MUMBAI/KOLKATA | Aug 18, 2015: Birla Corp agreed to acquire two cement units of Lafarge India that the French company has to sell to conclude its global merger with Holcim, beating several multinational giants and bulge-bracket private equity suitors that were also in the running. Investors applauded the move with Birla Corp surging by 20% to Rs 540.25 on the Bombay Stock Exchange.
The two assets in eastern India — Jojobera in Jharkhand and Sonadih in Chhattisgarh — are being sold through a slump sale for an enterprise value of Rs 5,000 crore, Birla Corp said on Monday.
The transaction will be funded through existing cash reserves and incremental debt and is subject to approvals, including clearance from the Competition Commission of India.
Under the deal, Birla Corp will acquire an integrated cement unit at Sonadih, a cement grinding unit at Jojobera and the Concreto and PSC brands along with the management team. The plants have a total cement capacity of 5.15 million tonnes per annum (MTPA) with mineral rights over adequate reserves of limestone.
Established in 1919, Birla Corp is part of the MP Birla Group with a presence in cement and jute. Cement accounts for more than 90% of revenue with a total operational capacity of 10 MTPA through units in Rajasthan, Madhya Pradesh, Uttar Pradesh and West Bengal.
Birla Corp will look to derive synergy and cost savings through consolidation of capacity. The company already has a 2.3 MTPA grinding unit in Durgapur. On completion of the deal, its footprint in the east will go up to 7 MTPA, giving it an edge over others. The acquisition fits "perfectly... into our strategic vision and ambition of enhancing our competitiveness in our chosen markets", said Birla Corp Chairman Harsh Lodha. "I am glad to welcome new talent and leaders to our group who share our convictions and professional culture."
Birla Corp will use Rs 1,500 crore of the Rs 1,700 crore of cash and cash equivalent on its books to fund the acquisition. Additional debt of approximately Rs 3,500 crore will be raised from a consortium including Deutsche Bank, Axis Bank, State Bank of India and IndusInd Bank, among others, merchant banking executives said.
The company had total debt ofRs 1,302 crore as of FY15 but generated an operating profit (earnings before interest, taxes, depreciation & amortisation, or EBITDA) of Rs 288 crore and net profit of Rs 175 crore in the last fiscal year.
(Source: http://economictimes.indiatimes.com/)