CRH to buy 51% in Jaypee's Gujarat units for INR21bn (US$378.9m)

CRH to buy 51% in Jaypee's Gujarat units for INR21bn (US$378.9m)
Published: 24 August 2012

Tagged Under: CRH Jaiprakash Associates India 

Irish building materials group CRH is set to pick up a controlling 51 per cent stake in the cement operations of Jaiprakash Associates in Gujarat for an enterprise value of INR42bn.

CRH will also be able to increase its holding to 65 per cent over the next three years at a pre-fixed price via a call option.

“CRH will have the option of picking up an additional 14 per cent from Jaiprakash Associates at the current price plus a 16 per cent annualised return or at a fair price determined by an independent valuer, whichever is higher,” said one of the officials familiar with the ongoing negotiations.

Jaypee Cement Corp has two plants in Gujarat – in Sewagram and Wanakbori – each having a capacity of 2.4Mta. After the transaction, Jaypee Associates, the diversified power to real estate and cement group’s flagship, will be able to deleverage its balance sheet, which has been struggling to bring down its consolidated debt of INR450bn.

The deal will lower the Indian producer’s debt by INR18bn and see a fresh equity infusion of INR12bn.
Jaypee Group, the country’s third largest cement maker, has a total installed capacity of 33.5Mta, of which 23.7Mta comes under Jaiprakash Associates. The operations in Gujarat and Andhra Pradesh were recently hived off into a separate entity, called Jaypee Cement Corporation, to facilitate a stake sale. But now Jaypee will retain control over its 4.8Mta Andhra operations.

Sources said Jaypee might soon initiate talks with others for the Andhra unit as well. The due diligence is currently being carried out as both CRH and Jaypee have agreed to undergo exclusive negotiations. A formal announcement was due within a few weeks, said one of the sources mentioned above.