Ambuja-Holcim Restructuring: A Raw Deal For Minority Shareholders

Swiss cement giant Holcim, after getting FIPB (Foreign Investment Promotion Board) nod to merge its holding firm Holcim India with its unit Ambuja Cements, is making plans to restructure its stake. However, the terms of this restructuring are being said to be against the interest of minority shareholders. According to the company, its India operations will receive a synergy benefit of Rs 900 crore per annum accrued from logistics and supply chain.

Four public sector general insurance companies, viz. New India Assurance, National India, United India Assurance and Oriental Insurance, which together have around 2% stake in the company, may join General Insurance Corporation of India in voting against the transaction. LIC, with a 6.1% stake, is undecided on what to do about the deal.

Holcim, which has controlling stakes in two leading Indian cement makers – ACC and Ambuja Cements – had announced a plan in July 2013 to consolidate operations in a two-step process through a cash and share deal valued at about Rs 14500 crore. The Swiss major directly owns 40.76% stake in Ambuja and another 9.75% through Holcim India (HIPL). In ACC, Holcim has 0.29% direct stake and 50.30% through HIPL.

The minority shareholders have naturally been against the transaction. As per the deal, Ambuja Cements will first acquire 24% stake of the unlisted Holcim India from Holder Investments Mauritius, wholly owned by Switzerland's Holcim, in a Rs 3500 crore cash transaction. This will be followed by the merger of Holcim India into Ambuja Cements. Minority shareholders are protesting that the structure of the deal favours the Swiss company.

As of September 30, 2013, institutional investors own 39.66% and non-institutional investors own 8.16% of Ambuja Cements. Though it is too early to comment on the consequences of deal on the earnings and valuation of the company, if the deal goes through, it will rob them of their fair interests as they also have a stake in the cash.