Holcim is reported to have indicated to the Securities and Exchange Board of India (Sebi) that it is weighing the option of merging ACC — in which it owns 34.7 per cent through majority-held Ambuja Cement India (ACIL) — with Ambuja Cement Eastern (ACEL). Holcim’s plan, it is learnt, was conveyed to the market watchdog after it clarified that ACEL, in which ACIL owns 95 per cent, needs to shore up its public shareholding — which is way below the mandatory 10 per cent — in case it wants to remain a publicly-listed entity.
Although ACEL has a year’s time to increase the public shareholding, Holcim has apparently made it clear that the need to do so may not arise as it does not see the need to have two listed firms in India, and would work towards amalgamating them. Apart from the regulatory compulsions, however, the move to marry ACC with ACEL would serve another crucial purpose: Holcim, which failed to make ACC its subsidiary through an open offer, could end up with a 50 per cent shareholding in the merged entity given the fact that the Holcim-controlled ACIL holds a 95per cent stake in ACEL, which also has a fairly large capital base. The exact shareholding, however, would depend on the swap ratio.
ACEL’s share capital at Rs193.3 crore is higher than that of ACC at Rs179.6 crore, and this would allow Holcim to use the former’s large capital base as a currency to shore up its shareholding in the merged entity. ACEL’s cement capacity however is just around 2Mta, as against 18Mta of ACC. ACIL, which owns stakes in both ACC and ACEL, is 67 per cent owned by Holcim, while the balance 33 per cent is owned by Gujarat Ambuja Cements, the country’s fourth largest cement producer.
Industry observers say that the creeping acquisition route — which allows a promoter to buy five per cent in the company every year — could be a little
tedious as Holcim would then have to wait another three years to hit the magic figure of 50 per cent in ACC. A creeping acquisition would also delay Holcim’s plans to consolidate ACC with its worldwide operations. And after pumping in $518m in India already, Holcim may not want to wait that long.