What Adani Has Agreed To Pay For Ambuja-ACC Buyout

Here's the valuation behind one of the largest buyouts in India's cement space.
<div class="paragraphs"><p>Image: Unsplash</p></div>
Image: Unsplash

Billionaire Gautam Adani has agreed to buy Ambuja Cements Ltd. and ACC Ltd. from the Holcim Group in a $10.5-billion deal.

The Adani family will acquire 100% stake in the offshore Holcim arm, Holderind Investments Ltd., according to the details of the transaction. Holcim held 63.2% in Ambuja Cements and 4.48% in ACC Ltd. through Holderind. The Swiss group held 50.05% stake in ACC through Ambuja.

Adani will pay Rs 385 per share for Ambuja Cements and Rs 2,300 apiece for ACC shares held by Holderind. That would cost Adani about Rs 50,000 crore. It will also make an open offer for 26% to the minority shareholders of the two cement companies. Subject to success of the offer, it could cost Adani up to Rs 31,106 crore more, taking the total value of the deal to Rs 81,287 crore or $10.5 billion.

So far, UltraTech Cement Ltd. has been a torchbearer for consolidation, lapping up assets of Jaiprakash Associates Ltd., Binani Cement Ltd., and Century Cement Ltd., according to a Jefferies report. Dalmia Bharat, too, has added smaller capacities via mergers and acquisition.

Ambuja Cements and ACC together were valued at an enterprise value of Rs 88,140 crore (CHF 11.30 billion; 1CHF = Rs 78), according to Holcim. That translates into an enterprise value of $162.7 a tonne, according to BQ Prime's calculation. That's higher than any other cement deal since 2016.

Only three M&A transactions breached $200 a tonne in the past two decades, according to Elara Securities' analysis.

Holcim acquired stake in Gujarat Ambuja Cement at $212 a tonne in FY06, followed by the CRH Group acquiring stake in My Home Industries at $205 a tonne in FY09 and Vicat Group buying stake in Bharathi Cement at $201 a tonne in FY11, it said.

Profitability Of Top Cement Players

Among Indian cement makers, Shree Cement Ltd. ranks the highest on profitability in terms of EBITDA per tonne, followed by UltraTech Cement. Despite the synergy benefits, ACC and Ambuja Cements rank third.

The trailing 12-month EBITDA per tonne stands at Rs 835 for the combined entity, which is significantly lower than most of their peers.

Valuation Of Cement Makers

At current levels, Shree Cement is valued at a significant premium to its peers. While Ambuja Cements is on a par with Ultratech Cement, ACC is significantly below other regional counterparts like Ramco Cement Ltd.

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

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