Roadblock on Holcim’s Indian adventure

Swiss cement group Holcim Ltd and an Indian partner have fallen short in their attempt to acquire Associated Cement Companies Ltd., India’s biggest cement maker by sales. The open offer for 50.01 per cent of Associated Cement closed late Monday, April 11, with some shareholders of the target not participating, as they expected their stock to rise. Instead, Holcim and partner Gujarat Ambuja Cements Ltd. added a 20.8 per cent stake to their existing holdings, giving them 34.6 per cent in total.

Holcim did not release how much it spent on the purchase, but it originally planned to spend $200m raising its stake to 50.01 per cent, suggesting it has invested about $114m.

Holcim said in January it plans to spend $800m to enter India, including acquisitions, expansions and upgrades. Holcim and Gujarat Ambuja, who made the offer through a 67%-33% venture, had offered 370 rupees ($8.46) for each Associated Cement share. The shares closed Monday at 356.90 rupees ($8.16) and Tuesday gained 1.58% to close at 365.55 rupees.

Gujarat Ambuja said the partners would acquire more of Associated Cement through secondary market purchases. "Over the next few months, we would like to take the creeping acquisition route to increase our stake in [Associated Cement]," director Anil Singhvi said in a phone interview.

Indian securities laws allow a suitor to make market purchases up to 5 per cent of a target’s issued capital a year, beyond which it will have to furnish details of its purchases to the country’s stock markets regulator, the Securities Exchange and Board of India.

The January deal was to have given Holcim control of more than half stake in manufacturing capacity of about 34Mt — more than 27 per cent of India’s cement capacity.  Holcim was advised by investment bank DSP Merrill Lynch Ltd., an Indian affiliate of Merrill Lynch & Co (abstracted from India’s The Deal).