Aditya Birla Group bids for Lafarge, Holcim units

MUMBAI: The Aditya Birla Group, owned by billionaire Kumar Mangalam Birla, submitted bids on Monday to purchase global assets likely to be carved out of the merger between cement giants Lafarge and Holcim.
UltraTech Cement and other companies belonging to the $40-billion Aditya Birla Group have put in bids for cement units of Lafarge and Holcim in Brazil and the Philippines at an enterprise value of $1.4 billion. The group had identified Brazil as a major place for expansion three years ago. An office was opened and former Hindalco company secretary Anil Jhala was appointed the country head to evaluate opportunities. The Philippines was among the overseas countries where the group started operations several years ago.
An Aditya Birla spokeswoman was unavailable for comments. Holcim and Lafarge SA unveiled a proposal to create the world’s largest cement company on April 7, 2014. In July, they also proposed multibillion asset sales to force competition watchdogs to back the proposed deal that will create a $44 billion cement company. They plan to sell units with an enterprise valuation of close to $6.3 billion.

Competition authorities in 15 countries as well as the European Commission are expected to scrutinise the deal which will create an entity with a combined stock market value of more than $55 billion. The Birla group is competing with rival cement companies and private equity funds for these units. Germany's HeidelbergCement AG has teamed up with Votorantim Cimentos SA of Brazil while Cemex SAB of Mexico has joined hands with Irish firm CRH Plc.

Eurocement Holding AG, controlled by billionaire Filaret Galchev, is also in the race. The Birla group move is part of its overall plan to increase cement capacities to 70 million tonne per annum by early 2016 from 63 mtpa.

The group's cement company Ultratech acquired the cement unit of Jaypee Group last year. The acquisition, if and when it happens, may help the group to gain market share without having to build green field factories Aditya Birla Group has been expanding its global footprint post economic liberalisation in 1991. The group concluded 36 acquisitions in 20 countries since Kumar Mangalam Birla came to the helm in 1995 after the untimely death of his father.

Over 50 per cent of the Aditya Birla Group's revenues flow from its overseas operations. It is now present in several countries including, the US, China, Singapore, Russia, South Africa and Spain. It employs close to 50,000 people abroad. Ultratech is also looking for assets in places like Indonesia, Thailand, Malaysia and the Philippines. It is already present in Sri Lanka, UAE and Bahrain. The company had acquired Dubai-based ETA Star Cement for an enterprise valuation of Rs 1,700 crore in 2010.

"Aditya Birla group will be unable to bid for assets carved out of the Lafarge-Holcim merger in some of the market, including India, as a purchase will lead to monopoly in these markets,” said a consultant close to the group.

"Hence it is seeking to purchase assets in the growing markets in Brazil and the Philippines which are investing heavily in infrastructure and housing." In its latest Global Economic Prospects report, the World Bank forecasts 'modest but sustained growth' for Latin America's largest economy, estimating that Brazil's GDP will grow by 2.4 per cent in 2014, 2.7 per cent in 2015 and 3.7 per cent in 2016.

The Cement Manufacturers Association of the Philippines (CeMAP) president, Ernesto Ordonez, said that total cement sales for the first half of 2014 reached 10.72 mt, up from 10.14 mt for the first six months of 2013. For the second quarter of 2014 alone, cement sales climbed by 3.2 per cent to 5.52 mt from 5.35 mt in the comparable period of 2013.