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Displaying items by tag: Acquisition
Adani Group speeds up its expansion plans in India
19 June 2024Adani Group’s subsidiary Ambuja Cements signed a deal this week to buy Penna Cement for US$1.25bn. The agreement adds 14Mt/yr of cement production capacity to the group with a focus in the south of India. The acquisition is a big step towards the group’s target of reaching a capacity of 140Mt/yr by 2028. Ajay Kapur, the head of Ambuja Cements, also singled out the advantage the company hopes to gain from taking control of Penna Cement’s terminals saying that they would “prove to be a gamechanger by giving access to the eastern and southern parts of peninsular India.” The move is expected to increase the group’s market share in India by 2%, and by 8% in South India.
Penna Cement operates four integrated plants in Andhra Pradesh and Telangana with a capacity of 7Mt/yr. Two of these units also include waste heat recovery installations and one has a captive power plant. It runs two grinding plants in Andhra Pradesh and Maharashtra with a capacity of 3Mt/yr. Another integrated plant is being built at Jodhpur in Rajasthan and a grinding plant at Krishnapatnam in Andhra Pradesh. Finally, the company owns four bulk cement terminals at Kolkata, Gopalpur, Karaikal and Kochi in India, one at Colombo in Sri Lanka and it also owns a 25,000t cement carrier.
Adani Group’s march towards that target of 140Mt/yr by 2028 started off in mid-2022 when it purchased Ambuja Cements and ACC from Holcim. This gave it a starting capacity of 68Mt/yr in the cement sector. Various smaller additions followed including new plants at Ametha and Dahej and the acquisitions of Asian Cement and Concrete, MyHome Industries and Sanghi Industries. The latter company was the biggest of these purchases. Once the in-progress projects from Penna Cement are built, Adani Group should have a capacity of 93Mt/yr. Another 20Mt/yr is reportedly at various stages of execution. The remaining 27Mt/yr is described as being ‘blueprint ready.’
Generally, the local financial press has been in favour of the transaction agreeing with the geographic advantages of Adani Group increasing its presence in the southern states. The benefits of the high number of railway sidings at Penna Cement’s plants were also commented upon as a means for Ambuja Cements to reduce its costs per tonne of cement. The logistics benefit from the port terminals is also expected by Adani Group’s chief financial officer to reduce the group’s logistics costs with an impact expected within the next year. However, it has been reported that Penna Cement’s operating performance had been weaker in the last financial year due to low sales volumes, poor operational efficiency and high coal costs. A takeover by Adani Group could certainly fix the latter two issues. Yet, it has also been reported that competition in the cement markets in Andhra Pradesh and Telangana is up, due to a mismatch between supply and demand. So, improving Penna Cement’s capacity utilisation in these regions might be harder to solve than simply being absorbed into Adani Group.
India’s two largest cement producers both have plans in motion to mount up production capacity by the end of the decade in what has been dubbed ‘the battle of the billionaires.’ The market leader is UltraTech Cement and it has shown reluctance to cede ground to the cement newcomer Adani Group. The former company’s current target is to make it to just under 190Mt/yr by 2027. It said it had a capacity of 152Mt/yr in May 2024. It is ahead of Adani Group by this measure but there is still plenty of scope for surprises. Given the rivalry between the companies there is a regular stream of speculation about which of the smaller cement producers they might be about to buy at any given time. For example, in October 2023 HeidelbergCement India was rumoured to be courting offers from UltraTech Cement, Adani Group and JSW Cement. Last week, Adani Group was reportedly interested in buying either Saurashtra Cement, the cement business of Jaiprakash Associates, Vadraj Cement or… Penna Cement. Occasionally the rumours are true after all. UltraTech Cement remains in first place for now but the situation may change.
Saudi Arabia: Qassim Cement Company (QCC) has successfully completed the acquisition of Hail Cement Company (HCC) for US$378m. The transaction, initially announced on 25 September 2022, involved increasing QCC's capital to facilitate the acquisition of all HCC shares. The acquisition follows a binding implementation agreement reported by HCC on the Saudi Exchange.
Ambuja Cement to acquire Penna Cement for US$1.2bn
14 June 2024India: Following the news of Adani’s multiple acquisition of cement companies, more details have come to light regarding the acquisition of Penna Cement. Adani-owned Ambuja Cement has signed an agreement to acquire Penna Cement Industries (PCIL) for US$1.2bn, aiming to reach a production capacity of 140Mt/yr by 2028. This acquisition adds 14Mt/yr to Adani Cement's total capacity, bringing it to 89Mt/yr, and expands Ambuja's market presence in southern India. The purchase will be fully funded through internal accruals.
Ambuja Cement CEO Ajay Kapur said "PCIL’s strategic location and sufficient limestone reserves provide an opportunity to increase cement capacity through debottlenecking and additional investment. Importantly, the bulk cement terminals will prove to be a game changer by giving access to the eastern and southern parts of peninsular India, apart from an entry to Sri Lanka, through the sea route."
CRH acquires Adbri in US$1.4bn deal
13 June 2024Australia: CRH has won approval from Adbri shareholders to acquire 57% of the company for close to US$1.4bn. The deal was the result of a unanimous vote in favour on 12 June 2024.
Adbri’s lead independent director and chair of its independent board committee Samantha Hogg said “A combined CRH and Adbri will bring growth opportunities, new talent and innovation to continue to strengthen Adbri’s product offering in Australia.”
India: Adani Group is exploring potential acquisitions of several cement companies including Penna Cement, Saurashtra Cement, the cement business of Jaiprakash Associates and Vadraj Cement owned by ABG Shipyard. The group plans to invest US$3bn in these acquisitions to potentially surpass its rival, UltraTech Cement, within three to four years.
The group is ready to offer an enterprise value of US$85-120/t for these businesses, focusing on those with expansion potential, limestone mines and packing terminals. These acquisitions are part of a strategic push to leverage the ongoing government-driven infrastructure boom, which is expected to increase demand significantly.
India: Dalmia Cement (Bharat) will acquire a 19.2% stake in Amplus Kaveri Solar for US$1.94m. This transaction is subject to customary conditions and is expected to complete within eight to nine weeks.
RAK White Cement encourages shareholders to accept UltraTech Cement’s offer to acquire stake
11 June 2024UAE: The board of RAK White Cement has recommended that its shareholders accept a cash offer from UltraTech Cement for the acquisition of a further stake in the company. Global Cement News reported in May 2024 that UltraTech Cement had offered to acquire 32% of shares in the company. It previously acquired 29% in April 2024.
SigmaRoc to buy CRH's Polish lime operations
05 June 2024UK/Poland: SigmaRoc announced it has entered a share purchase agreement and exercised a call option to acquire the Polish lime operations of CRH. The deal, valued at €100m for deferred consideration, follows SigmaRoc's acquisition of CRH's lime operations in Germany, Ireland, the Czech Republic and the UK. The acquisition includes two production sites in Kujawy and Sitkowka, along with an associated distribution network. Completion is contingent upon clearance from the Polish Competition Office, anticipated by the end of September 2024.
SigmaRoc said it is ‘pleased’ with the progress to date on the integration of the German, Czech, Irish and UK entities, and will provide a further update alongside its interim results for the period ending on 30 June 2024.
UK: Holcim has completed the acquisition of Land Recovery. This acquisition broadens Holcim's access to construction demolition materials, with Land Recovery having recycled over 300,000t in 2023. The deal follows the previous purchase of Sivyer Logistics.
CEO of Holcim, Miljan Gutovic, said "Land Recovery strengthens Holcim’s leading position in circular construction and advances our group target of recycling 10Mt of construction demolition materials in 2024. I look forward to welcoming all 85 employees of Land Recovery and investing in our next era of growth together."
Canada/US: Béton Provincial has concluded a transaction with CRH Canada Group to acquire several assets located in Quebec, Newfoundland, Labrador and New York.
President of Béton Provincial André Bélanger said "This significant milestone highlights the journey undertaken by Béton Provincial since its foundation in Quebec in 1960. We are very proud to see that a 100% Canadian-owned company is now making its mark alongside the major multinational players in its industry.”