Ultratech bids for Holcim units as bidders seek access
Deborshi Chaki & Swaraj Singh Dhanjal
MUMBAI: Ultratech Cement Ltd, India’s largest cement maker, has submitted a non-binding bid for Holcim Ltd’s Indian assets Ambuja Cements Ltd and ACC Ltd, two people aware of the development said.
Details about Ultratech’s bid could not be immediately ascertained. A spokesperson for Aditya Birla Group, which controls the cement maker, declined to comment.
Meanwhile, companies seeking to acquire Ambuja Cements and ACC are finding it difficult to price their bids as the Swiss company has allowed them limited access to inspect the assets of the two companies, the people said, requesting anonymity.
Holcim has asked interested parties to submit their best indicative offer, along with letters of support from lenders or investors for financing the offers, the people said, seeking anonymity. Firms that bid the highest will then be allowed to conduct comprehensive due diligence and submit binding offers, they added. However, prospective bidders are unsure what value to ascribe to the two Holcim firms with the limited information they have at this stage.
“Given the nature of the business, one needs to conduct proper diligence of the companies’ assets, especially limestone linkages, since they are critical for day-to-day operations and growth. Having significant limestone reserves is critical for any cement business and, thus, the reserves feed significantly into the valuation. New reserves can only be bought through auctions or by acquiring a company. Sourcing limestone from the market increases costs of operations, affecting margins. So, it is a very critical component of valuing a cement company,” one of the two people said. Even some lenders have expressed concern since they have to fund the offer with limited information about the assets they are backing, the people cited above added.
“Some of the large foreign banks have agreed to offer letters of intent but have told the bidders the final call on underwriting the bid will depend on the valuation that emerges after a comprehensive due diligence,” the second person said.