The country’s anti-trust regulator, Competition Commission of India, has written to Holcim-Lafarge to divest some of its units, including limestone reserves, to prevent a monopoly in eastern India, top sources said.
Swiss cement group Holcim and Lafarge, its French rival, had announced a global merger on April 7, 2014, and applied for approval from regulators in more than a dozen countries. Anticipating anti-trust regulators’ requirements, the two groups had proposed divestment of assets in several countries, but India was not one of them.
In India, the CCI received a notice from Holcim Ltd and Lafarge SA on the proposed merger. After prima facie investigations by CCI revealed the combination will likely have an appreciable adverse effect on competition, especially in eastern India, the CCI launched, what it calls, phase II investigations. It put the merger proposal in public scrutiny under Section 29(3) of the Competition Act, 2002 and invited comments from stakeholders including competitors.
According to sources, after the phase-II investigation, the regulator has now written to the combine that the merger proposal is fine, but certain assets including limestone reserves need to be divested, in eastern India. “The assets may be sold to a company which is not a competitor,” said the source, adding that the combine has 30 days to respond to the CCI’s suggestions. Information provided by the two companies to CCI shows that the combine will have a market share of 29 per cent in eastern India, taken with Madhya Pradesh and eastern UP.
The Holcim-Lafarge deal is only the second merger proposal to be placed under public scrutiny in November 2014 after pharmaceutical companies Sun and Ranbaxy announced a $4 billion merger in April 2014. Sun-Ranbaxy proposal was finally approved in December 2014 with a rider that the combine divest assets relating to seven drugs.
Swiss major Holcim has controlling stake in two big Indian cement majors, ACC Ltd and Ambuja Cements Ltd. The total cement manufacturing capacity of Holcim and Lafarge in India stood at about 67 million tonnes in 2013-14 end. The current total installed capacity in the country is 350 mtpa and the combine’s closest rival to the new combine is Aditya Birla group’s Ultratech Cement Ltd with annual capacity of 63 million tonnes.