The boards of global cement majors - Holcim and Lafarge - have unanimously agreed to merge their global operations (in 1:1 ratio) to create the world's largest building materials entity, to be called 'LafargeHolcim'. In India, Holcim is present through ACC and Ambuja Cement (ACEM), while Lafarge is present through Lafarge India (LIPL).
''In our view, the gigantic merger will see three possible scenarios in India. ACC, ACEM, LIPL will continue to function as independent entities in India. Indirect consolidation will make it a positive for industry if the Competition Commission of India (CCI) approves; objection by CCI may result in cement assets' sale to third parties, and hence neutral for industry; and LIPL is acquired by ACEM or ACC (high probability for ACC as it has cash on its books) and CCI approves the same,'' said Edelweiss Securities.
''While this will be positive at industry level, the deal valuation will decide its attractiveness for the acquirer. We await clarity from respective companies regarding execution of the merger in India. We maintain our cautious view on the sector due to continued low industry utilizations,'' it said.
''In our view, sale of cement assets to third parties to suit CCI may make the gigantic merger 'Neutral' for Indian cement industry. We await further clarity on execution of the merger in India. We maintain our cautious view on Indian cement industry as despite assuming demand growth of 6%/7% in FY15/16, industry utilisations are expected to remain subdued at 74% levels,'' the broking firm added.
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