Stock - Adani
Adani will inherit Ambuja’s controlling stake in another publicly traded cement producer, ACC Ltd, and buy Holcim’s direct 4.5% holding in the unit. Image Credit: Bloomberg

Swiss building-materials firm Holcim Ltd agreed to sell its Indian operations to local billionaire Gautam Adani, currently the richest person in Asia, another step in CEO Jan Jenisch’s pivot away from traditional cement.

Holcim will sell its 63 per cent stake in Mumbai-listed Ambuja Cements Ltd to Adani Group, it said in a statement on Sunday. Adani said it plans to spend about $10.5 billion on the stake purchases and open offer consideration for Ambuja and related entities.

As part of the deal, Adani will inherit Ambuja’s controlling stake in another publicly traded cement producer, ACC Ltd, and buy Holcim’s direct 4.5 per cent holding in the unit. Holcim expects to receive 6.4 billion Swiss francs ($6.4 billion) of cash proceeds from the sale, according to the statement.

“We have quite a list of businesses we would like to acquire, so I think we can put this money here very well to use,” Jenisch said in an interview on Sunday. “At the moment, we’re working on more than 10 deals.”

Jenisch, who joined Holcim in 2017 from Sika AG, has been selling non-core cement businesses and buying new construction companies to benefit from rising demand for energy efficient buildings. As part of the strategy to expand the so-called solutions and products division, he has spent about $5 billion for acquisitions including Malarkey Roofing Products in December and Firestone Building Products in early 2021.

The 55-year-old German has been cleaning up the company after the messy mega merger of Holcim and France’s Lafarge SA in 2015. Jenisch divested a Brazilian unit for $1 billion in September and Asian businesses such as Holcim Indonesia in 2019.

Holcim’s sale of its Indian business - which is subject to local regulatory approvals - is expected to close in the second half of 2022, helped by the fact that Adani doesn’t have sizable overlap. The company began reviewing new asset sales over the last year after the roofing acquisitions, and concluded negotiations with a handful of potential Indian buyers in about three months, Jenisch said.

‘Position of Strength’

“That’s something important to us that we have a strong balance sheet,” he said in the interview, adding that quick completion, the right price and good fit were key to choosing the winning bidder. “It’s always wise to be in a position of strength and have the opportunity to realise transactions and not to think about, oh, how can I raise this money.”

For Adani, the deal would propel it to become India’s second-largest cement producer from being a small player in the fragmented sector, according to Phillip Capital analyst Vaibhav Agarwal. The group beat out other local companies including JSW Group, according to people familiar with the matter. Bloomberg News previously reported that Adani Group was in advanced talks with Holcim.

Adani Group is offering Rs385 per share for Ambuja Cements, a 7.2 per cent premium to Friday’s closing price, according to Sunday’s statement. It will pay Rs2,300 per share for ACC.

Shares in Ambuja Cements rose as much as 3.5 per cent in early Monday trading in Mumbai, while ACC advanced as much as 7 per cent.

The conglomerate has been moving beyond its core business of operating ports, power plants, coal mines and renewable energy and into areas like data centers, airports, digital services, retail and media.

A first-generation entrepreneur with a net worth of about $100 billion, according to the Bloomberg Billionaires Index, Adani has been looking to transform his company into a multi-sector juggernaut like Mukesh Ambani’s Reliance Industries Ltd Adani overtook Ambani as Asia - and India’s - richest man earlier this year.

Adani’s motivation

The deal for Ambuja will transform Adani Group into a sizable player in the cement sector. Founded in 1983, Ambuja has a cement capacity of 31 million metric tonnes, and has six integrated manufacturing plants and eight cement grinding units in India, its website shows.

“Our move into the cement business is yet another validation of our belief in our nation’s growth story,” Adani, chairman of his namesake group, said in Sunday’s statement.

Adani Group’s flagship firm Adani Enterprises Ltd. has two cement subsidiaries. Adani Cementation Ltd is planning to build an integrated facility in the state of Gujarat, according to a compliance report in November. The group established Adani Cement Industries Ltd in June 2021.

Adani’s sons could take charge of day-to-day operations of the cement business, Phillip Capital’s Agarwal said in a Monday report, reiterating buy rating for ACC while upgrading Ambuja Cements to buy from neutral.

Barclays Plc, Deutsche Bank AG, ICICI Securities Ltd. and Standard Chartered Plc worked with Adani on the deal. Holcim led the transaction with its internal deal team supported by BNP Paribas SA, JPMorgan Chase & Co. and Perella Weinberg Partners.