LafargeHolcim Constructs $1.4 Billion Deal for Indian Unit
Global building materials leader LafargeHolcim (HCMLY) is to sell its Lafarge India operation to Nirma for an enterprise value of $1.4 billion, double the value of an earlier Indian asset sale that was controversially scrapped in February.
"This agreement is an important step in our 3.5 billion Swiss francs ($3.55 billion) divestment program," said LafargeHolcim CEO Eric Olsen. "With this deal, two thirds of the program has been secured and the remainder of the program is well on track."
Lafarge India operates three cement plants and two grinding stations with a capacity of 11 million tons a year as well as marketing operations and a ready-mix concrete business. LafargeHolcim will use cash from the sale to pay down debt.
The sale comes six months after LafargeHolcim pulled out of a $753 million agreement to sell two cement plants to India's Birla Corp Ltd. The seller scrapped that deal, claiming that a change in Indian regulation meant it was unable to sell mines linked to the cement plants and thus unable to conclude the deal. Birla, which had won an auction to buy the cement plants and their associated mines, disputed that claim and began legal proceedings to force the agreement through.
The collapse of the Birla deal left LafargeHolcim in breach of agreements with India's competition regulator, which had made the sale of assets a condition of its approval for Holcim's acquisition of Lafarge last year. Jona, Switzerland-based LafargeHolcim quickly re-filed to sell its entire Lafarge India operation as an alternative solution, claiming that selling the holding company rather than individual operations would enable it to circumvent the law banning the sale of the mines.
The entire issue became moot in May, when Indian lawmakers amended the act that had banned the transfer of mining leases, to clear the way for consolidation in India's fragmented cement and steal industry.
Gujarat, India-based Nirma already owns a small cement operation, alongside a sprawling range of other operations ranging from soap manufacturing to salt and packaging production.
LafargeHolcim will continue to operate in India through its ACC Ltd. and Ambuja Cements Ltd. subsidiaries, which have a combined production capacity of more than 60 million tons a year.
LafargeHolcim shares traded Monday morning at Sfr41.75, up Sfr0.93, or 2.3%, on their Friday close.