manufacturing facility and a small 5-mtpa cement plant in Maharashtra, with an initial investment of as much as 1,000 crore.

Adani has another cement subsidiary Adani Cementation Ltd, which plans to build an integrated facility in Gujarat.

“Post the proposed Ambuja-ACC cement business acquisition, Adani is keen to rapidly expand its control in the eastern, central and north-eastern market in the infrastructure space," said the first person.

“Adani has held concrete discussions with banks, foreign investors and creditors and is ready with a funding facility of up to $13.5 billion for the proposed Ambuja-ACC purchase. To own an in-house cement manufacturing business, Adani is ready to pay a valuation premium of 20-30%, which other contenders may be hesitant to pay," the person said.

Adani Group is closely competing with JSW Cement and Aditya Birla Group-owned Ultratech Cement to acquire Ambuja Cement and ACC.

According to a report in The Economic Times, Adani Group plans to involve a Gulf-based investor as the principal entity for executing the Ambuja-ACC acquisition.

Accordingly, Adani plans to engage Sheikh Tahnoon bin Zayed Al Nahyan of the United Arab Emirates’ ruling family and other investment groups in West Asia to raise a part of the funds required to acquire Ambuja and ACC.

If Adani Group succeeds in acquiring promoter control in Ambuja and ACC, the money for funding the open offers may be raised by group companies through the sale of non-convertible debentures, the first person said.

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