The proposed merger of Holcim and Lafarge globally may have to go through the scrutiny of the Competition Commission of India even as the combined entity will catapult to the leadership position in India with 66 million tonne per annum capacity here.
However, this top slot may be short-lived as the nearest rival Aditya Birla Group’s UltraTech Cement, that has a production capacity of 59 million tonne, is fast expanding. It recently acquired 4.8-million-tonne-per-annum Jaypee Cement’s Gujarat plant.
All the three companies – UltraTech Cement, Ambuja Cement and ACC – have lined up huge expansion plans.
The merger comes at a time when the Swiss-based Holcim is consolidating its holding in ACC under Ambuja Cement. As part of the consolidation process proposed last July, Holcim decided to merge Holcim India with Ambuja Cement by transferring over 50 per cent of its stake in ACC to Ambuja. It recently received the Gujarat and New Delhi High Courts’ approval for the restructuring of stake.
A Srinivasan, Research Analayst, Angel Broking, said the talks are at a very preliminary stage and more details needs to emerge before coming to a conclusion on the impact of this merger in India.
“At the outset it appears a step in right direction. Though Lafarge’s presence in India is limited to the eastern region, the combined entity will have better market command with three major brands under its fold,” he said.
Shriram Subramanian, Managing Director, InGovern, said it is still not clear whether the merger will go through at the global level and even if it happens it is not known whether they will merge the unlisted Lafarge with Ambuja Cement.
“For all that you know, the combined cement major may continue to operate Lafarge as a stand alone entity,” he said.
At the global level, the merger will help both companies to bring down the borrowing cost with a strong balance sheet. Both Lafarge and Holcim added huge debt on their books after making large acquisitions.
Lafarge bought Egypt-based Orascom Cement for $12 billion in 2008, while Holcim paid about $3.4 billion for Aggregate Industries in 2005.
Holcim reported net sales of $22 billion last year while it was $20.7 billion for Lafarge.