Ambuja, ACC call off merger after 10 months

Source: TNN

Ten months after Ambuja Cements and ACC announced plans to merge their business, the two companies on Monday said that they are not going ahead with the proposal now, although their ultimate goal is to merge. A limitation in transferring mining assets is said to be one of the reasons behind the two cement majors’ decision to drop the merger plan as of now.

In two separate regulatory filings, the listed entities, without elaborating on what the constraints were in implementing the merger, said that following the evaluation of the merger proposal by the committee, which included its board members, it has been decided to not go ahead with the scheme. The merger would have resulted in the creation of India’s second-largest cement company in terms of market capitalisation. The Ambuja Cement-ACC combine would have a market cap of Rs 83,300 crore, while rival Ultra-Tech currently has a market cap of Rs 1.1 lakh. Franco-Swiss group Lafarge-Holcim holds 64% stake in Ambuja Cements, whereas it owns 55% in ACC.

However, in terms of capacity, the Ambuja Cements-ACC combine would have been a close rival of UltraTech, the sector leader. Compared to Ultra-Tech’s capacity of over 70 million tonnes, the combined entity would have had over 60 million tonnes.

Ambuja Cements and ACC said that they will continue to work together to maximise synergies. Towards this, the two boards on Monday approved an arrangement for the sale and purchase of materials on a mutually agreed basis. About Rs 900 crore worth of synergy benefits were expected from the merger when the proposal was announced in May 2017.

Since the merger was announced on May 5 last year, the stock price of Ambuja Cements has moved from Rs 242 to Rs 262 on Monday, a gain of 8% while ACC’s stock price has moved from Rs 1,590 to Rs 1,663, a gain of 4.6%.

The merger of Ambuja Cements and ACC has been in speculation ever since Lafarge and Holcim combined their operations globally in 2015 to form the largest cement producer in the world.

Source: TNN