Mumbai/Calcutta | Feb 04, 2016:

Birla Corporation is looking to acquire the cement assets of Reliance Infrastructure, an Anil Ambani group company. The announcement comes two days after French cement major Lafarge scrapped a deal with the flagship MP Birla group company to sell its cement units and limestone mines.

Birla Corp will acquire the entire business of Reliance Cement Company, a wholly owned subsidiary of Reliance Infrastructure, at an enterprise value of Rs 4,800 crore. The acquisition, funded through existing cash reserves and incremental debt, needs the approval of the Competition Commission of India and other regulatory authorities.

The acquisition will expand both Birla Corp's cement capacity, to 15.5 million tonnes (mt) per annum from 10mt, and geographical presence. Reliance Cement has a capacity of 5.5mt with units at Maihar, Madhya Pradesh, Kundanganj, Uttar Pradesh and Butibori, Maharashtra. The deal values the business of Reliance Cement at $140 per tonne, which an analyst said was reasonable.

The Reliance-Birla Corp deal is almost similar in value and capacity Birla Corp's agreement with Lafarge. The deal could not go through as the mining lease could not be transferred to Birla Corp along with Lafarge's cement units.

The amended Mines and Mineral Development and Regulation (MMDR) 2015 Act only allows the transfer of mineral concessions which were granted through an auction. Birla Corp had said it would pursue legal options against Lafarge.

In Reliance Cement, Birla Corp is buying the entire company, which will expand its mineral concession in states such as Madhya Pradesh, Maharashtra, Rajasthan, Karnataka, Andhra Pradesh and Himachal Pradesh. Birla Corp will also benefit from Reliance Cement's captive coal mine. Reliance Cement had won the Sial Ghoghri coal block in the auction last year.

"Reliance Cement fits our plans to grow the business profitably very well and offers lucrative prospects for creating synergy with existing operations. It provides an excellent platform for increasing our footprint in existing as well as new geographies,'' said Birla Corporation chairman Harsh Lodha.

The Calcutta-based company has units in Rajasthan, Madhya Pradesh, Uttar Pradesh and Bengal. Cement constitutes over 90 per cent to its revenue.

Birla Corp had appointed Axis Capital as the financial adviser and Nishith Desai Associates as counsel, while Deloitte did the financial and commercial due diligence. SBI Capital Markets was the adviser to Reliance Infra.

The deal comes on a day Lafarge announced its decision to divest its entire capacity of 11mt in the country. It is an alternative divestment strategy as part of the merger with Hocim.

"The alternative remedy is now under consideration by the CCI. The group remains in dialogue with the CCI," Lafarge Holcim said in a statement.

Reliance Infrastructure in November had announced its plans to exit the cement business to bring down debt and focus on the defence sector. It had shortlisted seven potential buyers from 15 interested entities. Apart from Birla Corp, Blackstone, KKR, Carlye and Baring Private Equity Asia had shown interest.

(Source: http://www.telegraphindia.com/)