SCCC`s new acquisition in India?

SCCC`s new acquisition in India?
Published: 19 January 2004

According to Business Day, India, Siam City Cement Plc is set to announce a new acquisition in India by the end of this month that would rival the deal it had hoped to announce when it was in the process of taking control of TPI Polene Plc.  "We are going to make an official announcement by the end of this month on the issue of the acquisition as we have to [wait to] see the outcome of the share offering of TPI Polene," Paul Hugentobler, vice chairman of Siam City Cement and head of regional operations Holcim. "We cannot say which company or which country our target is in, as it could jeopardise the entire deal, but things are going on right now, and we should be able to make an announcement by the end of this month."

"Once the issue of TPI Polene's capital raising is over, there's nothing more left for Siam City Cement to look for in Thailand and we would want to look at regional options thereafter," Hugentobler said.  "The acquisition could be anywhere between India and China." Hugentobler's comments were in line with the company's second vice chairman, Veraphan Teepsuwan, who also said that his firm was in negotiations for a regional acquisition but again declined to give any details.  "If you look at the options, I would say that India is an attractive market for us to go to, as the economy is in the growth phase and cement consumption is starting to pick up there," he said.  "We are looking for investment opportunities and if it is in India, so be it," Veraphan said. "I can safely say that we are talking to one company there and that's all that I can say at this point."

Hugentobler said that any acquisition that would take place would likely be either using Siam City Cement alone or in conjunction with Holcim and the pricing would be in line with the market price of about $100 EV/tonne (enterprise value/tonne). He said that the pricing may vary depending upon the location and the plant "about $100 is the going rate in Asia currently." This comes in line with other earlier reports from India which stated that Holcim was looking at talking to Gujarat Ambuja Cement (GAC); a listed company on the Bombay Stock Exchange, for buying out the latter's 14.4 percent stake in Associated Cement Companies (ACC) another listed company.

ACC is one of India's largest cement players with an annual production capacity of about 17 million tonnes, and GAC has annual production capacity of 12.5 million tonnes.  Analysts said that GACL has expressed its interest in having a strategic partner for its stake in ACC shares.  "GACL had last year confirmed to us that it is not averse to a strategic partnership as a way forward for unlocking value from its ACC stake," Reena Verma, cement analyst at DSP Merrill Lynch Securities in Mumbai, India said.