Displaying items by tag: Acquisition

India: UltraTech will create a separate corporate structure for the cement assets of Jaiprakash Associates it has agreed to buy if a key mining law is not amended by June 2016. An amendment to the Mines & Minerals (Development & Regulation) (MMDR) Act in 2015 suggested that the transfer of mining rights could only be passed by auction, leading to delays in several mergers and acquisitions in the cement industry.

"We have considered both scenarios. If the amendment goes through, it is a clear asset purchase. If not, there are structures we have in mind, with which we will be able to do the deal," said Atul Daga, chief financial officer of UltraTech to the Hindustan Times. He added that the deal is not entirely linked to the mining amendment. "The agreement is for specific assets. It's more about how you structure it. I do not want to comment on the structure until the closure of the definitive agreement."

If the MMDR Act amendment is not approved, Jaiprakash Associates will need to create a separate entity out of the assets being sold to UltraTech, for the deal to proceed. However, it will refinance Jaiprakash's borrowings at lower rates if the MMRDA amendments get approved.

UltraTech announced in late February 2016 that it was purchasing the majority of Jaiprakash Associates’ 22.4Mt/yr cement portfolio instead for US$2.4bn.

India: Members of the Birla family have challenged the take-over of the Reliance Infrastructure in the Calcutta High Court claiming that it was done without the consent of the family or the court. The move follows a prolonged legal battle in 2004 between the Birla family members and chartered accountant R S Lodha. Lodha claimed that M P Birla's widow Priyamvada had bequeathed the assets of the estate to him. The matter is still being contested legally.

Representatives for Birla Corporation defended the purchase saying that the funds were not being taken from the estate and that it was being done through internal accrual and other sources. They added that the US$715m take-over would be a 'sweet deal' as the assets of the Reliance Infrastructure cement company were new. The deal was announced in early February 2016.

India: UltraTech Cement's US$2.5bn proposed acquisition of Jaiprakash Associates' cement plants is expected to be completed by June 2017, according to UltraTech Cement.

"We have to ink definitive agreements and get permission from the High Courts. This will take time. The firm expects the agreement to be finalised in the next 12 - 15 months. Expect it to consummate by June 2017," said UltraTech Cement Chief Financial Officer Atul Daga.

Daga added that UltraTech is also looking at alternative routes in case proposed amendments to the Mines and Minerals (Development and Regulation) (MMDR) Act do not happen. In February 2016 the government took views from public, states and industry on amending the MMDR Act to include provisions allowing transfer of captive mines granted through procedures other than auction.

The transfer of captive mining leases, granted other than through auction, would allow banks and financial institutions to liquidate assets where a company or its captive mining lease is mortgaged. The move will allow mergers and acquisitions in the Indian domestic market, especially in the cement sector, in which several deals are currently on hold.

UltraTech Cement signed a Memorandum of Understanding to buy Jaiprakash Associates’ cement plants in late February 2016. Altogether, the cement plants have a total cement production capacity of 22.4Mt/yr.

India: UltraTech Cement has signed a Memorandum of Understanding to buy Jaiprakash Associates’ cement plants, which have a total cement production capacity of 22.4Mt/yr. The deal includes both integrated cement plants and cement grinding plants. The plants are situated in Madhya Pradesh, Uttar Pradesh, Himachal Pradesh, Uttarakhand, Andhra Pradesh and Karnataka.

The acquisition also includes a 4Mt/yr cement grinding plant being built in Uttar Pradesh. UltraTech will pay an additional US$68.7m for this plant once it is completed. The deal will increase UltraTech’s total cement production capacity to 90.7Mt/yr from 68.3Mt/yr. The transaction is subject to regulatory approval.

South Korea: The South Korean private equity fund Glenwood Private Equity will join with Hong Kong-based private equity fund Baring Private Equity Asia to buy Lafarge Halla Cement from LafargeHolcim for US$455m, according to investment bank sources.

According to investment bank industry sources on 11 February 2016, Glenwood PE, a preferred bidder of Lafarge Halla Cement, has notified LafargeHolcim that it selected Baring Private Equity Asia as a joint takeover partner. The group will decide whether to give a final nod to the acquisition proposal ahead of its shareholders’ meeting scheduled in March 2016.

Glenwood PE will likely establish a strategic partnership with a local cement company after it buys Lafarge Halla Cement. The possible cement companies include Sungshin Cement Co. with a 12.9% market share as of 2014 or Hanil Cement, which had a 13.6% market share in 2014. The combined market share of Lafarge Halla Cement (12.1%) with either of the cement companies would top the 19.8% share held by the current South Korean market leader Ssangyong.

Germany: Hengst has acquired all the shares of the Danish filtration specialist Nordic Air Filtration. The Münster-based filtration manufacturer said that the acquisition was part of its growth strategy.

"Nordic Air Filtration's entire product portfolio is an excellent complement to our current expertise in the field of industrial filtration. Our goal is to expand our activities in the non-automotive market further and to transfer our competence and technology as a partner in the automotive industry to filtration applications in these related segments," said owner Jens Röttgering.

Nordic Air produces industrial air filtration systems and it supplies dealers and original equipment manufactures worldwide. The company has three locations in Denmark and in the UAE and employs around 100 staff who generate sales of over Euro15m/yr. Nordic Air Filtration has a very large portfolio of around 4000 different filter products and more than 20 different filter media for gas turbines and industrial applications. André Radley Grundahl, who was formerly Managing Director of Nordic Air, will continue to oversee business operations.

India: Sagar Cements is in advanced talks to buy Jaypee Group's Andhra Cements. JSW Cement is another potential contender. The enterprise value of the deal is expected to be around US$162 – 169m, a steep discount of about 30% in comparison with recent cement deals.

Andhra Cements has two plants in Andhra Pradesh with a combined capacity of 2.6Mt/yr. It also has a 25MW captive power plant under construction. It had a debt of US$118m at the end of its 2015 fiscal year. If the deal transpires at US$162m, it will translate into an enterprise value of US$64/t of cement capacity. This is lower than the average valuations of US$100/t of the recent deals in the sector.

"We would like to clarify that, though the company does hold discussions internally now and then in an informal way on expanding its operations through organic and inorganic routes, no particular entity has yet been identified for a possible acquisition," said an Andhra Cements spokesperson.

For Sagar Cements, the deal presents several long-term synergies. The acquisition will enhance its current capacity of 3.8Mt/yr by 2.6Mt/yr. Secondly, Sagar Cements will add the capacity at a time when the creation of two new states, Telangana and Andhra Pradesh, is expected to generate an incremental cement demand of 30Mt in the region in the next five years.

Germany: HeidelbergCement has successfully issued debt certificates in the amount of Euro625m, further strengthening its financing structure. Due to high demand, it was possible to significantly increase the issue volume from Euro400m to Euro625m.

The newly-issued debt certificates, with a maturity date of 20 January 2022, consist of two tranches; one tranche with a floating rate and the other with a fixed rate. The fixed rate tranche yields at 1.85%/yr and the floating tranche at 1.5%/yr over six months Euribor.

The proceeds will be utilised to pre-fund the upcoming Italcementi acquisition and thereby reduce the volume of the bridge financing from Euro3.3bn to Euro2.7bn. The refinancing needs in the bond market decline to below Euro2bn, correspondingly.

Issuance of the debt certificates was secured with the assistance of Landesbank Baden-Württemberg, Landesbank Hessen-Thüringen and Raiffeisen Bank International.

As previously reported, the bridge financing should be refinanced by free cash flow, the sale of production sites and the issuance of bonds. The reduction in the volume of bridge financing thus also reduces the need for refinancing in the bond market by the same amount.

India/Ireland: CRH has decided to bid on the 11Mt/yr of cement assets up for sale by Lafarge India, according to local media. This follows CRH's acquisition of US$7bn of assets from Lafarge and Holcim in 2015 that were available as a result of their merger.

CRH is already present in India via its 50% stake in My Home Industries (MHI), which has 4.8Mt/yr of cement production capacity. In 2013, MHI acquired Sree Jayajothi Cements, which has 3.2Mt/yr of production capacity in the south of India.

Kenya/India: UltraTech Cement Ltd may buy a controlling stake in Kenya's ARM Cement Ltd. ARM announced on 23 December 2015 that it was in talks with an unidentified institutional investor about a US$125m investment.