Adani in $10.5 billion deal for Holcim India cement business
The deal marks Holcim’s exit from the Indian market ater 17 years and is a part of a global restructuring strategy ater the Swiss cement giant’s 2015 merger with France’s Lafarge
Indian billionaire Gautam Adani struck a $10.5 billion deal to buy Swiss cement giant Holcim’s local business, the companies said, beting on a construction boom predicted in coming decades.
In his biggest acquisition to date, the deal will give coal-to-ports magnate Adani -- who vies with fellow Indian Mukesh Ambani for the title of Asia’s richest person -- a controlling stake in India’s second-largest cement manufacturer.
“Our move into the cement business is yet another validation of our belief in our nation’s growth story,” Adani, 59, said in a statement late Sunday.
“Not only is India expected to remain one of the world’s largest demand-driven economies for several decades, India also continues to be the world’s second largest cement market,” he added.
The deal marks Holcim’s exit from the Indian market ater 17 years and is a part of a global restructuring strategy ater the Swiss cement giant’s 2015 merger with France’s Lafarge.
Once approved by regulators and shareholders, the firm will acquire Holcim’s stakes in local producers Ambuja Cements and ACC.
The acquisitions will make Adani the country’s second-biggest cement maker with a capacity of 70 million tonnes per year.
India, already home to 1.4 billion people, is projected by the United Nations to become the planet’s most populous nation by the middle of the decade.
The International Energy Agency said in a report last year that an estimated 270 million people will be added to India’s urban population by 2040 -- the equivalent of adding a new city the size of Los Angeles each year.
This will also likely increase emissions in the world’s third-biggest polluter, since the manufacture of cement produces carbon dioxide.
Holcim will use cash raised from the sale of its Indian business for acquisitions focused on building products and solutions, Chief Executive Jan Jenisch said on Monday, with the cementmaker currently eyeing 10 potential targets.
Over the last 15 months Holcim has spent 5 billion Swiss francs ($4.99 billion) on a string of companies outside the cement market as it pivots towards building products like roofing and mortars.
“We hope we can keep a similar pace and put this money to work very fast,” Chief Executive Jan Jenisch told reporters.
“At the moment we have around 10 transactions being checked by us, being negotiated by us. They are small transactions, they are bigger transactions,” Jenisch told reporter.
“We are ready for another Firestone,” he said, referring to the $3.4 billion purchase of the American roofing business Holcim made last year.
The company would also look at smaller bolt on deals in the aggregates and ready-mix concrete areas, Jenisch said.
The sale of the Indian operations, which included 31 cement plants, would lower Holcim’s CO2 profile, he added.
Making cement is an energy intensive industrial process which produces high levels of carbon, a situation which has deterred many investors and weighed on Holcim’s share price.
Its shares were indicated 2.9% higher in premarket activity.
“Around 26% of our CO2 emissions are in India, so we will have a much reduced CO2 footprint,” Jenisch said.
“We will always make cement, but we will decarbonise cement. We are happy to build up other segments like building solutions and products.”
Following the India sale, the proportion of Holcim total sales in building products has risen to around 20%, with the company targeting a share of around 30%, he said.
Meanwhile, Indian shares closed higher on Monday ater six consecutive sessions of losses, driven by gains in Eicher Motors, and some cement stocks ater Adani Group announced a $10.5 billion deal that will make it the second-biggest cement producer in the country.
The NSE Nity 50 index gained 0.38% to 15,842.30 at close, and the S&P BSE Sensex advanced 0.34% to 52,973.84. The indexes rose over 1% each in the session earlier.
“In a bear phase, there will be relief rallies, but such rallies are unlikely to sustain, given the relentless selling by foreign institutional investors (FIIS),” said V K Vijayakumar, chief investment strategist at Geojit Financial Services.
Foreign investors sold $1.81 billion worth of Indian equities last week, Refinitiv data showed.
“It’s important to appreciate the fact that FIIS are selling not because they are bearish on India but because U.S. bond yields are attractive and the dollar is strengthening,” Vijayakumar said.
Royal Enfield owner Eicher Motors settled 7.6% higher and was the top gainer on the Nity 50. It reported consolidated net profit of 6.10 billion rupees ($78.53 million) for the March quarter, up nearly 16% from a year earlier.
Ambuja Cements and ACC closed 2.5% and 3.9% higher, respectively, ater Adani Group said it would buy Swiss company Holcim AG’S controlling stake in the cement businesses.