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Adani-Holcim Deal For ACC, Ambuja Cements Is Tax-Free, The Swiss Firm Says

Holcim has signed a binding agreement with the Adani Family to sell its business in India.

<div class="paragraphs"><p>The logo of the Adani Group is seen on the facade of one of its buildings on the outskirts of Ahmedabad. (Photo: Amit Dave/Reuters)</p></div>
The logo of the Adani Group is seen on the facade of one of its buildings on the outskirts of Ahmedabad. (Photo: Amit Dave/Reuters)

The $6.38-billion Adani-Holcim deal is tax-free, the Swiss firm has said.

The Holcim Group had on Sunday signed a binding agreement with the Adani Family to sell its business in India -- about 63% stake in Ambuja Cements Ltd., which owns a 54.53% stake in ACC Ltd. (of which 4.48% is direct shareholding).

"So, according to our analysis, it is a tax-free transaction," Holcim CEO Jan Jenisch said while addressing investors after the deal on Monday. When asked about the tax implications, he said, "Never know if any complication arises, but we assume that we will get the 6.4 billion Swiss Francs as net proceeds."

According to the deal, Adani Group will acquire Holcim's full stake in Ambuja Cements and ACC for CHF 6.4 billion ($6.38 billion). Adani has also made an open offer to acquire 26% stake in each of the two listed firms -- Ambuja Cements and ACC -- from public shareholders. The Adani family is routing the deal through Mauritius-based subsidiary Endeavour Trade and Investment, which is promoted by Acropolis Trade and Investment Ltd.

"The ultimate beneficial ownership of Acropolis Trade and Investment Ltd. is held by certain members of the Adani family", according to the open offer. Holcim expects the deal to close in the second half of this year.

The Swiss building major is also confident of getting regulatory approval from the Competition Commission of India for the entire deal, which is estimated to be around $10.5 billion.

"We have quite a simple contract. So, basically, the only condition precedent is the approval of the Competition Commission of India, this has nothing to do with any potential litigation as a standard process...," Jenisch said. "As Adani doesn't have building materials in his portfolio today, it is expected that this will be a very fast approval."

This is a simple contract, where Holcim is basically selling the company's shares in the two businesses, he said.

"So, very straightforward. And no further conditions, no further due diligence, or anything involved in the transaction. So, cross fingers, this should go quite smooth over the next two to three months," he added.

Besides, Holcim also said that the new owner would be liable for the fines imposed by the CCI on Ambuja Cements and ACC after the sales. "It will be with the new owner. We have sold the company... there would be no indemnification from our side," Jenisch said.

The fair trade regulator had slapped a fine of Rs 1,148 crore on ACC and Rs 1,164 crore on Ambuja Cements. Both companies had challenged the fine before the appellate authority, which in July 2018 dismissed their plea.

The matter is presently pending before the Supreme Court.

Adani Group has through Endeavour Trade and Investment made an open offer of Rs 385 per share for Ambuja Cements and Rs 2,300 per share for ACC.

For Ambuja Cements, Adani Group has made an open offer to its public shareholders to acquire up to 51.63 crore equity shares, representing 26% of the expanded share capital, aggregating to a total consideration of Rs 19,879.57 crore.

For ACC, Adani Group has offered to acquire up to 4.89 crore shares held by public shareholders, representing 26% of the expanded share capital, aggregating to a total consideration of Rs 11,259.97 crore.

Also Read: Adani's Buyout Of Ambuja-ACC: No Tax?

Ambuja Cements and ACC currently have a combined installed production capacity of 70 million tonnes per annum. The two companies together have 23 cement plants, 14 grinding stations, 80 ready-mix concrete plants and over 50,000 channel partners across India.

Also Read: What Adani Has Agreed To Pay For Ambuja-ACC Buyout

Disclaimer: Adani Enterprises is in the process of acquiring a 49% stake in Quintillion Business Media Pvt. Ltd., the owner of BQ Prime.