Displaying items by tag: Acquisition
India: Local press has reported that a 'leading Indian conglomerate' may have concluded a deal to enter the cement industry in the union territory of Jammu and Kashmir. The Kashmir Monitor newspaper has reported the value of the deal as US$30.4m.
At present, the Jammu and Kashmiri cement sector is comprised of state-owned J&K Cements and five private companies. J&K Cements previously ceased production at its 400,000t/yr Khrew cement plant in Pulwama amid 'financial difficulties.' It has since sought a buyer for its business.
Seeking a stake in Sanghi Cement
26 July 2023Adani Group and JK Lakshmi Cement were reported to be leading the race to acquire Sanghi Cement this week. The Economic Times newspaper reported sources who said that both companies are about to start due diligence processes ahead of making formal offers in the next few months. The enterprise value of Gujarat-based Sanghi Cement is around US$730m. Shree Cement, Nirma Group and Dalmia Bharat were said to have been interested previously, but no longer at this stage. However, none of the companies involved have commented directly on any bidding process so far.
Coverage in the India-based press earlier in July 2023 suggested that Shree Cement had dropped out of the bidding process for a 40 - 70% stake in Sanghi Cement. Although the exact reasons for Shree Cement withdrawal were not expressed, it was noted that the enterprise value for Sanghi Cement included debts of around US$220m. In late 2022 the Kotak Mahindra Bank made an investment of around US$67m in Sanghi Cement to ‘help the company's liquidity profile and enhance its operations.’ The head of the bank’s Special Situations Fund added that the cement producer’s performance had been under pressure due to high energy costs and that this had been further exacerbated by impending debt repayments stemming from expansion capital expenditure.
Sanghi Cement had the misfortune of commissioning a new line at its integrated plant during the Covid-19 pandemic. The subsidiary of Sanghi Industries operates a 6.6Mt/yr unit at Kutch in Gujarat, with a 130MW captive power plant and a 13MW waste heat recovery (WHR) unit, making it one of the largest plants in the country. It also owns three cement terminals in Gujarat, Maharashtra and Goa. Its annual power and fuel costs rose by 79% year-on-year to US$49.9m in the year to March 2022. Then its finance costs tripled to US$29m in the year to March 2023. Some of the increased fuel costs may have been down to the new production line but its total income in the year to March 2023 was lower than in the year to March 2019.
Adani Group and JK Lakshmi Cement both operate plants in Gujarat. Adani Group runs one integrated and one grinding plant in the state via its Ambuja Cement subsidiary. JK Lakshmi Cement owns a grinding plant. A number of other companies additionally manufacture cement in the state. The biggest of these is the country’s largest cement producer, UltraTech Cement, with three integrated plants and two grinding ones in Gujarat. It would be a surprise if this company tried to buy a share of Sanghi Cement. One prominent India-based cement company that does not have a manufacturing presence in the state is Shree Cement. This made it a compelling candidate for the acquisition before it ruled itself out.
On the national stage, ratings agency ICRA’s June 2023 cement sector report forecast a ‘stable’ outlook for the sector, with cement volumes expected to grow by 7 - 8% in the 2024 financial year. This should be supported by the residential market and infrastructure projects. Crucially, it also noted that power and fuel costs, which peaked in the July - December 2022, eased in early 2023 and are anticipated to further soften in the 2024 financial year. The agency’s view was that this would help company earnings margins, but not to the levels seen in the five years prior to the Russian invasion of Ukraine. This may be cold comfort for Sanghi Cement, but it may have implications for any bidding process.
Lastly, ICRA also warned of the weakening effects that El Niño could have on the monsoon season and, in turn, rural house building during this period. The weather has been a ‘hot’ topic globally this year, as various records have been broken. Yet on a day-to-day basis the weather can also affect the business of making and selling cement. ICRA’s concern was for the latter. An example of the former occurred in June 2023 when Cyclone Biporjoy caused disruption at Sanghi Cement’s Sanghipuram plant. The unit was shut down in mid-June 2023 to protect the staff. Some damage was reported and the plant reopened at the end of the month. Again, as with fuel prices, the weather may also play a part in the calculations of any company considering buying a stake in Sanghi Cement.
India: Adani Cement and JK Lakshmi Cement have emerged as frontrunners in the contest to acquire Sanghi Cement for US$733m. The Business Standard newspaper has reported that the prospective buyers are expected to submit formal offers before October 2023.
India: CK Birla Group subsidiary Orient Cement has concluded a share subscription and shareholders' agreement with Cleantech India to acquire a 29% stake in Ardeur Renewables for US$1.16m. Ardeur Renewables is building a 16MW solar power plant at Orient Cement’s Chittapur cement plant in Karnataka and a 5.5 MW solar power plant at Orient Cement’s Jalgaon cement plant in Maharashtra. The cement producer says that the acquisition will help it to further increase its renewables usage and optimise its energy costs.
Ramco Cements to invest US$91.3m in growth in Karnataka and Odisha during 2024 financial year
19 July 2023India: Ramco Cements plans to invest a total of US$91.3m towards growing its capacity during the 2024 financial year, which ends on 31 March 2024. Its planned investments consist of US$15.8m in an expansion to its Haridaspur grinding plant in Odisha and US$75.5m in the acquisition of land in Bommanalli, Karnataka, on which to establish a limestone mine.
During the previous financial year, which ended on 31 March 2023, Ramco Cements invested US$215m in capital expenditure.
Bosnia & Herzegovina: Hungary-based Talentis Group and Austria-based Asamer Baustoffe have signed a letter of intent giving the former exclusive negotiation rights in the sale of Lukavac Cement. The subsidiary of Asamer Baustoffe operates the 650,000t/yr integrated Lukavac cement plant in Tuzla Canton. It also controls the nearby Vijenac limestone mine.
Talentis Group already holds foreign assets in Croatia and Romania.
Oman: Huaxin Cement informed the Muscat Stock Exchange of its intent to buy a further 5.1% stake in Oman Cement on 3 July 2023. Zawya News has reported that this would increase the China-based group's stake in Oman Cement to 64.7%. It acquired its existing 59.6% in the producer for US$193m earlier in 2023, but subsequently revised the price to US$200m.
Philippines: Holderfin, an existing 18% shareholder in Holcim Philippines, has acquired an additional 9.2% stake in the company from Japan-based Sumitomo Osaka Cement. This raises its control over Holcim Philippines to more than 27%. As a result of the deal, the proportion of publicly held shares in the cement producer fell to 5%. PhilStar News has reported that Holcim Philippines is now possibly seeking to delist from the Philippine Stock Exchange (PSE).
The producer said “Holderfin informed the company that if the company will be unable to issue additional shares to the public sufficient to raise its public float to the required level, Holderfin is prepared to make a tender offer for all outstanding common shares of the company held by the public with the aim of subsequently conducting a voluntary delisting of the company’s common shares from the Main Board of the PSE.”
Mozambique/South Africa: China-based Huaxin Cement has agreed to buy the Africa-based business of InterCement for US$265m. The deal includes the Brazil-based company’s assets in Mozambique and South Africa. It follows InterCement’s sale of its business in Egypt earlier in 2023 to an unnamed buyer. The company will use the latest proposed sale to reduce its debts. The transaction will be subject to approval from regulators in China, Mozambique and South Africa. InterCement appointed JP Morgan as its financial advisor to the sale of its operations in Egypt, Mozambique and South Africa.
InterCement operates two integrated cement plants and three grinding plants in Mozambique under its Cimentos de Moçambique subsidiary and one integrated plant and two grinding plants in South Africa under its Natal Portland Cement subsidiary. Huaxin Cement’s operations in Africa include subsidiaries in Malawi, Tanzania and Zambia.
China: China National Building Material (CNBM) subsidiary New Tianshan Cement plans to increase its stake in Ningxia Building Materials to 51% from 49% for US$373m. Reuters has reported that New Tianshan Cement will raise funds through the issuance of US$971m-worth of commercial papers.
Further to the restructuring, CNBM will enlarge its stake in Ningxia Building Materials subsidiary Ningxia Saima by 12%.