LafargeHolcim Ltd has received five final bids for Lafarge’s India assets that the Franco-Swiss company is forced to sell to win antitrust approval following a merger that created the world’s largest cement maker, said four people directly familiar with the matter.
“At present, bids have been submitted alone by the bidders, but JSW Cement is being backed by a private equity fund for the transaction,” said one of the persons mentioned above. Mint could not independently ascertain the name of the fund that is backing the Sajjan Jindal-controlled cement maker.
A fifth person involved in the process said that another entity may submit a bid by Tuesday.
“The bids are more or less in the range of Rs.8,000-9,000 crore. Earlier, it was pegged to be around Rs.10,000 crore, but after the initial due diligence the valuation has come down,” said a second person cited above.
JSW, Cemex and Piramal Enterprises declined to comment. A Nirma spokesperson could not immediately be reached for comment. Mint could not reach Anhui Conch either.
The value of the transaction may increase after the final negotiations are concluded, said Deepak Ladha, India head at investment bank Global M&A Partners.
“These are the first set of serious final bids that have come. Once the entire process comes down to one or two final bidders, then there would be upward revision in the deal value,” Ladha said.
Among the bidders that had shown interest in the initial rounds were Goldman Sachs Group Inc., CVC Capital Partners, Irish cement maker CRH Plc., Blackstone Group, CPP Investment Board, Ramco Group and Carlyle Group,Mint had reported on 9 May.
Lafarge is selling its entire 11 million tonne capacity to meet a Competition Commission of India merger condition. Lafarge owns cement capacity across Chhattisgarh, Jharkhand, Rajasthan, Haryana and West Bengal through its unit, Lafarge India Pvt. Ltd.
Lafarge India’s attempts to sell the assets to meet competition norms emerging from the combination of France’s Lafarge SA and Swiss company Holcim Ltd have faced several obstacles over the past one year.
Lafarge entered into a deal with Birla Corp. in August 2015 for its east India assets. The transaction was called off on 2 February because of regulatory hurdles over the transfer of related mine leases. This prompted LafargeHolcim to put Lafarge India’s entire capacity on sale.
However, on 14 April, a day after the non-binding bids were submitted, the Competition Appellate Tribunal stayed the sale of 11 million tonnes of cement capacity held by Lafarge India following an appeal by cement maker Dalmia Cement (Bharat) Ltd. Dalmia withdrew its appeal on 9 May, allowing the bidding process to resume.
Lafarge India through its brand Concreto enjoys a premium over other brands, including that of Dalmia, in eastern India.
The cement sector has seen a wave of consolidation in the past year.
According to a 17 March report by JPMorgan, the exit of distressed players will lead to better pricing power in the sector. “The industry is witnessing significant market consolidation in calendar year 2016 with the exit of three major cement players—namely, JPA (Jaiprakash Associates), Reliance, Lafarge—10% of industry capacity,” noted the report.
In a separate transaction on Monday, UltraTech Cement Ltd offered to pay a higher price for acquiring the cement assets of Jaiprakash Associates Ltd. The total enterprise value of Jaiprakash’s assets that UltraTech has agreed upon is Rs.16,189 crore, an increase of Rs.289 crore over the initial agreement.