In one of the biggest deals in the cement sector, Aditya Birla Group firm Ultratech will acquire two plants from Jaiprakash Associates (JAL) in Madhya Pradesh for an enterprise value of Rs 5,400 crore.
Ultratech, country's largest cement maker, said its board has approved the acquisition of JAL's Bela unit which has 2.1 million tonne per annum (mtpa) clinker and 2.6 mtpa cement grinding capacity. The other unit, located at Sidhi, has 3.1 mtpa clinker and 2.3 mtpa cement grinding capacity. Both units have a total of 180 MW power generation capacity.
"The board has approved the memorandum of understanding setting out the broad terms and conditions of the proposed acquisition. The enterprise value of this acquisition has been agreed at Rs 5,400 crore," Ultratech Cement said in a release.
The acquisition would create significant synergies and the units would add 4.9 mtpa capacity immediately, it said, adding the surplus clinker would enable Ultratech to augment its cement capacity by a further 1.8-2.5 mtpa. Following the acquisition, Ultratech's cement capacity in India would increase from around 60 mtpa to around 65 mtpa and with projects underway, it would go up to around 71 mtpa by 2016, Ultratech said. The acquisition, which is subject to due diligence, definitive agreements and regulatory approvals, will enable Ultratech to increase its presence in Santa cluster of Madhya Pradesh.
Debt-ridden Jaiprakash Associates, which would still have 22 mtpa capacity after this sale, has been selling cement and power assets to pare debt and improve its balance sheet, it said in a separate release.
"With this disinvestment, the group has disinvested assets of over Rs 20,000 crore, displaying the intent of the group's founder of maintaining credibility with all its stakeholders including lenders, creditors and shareholders," said Manoj Gaur, executive chairman, JAL.
With this, JAL's major disinvestment plans get rested and focus will now shift to innovate operational efficiencies to match with the best in class, coinciding with the imminent revival of the Indian economy, the company said. Last year, Ultratech had bought Jaiprakash's cement plant in Gujarat having 4.8 mtpa capacity for Rs 3,800 crore.
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