Displaying items by tag: Lafarge India

South Africa: Lafarge South Africa has appointed Rossen Papazov as its country chief executive officer (CEO). Papazov will join the company with effect from 1 October 2017, according to Business Report. He has been the country head for Holcim in Azerbaijan for the last four years. Prior to this he originally joined Holcim in 2000 as its Business Development Manager for Bulgaria. He has also held roles in Belgium and Romania.

India: The East Singhbhum district administration has asked for guidelines from the government of Jharkhand regarding the purchase of the Jojobera cement plant by Nirma from Lafarge India. There are no provisions for transfers of leased land to any third party without the prior approval of the state government with relation to agreements struck by Tata Steel, the plants previous owner, said East Singhbhum deputy commissioner Amit Kumar to the Hindustan Times.

"We are seeking state government's guideline on action to be taken over the reported transfer of management and bank accounts of Jojobera Plant here by Lafarge Holcim to Nirma Limited even though they are yet to respond to our notices from July 2016," said Kumar.

Lafarge India has said that the transfer of management and accounts for the Jojobera plant was completed on 6 -7 October 2016 following approval by the Competition Commission of India for the sale. It agreed to sell five cement plants to Nirma for US$1.4bn in July 2016.

India: Officials in Jharkhand have said that the recently announced sale of Lafarge India to Nirma will require state approval to transfer land at the Jojobera cement plant. The East Singhbhum deputy commissioner, Amit Kumar, has been asked to calculate the revenue that the government stands to gain from such land transfer and its registry, according to the Hindustan Times. Previously, the district administration served a notice to Lafarge India on 10 October 2015 when Lafarge India was in talks with Birla Corporation regarding the sale of some of the same assets.

"It's mandatory to seek state government's prior approval for third-party transfer of leased land, in this case leased to Tata Steel. The district administration had informed this to the company, requesting it to seek government's approval," said KK Sone, the state land and revenue secretary. "It has to comply with the administration's notice. Any violation would draw administrative, civil as well as criminal actions."

The Jojobera plant was built on government land leased to Tata Steel. Tata Steel then signed a business transfer agreement for its Jojobera plant with Lafarge India in March 1999.

Another week and another massive Indian cement industry deal. This week Nirma has won the bidding for the assets of Lafarge India that LafargeHolcim is selling. Before we get too carried away though, the diversified conglomerate entered into a letter agreement with LafargeHolcim on 7 July 2016 to pay US$1.4bn for three cement plants and two grinding plants with a total cement production capacity of 11Mt/yr.

It is worth noting that this is only a letter agreement. LafargeHolcim signed one previously with Birla Corporation for some of the same assets in August 2015. Unfortunately, an ambiguous amendment to the Mines and Minerals (Development and Regulation) (MMDR) Act struck in January 2015 made it unclear how easily mineral rights could be transferred with an industrial plant sale. After much likely internal squabbling Lafarge India said it was selling all of its assets in January 2016 followed by threats of legal action by Birla.

Some commentators in the Indian media have flagged the new deal as expensive for Nirma. It will be paying US$127/t for the new capacity compared to the US$118/t that UltraTech Cement is offering Jaiprakash Associates for its laboured deal. The Nirma deal comprises integrated cement plants at Sonadih in Chattisgarh, Arasmeta in Chattisgarh and Chittorgarh in Rajasthan, and cement grinding plants at Jojobera in Jharkhand and Mejia, West Bengal. Other assets include 63 ready mix concrete plants, two aggregate plants and a blending unit.

However, unlike UltraTech, Nirma is a relatively new entrant in the cement industry. Its main industries are in detergents and soda ash manufacture. It invested US$194m in a 2.28Mt/yr cement plant in Rajasthan that was commissioned in November 2014. It also ran into environmental issues over a proposal to build a new cement plant at Mahuva in Gujarat. One report compiled under request by the Indian Supreme Court in 2011 cited the presence of Asiatic lions as a reason for concern!

Lions aside, Nirma may be paying over the odds for its new cement business but it will gain a bigger presence in the industry quickly and diversify from its other existing industries in which it faces fierce competition. The Lafarge India plants are mostly in eastern Indian states compared to Nirma’s plant in Rajasthan in the west, giving it a reasonable geographic spread.

Nirma reportedly plans to finance the purchase through a leveraged buyout and the Mint business newspaper has described this as the largest transaction of its kind in India to date. The risk here will be how the Indian cement market plays out in the short term. LafargeHolcim reported that its cement volumes fell in 2015, although this has since picked up in the first half of 2016. UltraTech did better in its 2015 – 2016 financial year but it reported a slow construction market. Longer-term demographic trends suggest that the cement industry will grow, especially in the east of the country. With this in mind it may be a while before Nirma’s cement business roars.

India/Switzerland/UK: The five bidders that gave their final bids for Lafarge India’s 11Mt/yr cement business have been called to London, UK for the final leg of discussions, which started on 7 July 2016. Multinational bidders, including Mexico’s Cemex and China’s Anhui Conch, are believed to have bid aggressively. Domestic bidders Ajay Piramal Group, Nirma and Sajjan Jindal-led JSW Cement also submitted bids earlier in the week.

The bids are in the range of Euro1.19-1.33bn, which implies an enterprise value of US$108-121/t, comparable to UltraTech’s recent acquisition of JP Group’s cement assets for US$116/t.

“This discussion in London could take three to four days to finalise,” said a banker familiar with the development. “The winner will be decided not just on the price quoted for assets but also other conditions for the bid,” he said. Once the winning bid is decided, an exclusivity agreement will be signed with the bidder and it will take around three months to complete the deal.

Dalmia Cement (Bharat) threw a spanner in the works of the sale of Lafarge India this week. The cement producer, part of Dalmia Group, appealed against the Competition Commission of India’s (CCI) revised approval of the sale in February 2016. Dalmia challenged the CCI’s approval on procedural grounds querying both the revised and original order for the sale. Subsequently the sale has been delayed until a hearing in May 2016.

Dalmia’s objections concern how the CCI’s original approval in March 2015 interacts with the revised approval given in February 2016. Lafarge India was originally asked by the CCI in February 2015 to sell off 5.2Mt/yr of cement production capacity in Chhattisgarh and Jharkhand in eastern India. The request was a condition to allow the merger of Lafarge and Holcim in the country. Lafarge lined up Birla Corporation to buy the two cement plants but an ambiguous amendment to the Mines and Minerals (Development and Regulation) (MMDR) Act killed the deal. Then Lafarge India, a subsidiary of LafargeHolcim, announced that is was selling all of its assets in India. This includes three cement plants and two grinding stations with a total capacity of around 11Mt/yr.

Dalmia’s appeal may be planned to slow down the sale of a rival in the Indian cement business. Dalmia Group is the fifth largest cement producer in India with a capacity of 14.5Mt/yr. Lafarge India is, to an extent, a lame duck rival whilst the legal wranglings drag on.

However, the appeal may have a more serious side. A statement from the lawyers representing Dalmia also mentioned a challenge against the purchase requirements from the original CCI approval in March 2015. Specifically that any purchaser, “shall not have (directly or indirectly) operational capacity exceeding 5% of the total installed capacity in the relevant geographic market.” The confusion here is where that ‘relevant’ area refers to.

Originally the CCI designated this as Chhattisgarh, Odisha, Jharkhand, Bihar and West Bengal. And unsurprisingly, Dalmia holds more than 5% of production capacity in that region. If the CCI expands the relevant geographic area to more regions of the country then Dalmia’s market share is likely to fall. Local media reported that a bid for the Lafarge India assets by private equity firm KKR, which holds equity in a Dalmia subsidiary, was denied by the CCI. Cue the legal challenge.

It seems unlikely that the appeal by Dalmia will slow the sale down too much. If it is accepted then the CCI will have to reissue its approval for a second time and the sale will be delayed by a few months. If it is denied then the sale will proceed after a delay of one month. Either way the affair demonstrates how prized the Lafarge India assets have become. Indian local media reported that at least nine bids were made. It will be fascinating to see the price the winning bid makes when it is released.

India: The Competition Appellate Tribunal has delayed the sale of Lafarge India following an appeal by Dalmia Cement Bharat. The sale has been halted until a hearing on 9 May 2016.

"Operation of order dated 2 February 2016 passed by the Competition Commission of India (CCI)... shall remain stayed," the COMPAT order passed by its chairman GS Singhvi said. LafargeHolcim has been asked to reply to Dalmia's appeal before the hearing in May 2016.

Lafarge India is selling all of its assets in India including a cement production capacity of 11Mt/yr. It received approval from the CCI in February 2016.

India: LafargeHolcim has received nine non-binding offers for its subsidiary Lafarge India. The bidders include multinational cement producers CRH, HeidelbergCement and China Resources. Local companies which have made bids include JSW Infrastructure, Piramal Enterprises and Ramky Infrastructure, which have deals with private equity firms CVC Capital, Goldman Sachs Private Equity and Carlyle respectively. Blackstone, Baring Asia and CPPIB have also submitted a bid as part of a consortium. Bain Capital and Advent International have also submitted their bids individually, according to Business Standard.

Following a shortlisting and due diligence process a final bid will be selected. A final bidder is expected to be announced by the end of June 2016.

India: Ajay Piramal, the Indian businessman and chairman of Piramal, has started talks with Lafarge India to buy its assets, according to sources quoted by the Economic Times. Speculation has followed Piramal since he sold his pharmaceuticals business for US$3.8bn in 2010. If completed, the move would mark a diversification from Piramal’s healthcare, financial services and information management businesses.

Piramal and Lafarge India separately declined to comment on the issue. Lafarge India is selling all of its assets in India including a cement production capacity of 11Mt/yr.

Small print can cause large consequences. Billion US Dollar consequences. Take the 2015 amendment to India’s Mines and Minerals (Development and Regulation) (MMDR) Act from 1957. Ambiguous wording in the legislation may have held up two prominent cement industry acquisitions in 2015. It also hangs over the recently announced purchase by UltraTech Cement of Jaiprakash Associates’ cement plants.

The MMDR was amended in January 2015. As the Times of India explained in mid-2015, a clause in the amendment said, “The transfer of mineral concessions shall be allowed only for concessions which are granted through auction.” However, it was unclear whether this meant historically allocated mines given via nominations or only newly allocated ones. Given the reliance of clinker plants on reliable mineral reserves this caused havoc. Cue confusion and large legal budgets.

LafargeHolcim’s divestment of two cement plants to Birla Corporation was one casualty. As a condition of the merger between Lafarge and Holcim the Competition Commission of India (CCI) required that the Jojobera and Sonadih cement plants in Eastern India be sold in 2015. Together the plants have a combined cement production capacity of 5.1Mt/yr. However the ambiguity over the 2015 MMDR Act clause on transfer of mining rights held the deal up. By February 2016 Birla Corporation had endured enough. It publicly complained about Lafarge India’s ‘inability’ to complete the deal and threatened legal action. LafargeHolcim retorted by asking the CCI if it could sell all of Lafarge India instead. It received the revised clearance and a new buyer is yet to be announced.

Another victim was UltraTech Cement in a previous attempt to buy Jaiprakash Associates’ cement assets. That time it was down to buy two integrated cement plants in Madhya Pradesh with a combined clinker production capacity of 5.2Mt/yr with associated mineral rights. The deal was agreed in December 2014 and then reported delayed in mid-2015. Finally, on 28 February 2016 the Bombay High Court rejected the deal, citing the MMDR Act as the prime cause.

Luckily for UltraTech Cement the story has a happy ending (so far) as it then announced that it was purchasing the majority of Jaiprakash Associates’ 22.4Mt/yr cement portfolio instead for US$2.4bn. It is hoped that the deal will be finalised by June 2017 but this partly depends on the MMDR Act being amended. Although UltraTech Cement have said they are looking at alternative routes to the deal in case the act isn’t amended.

Poor legal wording kiboshed at least two cement industry deals for over 10Mt/yr production capacity. Roughly, at the price UltraTech Cement is paying for its latest deal, that’s over US$1bn worth of Indian cement assets. Given the hard time the Indian cement industry had in 2015 the question should be asked regarding how much damage the MMDR Act amendment has done. One option for the beleaguered industry is to consolidate and cut its costs. This was massively delayed in 2015.

The proposed 2016 amendment to the MMDR Act reads as follows:

“Provided that where a mining lease has been granted otherwise than through auction and where mineral from such mining lease is being used for captive purpose, such mining lease will be permitted to be transferred subject to compliance with the terms and conditions as prescribed by the Central Government in this behalf.”

Let’s hope it does the trick this time.