Lafarge made the cut with a revised and final bid offering a `business value' Rs 550 crore, and pipped rival bidders ACC, Grasim Industries and Larsen & Toubro in the process to the post.

The bid citing the `business value', subject to variation in the division's net working capital, was finally submitted to the Tata Steel board in `early December', revising a previous indicative bid, said a senior official of DSP Merrill Lynch, the M&A advisor to Lafarge on the deal.

The French giant which has 75 million tonnes of cement capacity worldwide made the final bid just days before the Tata Steel board was to meet on Friday to take a final decision on the sale of the division, sources familiar with the deal said.

The acquisition will mark the entry of the $11-billion major in India and the first by any multinational into the world's fourth-largest market.

Tisco had earlier put in a reserve price of Rs 540 crore to Rs Rs 600 crore for the division.

Both Tata Steel and Lafarge issued press releases announcing the Tata Steel board's decision, taken at a meeting in Mumbai on Friday, to accept the offer from Lafarge. Jardine Fleming advised the Tatas on the sale.

Explaining the term `business value', a senior DSP Merrill Lynch official said it should not be confused with asset value, but that is also includes the net working capital burden and any other associated debt transfer to Lafarge along with the division.

The net working capital burden of the division had been calculated as of an earlier date, and the variation on that figure would have to be worked in when the final formalities are completed, he said.

"We put in an early indicative bid, and then as we received more information, we updated our offer," said the official, "the binding bid in such a deal always comes at the end."

The project had been set up at a cost of Rs 406 crore, funded through a combination of World Bank and IDBI as well as ICICI loans.

Others in the race to pick up the unit were ACC (in which the Tatas are seeking to hike stake through a preferential allotment), Grasim Industries and Larsen & Toubro. Although The Financial Express had reported that Lafarge was out of the race last week, the French giant's final bid was clearly the most attractive.

Lafarge in a release has said that it has made substantial investments in Asia and India is a key element in the company's Asia plans. It believes acquisition of the Tisco cement division is an important part of the strategy. According to sources, after the recent part-acquisition of the Orissa Power Grid Corporation by AES Transpower of the US, the Lafarge bid will be the highest made for an Indian unit by an MNC.

"The board of directors of the Tata Iron & Steel Co Ltd at their meeting held on December 18, 1998 have agreed to accept the offer from Lafarge SA to purchase Tata Steel's cement division located at Jojobera in Bihar and Sonadih in Madhya Pradesh for a business value of Rs 550 crore (subject to variation in the value of net working capital)," said a Tata Steel release.

"The acceptance of Lafarge's offer is subject to necessary approvals as well as satisfactory agreement of all terms and conditions relating to the transaction," the release adds.