Share prices of Ambuja Cements and ACC settled with almost 6% gains on Monday after both the companies decided to explore a potential merger between them. The Ambuja Cements stock rallied the most on Nifty 50 after parent company LafargeHolcim decided to explore the possible merger. The stock rose nearly 10% on NSE during the day trade – its biggest intraday gain since November 2015. However, the stock pared initial gains and settled at Rs 260.75, up 5.8%. The stock of ACC gained 3.57% to close at Rs 1,714.40 on BSE. Intra-day, it soared 5.95% to Rs 1,753.85 – its 52-week high.
On Nifty, it was the third-best performer, rallying to a 52-week high before closing 3.08% up at Rs 1,711.25. The market valuation of ACC rose by Rs 1,110.25 crore to Rs 32,194.25 crore and that of Ambuja surged Rs 2,879.63 crore to Rs 51,785.63 crore. Ambuja Cements and ACC, in their respective board meetings on Friday, agreed to commence an evaluation of a potential merger of the companies which could enable both of them to combine their strengths of their businesses so as to benefit all stakeholders.
A special committee of independent directors has been constituted. “No decision to merge has been taken at this stage and the same will be considered by the board once a recommendation is received from the special committee of directors and the audit committee,” the companies said in exchange filings.
Market experts observe that the merger of two LafargeHolcim group companies makes sense as synergy will be achieved across many fronts including logistics, manpower, distribution, and raw material sourcing, among others, for the combined entity.
In an investor note, foreign brokerage Goldman Sachs, which has a neutral rating on ACC, observed: “The possible merger with Ambuja will create a cement company with a combined capacity of 63m tonne, 14% of total capacity in India.”