Lafarge India bidders in London for final negotiation

Five bidders who submitted their final bids for Lafarge India's 11-million tonne (mt) cement business have been called to London for last leg of discussion starting Thursday. Foreign bidders including Mexico's Cemex and China's Anhui Conch Cement Company are believed to have bid aggressively to get an entry into the country. Domestic bidders including the Ajay Piramal Group, Nirma and Sajjan Jindal-led JSW Cement also submitted their bids on Monday.

The bids have been submitted in the range of Rs 8,000 crore to Rs 9,000 crore. However, bid price would not be the only criterion for the selection of the winning bid.

"This discussion may take three to four days in London to finalise the name of winning bidder," said a banker familiar with the development. "The winner will be decided not just on the price quoted for assets but also other conditions for the bid," he said. Once the winning bid is decided, an exclusivity agreement will be signed with the bidder for about three months to complete the deal.

Lafarge India had submitted a revised proposal to the Competition Commission of India (CCI) to sell its entire 11-mt asset in India.

This decision came after the company's plan to sell its 5.15-mt cement capacity in Chhattisgarh and Jharkhand to Birla Corporation for Rs 5,000 crore ran into trouble. Investment bankers said the MP Birla Group company was facing challenges in securing limestone mining rights for the two units.

France-based Lafarge and Swiss cement giant Holcim announced a global merger in April 2014 to create the world's largest cement company. This raised eyebrows of anti-trust watchdogs in several countries.

In India, Holcim, through its control of Ambuja Cements and ACC, has 60 mt of annual capacity. Lafarge, on the other hand, has a capacity of 11 mt in India, of which 7.8 mt (70 per cent) is in Chhattisgarh, Jharkhand and West Bengal. Holcim's ACC and Ambuja have capacities of 6.1 mt and 4.6 mt, respectively, in India's eastern region.

A simple merger would have led to a capacity of 18.5 mt in the eastern states for Holcim-Lafarge, which would have been more than 40 per cent of the estimated 46 mt of total capacity in the region. This led to a scrutiny by the CCI.

The CCI had asked Lafarge India to sell its 5.15 mt capacity in eastern India by December 31 to complete its global merger.

In August 2015, Birla Corp had agreed to buy the proposed assets along with brands Concreto and PSC, and mineral rights over adequate reserves of limestone.

The deal was conditional on Birla Corp being able to secure mining rights that Lafarge had. Due to regulatory changes, the transfer of mining rights for an asset sale deal was not allowed.

Lafarge India, then, put the entire company on the block because such a sale allows transfer of mining rights.


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