The Aditya Birla Group recently took over Jaypee Group's cement unit in Gujarat for ` 3,800 crore. The acquisition includes the Jaypee cement unit's debt.
The Board of Directors of UltraTech Cement approved the acquisition of the Gujarat Cement Unit of Jaypee Cement Corporation Limited (JCCL),by way of a demerger, comprising of an integrated cement unit at Sewagram and Grinding Unit at Wanakbori. JCCL is a wholly-owned subsidiary of Jaiprakash Associates Limited (JAL).
Kumar Mangalam Birla, Chairman, UltraTech Cement, said that "With this acquisition of 4.8mtpa the company's current capacity increases to 59mtpa. With projects underway, it will stand raised to 70mtpa by 2015. Despite the prevailing muted growth of the industry, we believe the long term fundamentals and growth prospects remain intact. We will add more capacities in coming years."The enterprise value is Rs 3,800 crore besides the actual net working capital at closing.UltraTech will take over all the assets and the liabilities of the Unit at Closing and the net amount of enterprise value less liabilities taken over will be the consideration. Such consideration will be discharged by allotment of equity shares of UltraTech to the shareholders of JCCL, subject to a maximum value of such equity shares to be Rs.150 crore.
The combined capacity of both the divisions of the Gujarat Unit is 4.8mtpa of cement with 57.5 MW Coal based Thermal Power Plant, limestone reserves for over 90 years at current capacity and a captive Jetty at Sewagram.
The proposed transaction is subject to the approval of shareholders and creditors, sanction of the Scheme of Arrangement by the High Courts, approval of the Competition Commission of India and all other statutory approvals. The company anticipates the transaction to be closed in the next 7 to 9 months.
The takeover will further strengthen UltraTech's position of being largest cement company in India. The company plans to add another 10 mtpa capacity by 2016.
The deal brings several advantages to UltraTech. First being removal of a substantial volume-driven competitor, and secondly addition of 4.8 mTPA capcity at ~Rs 8,000/t. Besides, the deal will also make available limestone reserves worth 90 yrs at present capacity and option to scale up substantially in Kutch.
UTCEM will have a 35 per cent share in Gujarat post this acquisition. More importantly, Ambuja and UltraTech will control approximately 55-60 per cent market share, enabling better pricing.
O P Puranmalka (Left), Whole-time Director, Kumar Mangalam Birla (Centre), Chairman, Kailash Birla (Right), CFO of UltraTech Cement announcing the acquisition of a Gujarat-based cement unit of Jaypee Cement.