Adani to become India’s second cement maker with $10.5 billion Holcim deal

The Adani Group logo is seen on the facade of one of its buildings on the outskirts of Ahmedabad, India April 13, 2021. REUTERS/Amit Dave/File Photo

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May 16 (Reuters) – Billionaire Gautam Adani’s conglomerate plans to buy Swiss firm Holcim AG’s (HOLN.S) cement business in India for $10.5 billion, becoming the country’s second-largest cement maker in a its largest acquisition ever.

Under the deal, the largest in India since 2018, Adani Group will pay $6.4 billion in cash to acquire Holcim’s 63.1% stake in Ambuja Cements Ltd (ABUJ.NS) and the stake of 54.5% in ACC Ltd (ACC.NS). The rest of the companies’ shares will be purchased via an open offering.

Adani Group, which currently has no cement manufacturing business, said the businesses were a good fit given its port and logistics, energy and property businesses.

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“(We) will be able to build a uniquely integrated and differentiated business model and prepare for significant capacity expansion,” he said in a statement on Sunday.

Shares of Ambuja and ACC surged but were trading below prices offered by Adani on Monday.

As of noon, Ambuja’s stock was up 2.9% at 369.45 rupees from the offer price of 385 rupees. ACC shares jumped 3.6% to 2,190 rupees from the offer price of 2,300 rupees.

Gautam Adani, Asia’s richest man, plans to finance the deal using an offshore special purpose vehicle owned by the Adani family, he told the Economic Times.

“The acquisition is fully funded through approved commitments from our partner banks – Barclays, Deutsche Bank and Standard Chartered Bank – and a capital injection from the Adani family,” he said.

The divestiture by Swiss company Holcim marks its latest effort to reduce exposure to carbon-intensive cement production and boost its environmental, social and corporate governance (ESG) credentials.

Holcim also sold units outside of North America and Europe in an effort to focus more on key markets and diversify into building product areas like roofing. The company sold its Brazilian business for $1 billion and also exited Indonesia last year.

The deal, which was reached after a fierce bidding war with JSW Group and industry leader Ultratech Cement Ltd (ULTC.NS), is the largest deal in India since Walmart’s acquisition of a majority stake in retailer Flipkart for around $16 billion in 2018.

Ambuja and ACC combined have the capacity to produce at least 70 million tons of cement per year, while UltraTech Cement boasts a capacity of 120 million tons. Together, Ambuja and ACC own 31 cement plants and employ more than 10,700 people.

The transaction is expected to close in the second half of 2022, Holcim said. ($1 = 77.7140 Indian rupees)

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Reporting by Mrinmay Dey in Bengaluru, Rajendra Jadhav, Rupam Jain in Mumbai, John Revill in Zurich; Writing and additional reporting by Sudarshan Varadhan; Editing by Emelia Sithole-Matarise and Edwina Gibbs

Our standards: The Thomson Reuters Trust Principles.

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