AMBUJA-ACC-HOLCIM - MINORITY SHAREHOLDERS LEFT FUMING
By Ruma Dubey
Anil Singhvi, ex-MD and CEO of Ambuja Cement has come down like a bag of cement on this complex Ambuja-ACC-Holcim deal. He said, “In my opinion, this is nothing short of a fraud played out on the minority shareholders in India.”
Ambuja has been pummeled to pulp and ACC is also deep in the red. Brokerage houses across the board have downgraded Ambuja post this deal. And minority shareholders are crying foul.
One cannot help but wonder at this ‘dravidi pranayam’ of Holcim taking over Ambuja and then Ambuja holding ACC. The first thought which comes to mind after you have managed to figure out the complex deal is – why this roundabout way?
As at 30th June 2013, Holcim India has a 50.01% stake in ACC and Holderind Investments holds 0.29% stake. In Ambuja Cement, 40.79% stake is held by Holderind and Holcim India holds 9.76%.
Now as per the new complex deal, Ambuja will first acquire a 24% stake in Holcim India. Then Holcim India will be merged into Ambuja. This merger will thus give Ambuja indirect control over ACC through the Holcim connection. Thus Ambuja, merged with Holcim will now control 50.01% of ACC. And in Ambuja Cement, Holcim has a 9.76% stake which means post the merger, Holcim will have a 61.39% stake. It is truly such a complex and roundabout way to get control over two companies which as such already belongs to Holcim. Why couldn’t there have been a merger? If the purpose of this entire complex deal was to ultimately create synergies, why not a merger?
And therein lay the real story. Ambuja will acquire the 24% stake in Holcim India for a cash consideration of Rs 3,500 crore. Based on the approved merger ratio, Ambuja will issue 58.4 crore new equity shares of the company to Holcim, as consideration for the merger. The merger swap ratio values ACC at Rs.1260/share. This apart, Holcim will spend another Rs.3000 crore to boost its stake in ACC by 10% without triggering an open offer for the remainder of the stock.
The market is angry with this deal because as per this deal, all cash on the books of Ambuja cement will get transferred to the parent Holcim. At the end of FY13, Ambuja had cash of Rs.3700 crore and this will now all go to Holcim. And Holcim also gets a higher stake in the merged entity which in turn does not bring anything new on the table for ACC.
One also wonders what new synergies will be created which does not already exist. Ambuja, is a statement issued stated that the transaction will have a synergy potential of Rs.900 crore to be accrued over two years after the deal is completed. The management has also clarified that ACC and Ambuja will remain separate brands with their separate management teams and they have no plans to delist ACC. So one wonders what this deal is really about?
Well, the deal needs a string of approvals - Shareholders and creditors of Ambuja and Holcim India, BSE and NSE, SEBI, FIPB, Jurisdictional High Courts at Delhi and Gujarat. And one wonders whether the minority shareholders of Ambuja will allow this to go without a fight?