Displaying items by tag: Merger

Consolidation in the Indian cement sector continued through December 2024. UltraTech Cement completed its acquisition of a larger stake in The India Cements late in the month. Then, this week, Nuvoco Vistas said that it was preparing to buy Vadraj Cement. Along similar lines, JK Lakshmi Cement also confirmed that it was moving ahead with the merger of its cement-related subsidiaries.

The UltraTech Cement deal was approved by its board of directors in July 2024 but it took until 24 December 2024 before it formally completed the purchase of an additional 33% stake in The India Cements. The deal was valued at around US$460m in mid-2024 by local press. UltraTech Cement now owns just under a 55% stake in the company and is its majority shareholder. Back in July 2024 UltraTech Cement said that The India Cements had a total production capacity of around 14.5Mt/yr of ordinary Portland cement (OPC). Just under 13Mt/yr of this is based in the south of the country, mostly in Tamil Nadu, and 1.5Mt/yr is in Rajasthan.

The Nuvoco Vistas announcement follows a bidding process to acquire Vadraj Cement through a corporate insolvency process. Key parts of the deal include taking control of Vadraj Cement’s 6Mt/yr grinding plant in Surat and its 3.5Mt/yr integrated plant in Kutch. Both plants are in Gujarat. The agreement also includes limestone mining rights in the state and a captive jetty near the Kutch plant. However, the expression of interest for the insolvency proceedings, published in March 2024, revealed that the company’s operations have been suspended for five years. The grinding plant and the jetty were described as ‘partially constructed.’ Nuvoco Vistas has not disclosed how much it had bid to pay for the company, although it was keener in its press release to state that the transaction would see it become the fifth largest cement producer in India. It says that its cement production capacity will rise to 31Mt/yr; 19Mt/yr of this in the east, 6Mt/yr in the north and 6Mt/yr in the west. Synergies are also hoped for when the new assets are combined with Nuvoco Vistas’ current plants at Nimbol and Chittorgarh in Rajasthan.

Compared to the previous two news stories, the JK Lakshmi Cement merger plan is on a smaller scale but it follows the same trend. The cement producer presented its corporate restructuring plan to its shareholders in July 2024. It wants to merge JK Lakshmi Cement, its main cement company, with Udaipur Cement, Hidrive and Hansdeep. JK Lakshmi Cement runs two integrated cement plants at Sirohi, Rajasthan, and Durg, Chattisgarh respectively. It also operates what it calls ‘split location grinding’ plants at Kalol and Surat in Gujarat, at Jhamri in Haryana and at Cuttack in Odisha. Udaipur Cement operates one integrated plant in Rajasthan, Hidrive owns land next to the group’s Surat unit and Hansdeep is a preferred bidder for limestone resources in Nagaur, Rajasthan. The group’s clinker and cement production capacities are 10Mt/yr and 16.4Mt/yr. Its rationale is to gain synergies from production, distribution and logistics, to simplify the corporate structure, to improve efficiency and to raise shareholder value. That last one might be particularly useful for a cement producer looking to expand or sell in the future.

Further mergers and acquisitions are expected to happen in 2025 but at a slower rate than in 2024. Part of the dynamic so far has been that the highest demand is in the east and the highest capacity is in the south. Many of the deals announced in 2024 focused on markets in the south of the country. By contrast, analysts quoted in the Economic Times at the start of 2025 anticipate that new transactions might start to move to other regions. Obvious potential targets include Jaiprakash Associates and Heidelberg Materials. The first company became insolvent in 2024 and is likely to be sold off. Rumours of a potential purchase of the second company by Adani Group in the autumn hit the local press in October 2024. Doubtless there are other less visible possibilities too if the price is right. Read Global Cement Weekly in 2025 to find out what happens.

India: JK Lakshmi Cement will merge three of its subsidiaries, Udaipur Cement Works, Hansdeep Industries and Trading, and Hidrive Developers and Industries, into its operations. Under the scheme of amalgamation, Udaipur Cement Works’ shareholders will receive four JK Lakshmi Cement shares for every 100 shares held. The merger will ‘simplify the group structure’, making ‘one combined entity focused in the business of cement and cement products’, according to The Business Standard.

India: Ambuja Cements will merge its recently acquired companies, Sanghi Industries and Penna Cement Industries. Ambuja Cements purchased Sanghi Industries in December 2023 and Penna Cement in August 2024. Ambuja Cements holds a 58% share in Sanghi Industries and 99.94% share in Penna Cement. The transaction is expected to be completed within 9-12 months, according to the Deccan Herald.

Adani Group’s latest target for acquisition in the cement sector was revealed this week to be Heidelberg Materials’ India-based business. The Economic Times newspaper reported that talks have started between the companies with a tentative value of US$1.2bn. As might be expected, Adani Group is said to be keen to close the deal down quickly. It wants to avoid an auction situation where it might face competitors. However, there may be some disagreement about the actual production capacity of Heidelberg Materials’ companies in India. If a deal were finalised, it might be completed by early 2027.

Heidelberg Materials’ capacity in India was listed as 14Mt/yr by the press but this could include the company’s grinding plants as well as its integrated ones. Heidelberg Materials, itself, says it has a capacity of 12.1Mt/yr from three integrated cement plants, four grinding plants and a terminal across 12 states. Data from the Global Cement Directory 2024 suggests that this refers to the group’s integrated cement capacity. The plants are roughly split equally between subsidiaries Heidelberg Materials India and Zuari Cement. Heidelberg Materials entered the Indian market in 2006 when it acquired Mysore Cement, Cochin Cement and established a joint-venture with Indorama Cement. It later added Zuari Cement to its portfolio when it bought Italcementi in 2016. The group used to run four integrated plants in India until in May 2024, when it shut down clinker production at its Ammasandra plant in Karnataka, although grinding activity has continued at the site.

Back in 2021 Heidelberg Materials’ CEO Dominik von Achten said that the group had considered selling anything following a business review. "There are no sacred cows. Everything was on the table." Indonesia was generally perceived by analysts as a likely sale target in the developing markets but nothing happened in the end. India wasn’t mentioned at this time, although no doubt it was being considered. Yet Holcim divested its businesses there in 2022. These were picked up by Adani Group for US$6.4bn. This, in turn, kicked off the rivalry in the Indian cement sector between market leader UltraTech Cement and Adani Group. Both companies are now in a race to build production capacity through expansion, new plants and acquisitions.

One reason why Heidelberg Materials may have decided now in particular to talk to Adani Group can be seen in its recent financial reports. In 2023 it said that its “cement and clinker deliveries increased moderately, as massive excess capacities persist in our core markets.” It then followed this up in 2024 by noting that deliveries were slightly down year-on-year in the first half of the year. It blamed this on excess capacity in South India. The subsidiary reported a net loss of €6.3m in 2023. An article by Holtec Consulting in the October 2023 issue of Global Cement Magazine implied that capacity utilisation was 56% in 2023, the lowest of the country’s regions. This is a particular problem for the company given that Zuari Cement is based in the south.

Funnily enough, a sale of 12.1Mt/yr capacity for US$1.2bn suggests a price of US$99/t, a similar figure to what Adani Group paid to buy Holcim’s assets in India in 2022. This may explain why Adani Group is trying to avoid an open sale for the Heidelberg Materials assets. Then again, maybe the market in southern India really is suffering. By comparison, when Adani Group concluded a deal to buy Penna Cements in August 2024 it paid US$1.2bn for an integrated capacity of about 7Mt/yr or around US$170/t. Factor in the low capacity utilisation rate in south India and this potential Adani-Heidelberg Materials deal ends up at roughly the same price.

Something that may help Adani Group reach its goal might be a formal merger between its two main cement companies, Ambuja Cements and ACC. The Mint newspaper reported on it this week, saying that Jefferies and Axis Capital has been hired as an advisor. This certainly makes sense in synergy savings but moving all the mining and leasing rights around might prove cumbersome. Regardless, Adani Group is on an expansion drive, with a capacity of 140Mt/yr targeted by 2028. All the smaller cement companies in the country are potentially targets.

India: Adani Group is considering a merger of Ambuja Cements and ACC into a single entity, Adani Cement, by 2028. Mint News has reported that the group, which began integrating the operations of the two companies recently, may also include Sanghi Industries in the merger. The proposed merger would involve a share swap between the companies, with all existing brand identities retained.

CRH, formerly Cement Roadstone Holdings, announced this week that CEO Albert Manifold is retiring at the end of 2024. He will be replaced by current chief financial officer Jim Mintern in the role. Manifold will continue to work as an advisor to CRH in 2025. Manifold’s time at the head of CRH marks a decade of considerable change at the group. Crudely, CRH had a market capitalisation of US$19bn at the start of 2014 when Manifold became CEO. At the end of 2023 the group’s market capitalisation was US$50bn.

From a cement sector perspective the big events during Manifold’s tenure include CRH’s acquisition of assets around the world from the Lafarge-Holcim merger in 2015, the purchase of Ash Grove Cement in the US in 2018, the divestment of various businesses in emerging markets and the move of the company’s primary listing to the New York Stock Exchange in 2023. However, at the same time, CRH has been constantly sharpening its portfolio. So, for example, the group bought Germany-based lime and aggregates company Fels in 2017 only to later sell off its European lime business in 2023 and 2024. In the late 2010s the group sold off its US and Europe-based distribution businesses. Then, in 2022, it divested its Building Envelope business. Manifold was also the inaugural president of the Global Cement and Concrete Association (GCCA) when it formed in 2018.

Fairly or unfairly, CRH has given the sense over the last decade of often being ahead of the curve in following the cement markets. After it increased its portfolio when Lafarge and Holcim merged, it sold up relatively quickly in India and Brazil. Famously during an earnings call for CRH’s second quarter results in 2019, Manifold said that the group was prioritising its businesses in the developed world. CRH’s focus on the US in the late 2010s through the acquisition of Ash Grove Cement set it up well for the current strength of the cement market in North America, long before others joined the party. Another striking Manifold statement came at the company’s annual general meeting in 2023 when, in the run-up to the US listing move, he described his company as a ‘de facto’ American company.

Things that may have gone less well for Manifold on the cement side, that we know about, include CRH’s quiet attempt to divest its business in the Philippines in the late 2010s. The company wasn’t alone in trying through. Holcim publicly said that it had signed a deal to sell its local business in 2019 only to declare that it wasn’t happening the following year. Cemex is currently in the process of selling its subsidiary in the country, DMCI Holdings, but it hasn’t concluded yet. More recent acquisitions such as assets from Martin Marietta Materials in Texas in early 2024 and a majority stake in Adbri in Australia are clearly strategic and fit the definition of ‘bolt-on’ but they seem to lack the grand ambition of the earlier big deals.

Questions have also been asked about Manifold’s pay over the years. From 2016 onwards the Institutional Shareholder Services (ISS), for example, has repeatedly raised concerns about executive pay rises at CRH and recommended on occasion that shareholders reject them. Manifold became the highest paid head of an Irish public company and was reportedly the third highest paid CEO on the Financial Times Stock Exchange 100 Index (FTSE 100) in 2022. His response from one interview with the Irish Times newspaper in 2018 was simply: “I’m employed and paid very well to deliver shareholder returns.”

Looking back over the last decade, CRH was well placed to take advantage of the Lafarge-Holcim merger before Manifold started in 2014 but once he was in place it went for it and he led the charge. Yet, the Ash Grove Cement acquisition may prove to be the more momentous move given the current divergence of the European and North American markets. As readers may remember from the time, Summit Materials made a public counter offer but it was rebuffed. Albert Manifold was in charge of CRH and so he takes the credit. These are big shoes to fill. As Richie Boucher, the chair of CRH said in Manifold’s outgoing statement, “Under Albert’s leadership CRH has delivered superior growth and performance with consistently improving profitability, cash generation and returns.”

Saudi Arabia: The crowded cement sector in Saudi Arabia is experiencing tensions due to its varying market shares, according to Majed Al Osailan, vice chair of the National Cement Committee. He noted that despite initial slow demand, renewed spending on construction has led to a shift, with most companies now able to meet market needs. The cement sector saw its first merger between Qassim Cement and Hail Cement, according to Argaam news, with another planned between City Cement and Umm Al-Qura Cement. NCC chair Badr Johar said that demand for cement is expected to strengthen substantially from late September 2024 to February 2025.

Namibia: The Namibian Competition Commission (NaCC) has imposed a US$269m fine on two companies for completing a merger without prior approval. The acquisition of Hong Xiang Holdings’ shares by Wang Zhongke from Fan Qingmei led to the companies being fined after an investigation found that the merger would create a monopoly in the cement market. NaCC spokesperson Dina Gowases stated that the merger failed to meet the notification requirements under the Competition Act, aimed at safeguarding competitive markets crucial for the construction industry and the national economy. The settlement also requires the companies to implement a competition law compliance programme in Namibia.

India: JK Lakshmi Cement board has approved a corporate restructuring to merge three subsidiaries: Udaipur Cement Works, Hansdeep Industries and Trading, and Hidrive Developers and Industries. The merger is due for completion on 1 April 2025.

Saudi Arabia: Southern Province Cement and Yanbu Cement have signed a non-binding memorandum of understanding to evaluate a potential merger. The due diligence process will assess various aspects including operational, technical, financial, legal and actuarial factors, according to Mubasher.

The memorandum was signed on 23 June 2024 and is set to expire in 12 months unless a merger agreement is reached beforehand. The feasibility of the merger will depend on agreement on final terms, regulatory approvals and endorsements from both companies' general assemblies.