Cement stocks surged on the merger of Lafarge and Holcim, a deal stuck over the weekend.

Besides the rally in Holcim group companies ACC and Ambuja Cements, shares of rival Aditya Birla Group company UltraTech Cement hit a new 52-week high at ₹2,230, on hopes of further consolidation in the cement sector, throwing up better opportunity for established cement companies. India Cements and Prism Cement also ended in the green.

“Holcim and Lafarge today announced their intention to combine the two companies through a merger of equals, unanimously approved by their respective board of directors and fully supported by the core shareholders of both companies,” said Holcim, in a release. Both companies, which have combined sales at €32 billion, expect to close the merger by June 2015.

The world’s largest cement producer Lafarge has agreed to merge with the second largest cement maker Holcim Plc. Shareholders of Lafarge would receive one Holcim share for every one share held. The combined group will be based out of Switzerland and listed on the Zurich and Paris stock exchanges.

The new entity, worth just under $60 billion, will see 53 per cent shareholder control by Holcim and 47 per cent by Lafarge, said both companies in a joint website presentation.

In 1999, Lafarge entered the Indian market with the acquisition of Tata Steel’s cement business. In 2001, it acquired the Raymond Cement facility, followed by the acquisition of the ready mix concrete business of Larsen & Toubro in 2008. Currently, with a production capacity of eight million tonnes, the company has a strong presence in the eastern markets.

Holcim and its subsidiary Holderind Investments together hold over 50 per cent stake in ACC and Ambuja Cements. Most analysts feel that Holcim may adopt a different strategy for different countries. In India, it may keep the unlisted Lafarge as a separate business unit to avoid tax implications and scrutiny by the Competition Commission of India, said an analyst. Vikram Dhawan, Director, Equentis Capital, said the merger is the reflection of growth concerns over the next decade in bulk commodities such as steel, coal, aluminium and iron ore.

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