UltraTech Cement, India’s largest cement producer, has agreed to acquire Kesoram Industries’ cement assets in a share-swap deal for an enterprise valuation of Rs 7,600 crore, a move that would help it maintaining the leadership position. The transaction, expected to be completed in 9-12 months, is subject to regulatory approvals.
UltraTech will issue one share for every 52 shares of Kesoram as recommended by the valuers and accepted by the board, UltraTech said after it received board approvals for the deal. The deal value includes debt of about Rs 1,700 crore.
For the past three consecutive trading sessions, Kesoram Industries’ shares hit an upper circuit breaker. It jumped 15.74% from Rs 120.19 on November 24 to Rs 139.11 on November 30. During the same period, shares of UltraTech Cement rose 5.33% to Rs 9,000.65.
As per the deal, UltraTech will issue 5.97 million new shares to Kesoram’s shareholders. This will increase UltraTech’s equity capital to Rs 294.66 crore consisting of 294.7 million shares of Rs 10 each, it added.
The transaction will allow UltraTech, an Aditya Birla Group company, to extend its footprint into the competitive and fast-growing western and southern markets. At present, UltraTech does not have any cement manufacturing plant in the southern markets such as Telangana.
Kesoram Industries, which has a presence in cement, tyres and tubes, heavy chemicals and spun pipes, sells cement under the brand, Birla Shakti.
The operations will be bolstered by economies of scale resulting from synergies in procurement, logistics and fixed costs, it said, adding, that following the completion of the agreement, UltraTech’s cement capacity will rise to 149.14 million tonne per annum (MTPA) including that from its overseas operations.
The deal will help UltraTech accelerate its plan to achieve 200 MTPA cement capacity in India. The transaction is subject to approval including shareholders and creditors, stock exchanges and other regulatory authorities.
Kesoram’s cement business consists of two integrated cement units at Sedam (Karnataka) and Basantnagar (Telangana) with a total capacity of 10.75 MTPA. Out of this total capacity, 8.50 MTPA is clinker-backed and 2.25 MTPA is surplus grinding capacity. The cement business also has a 0.66 MTPA packing plant in Solapur, Maharashtra.
Bansi S. Mehta Valuers and PwC Business Consulting Services were the independent valuers, while ICICI Securities provided an opinion on the fairness of the valuation. Khaitan & Co was the legal advisor and Trilegal will be advising on Competition Law matters.
Last month, UltraTech Cement received board approvals for a fresh investment of Rs 13,000 crore to increase capacity by another 21.9 MTPA. The capacity addition would be under the company’s third phase of expansion, achieved by setting up four greenfield, four brownfield plants, and four greenfield bulk terminals.