Building-materials company Holcim forges US$10.5b deal with Adani, Asia’s richest man

SWISS building-materials company Holcim agreed to sell its Indian operations to local billionaire Gautam Adani, currently the richest person in Asia, another step in chief executive officer Jan Jenisch’s pivot away from traditional cement.

The company will sell its 63 per cent stake in Mumbai-listed Ambuja Cements to Adani Group, it said in a statement Sunday (May 15). Adani said it plans to spend about US$10.5 billion on the stake purchases and open offer consideration for Ambuja and related entities. 

As part of the deal, Adani will inherit Ambuja’s controlling stake in another publicly traded cement producer, ACC, and buy Holcim’s direct 4.5 per cent holding in the unit. Holcim expects to receive 6.4 billion Swiss francs (S$8.9 billion) of cash proceeds from the sale, according to the statement.

“We have quite a list of businesses we would like to acquire, so I think we can put this money here very well to use,” Jenisch said in an interview on Sunday. “At the moment, we’re working on more than 10 deals.”

Jenisch, who joined Holcim in 2017 from Sika, has been selling non-core cement businesses and buying new construction companies to benefit from rising demand for energy efficient buildings. As part of the strategy to expand the so-called solutions and products division, he has spent about US$5 billion for acquisitions including Malarkey Roofing Products in December and Firestone Building Products in early 2021.

The 55-year-old German, has been cleaning up the company after the messy mega merger of Holcim and France’s Lafarge in 2015. Jenisch divested a Brazilian unit for US$1 billion in September and Asian businesses such as Holcim Indonesia in 2019.

Holcim’s sale of its Indian business - which is subject to local regulatory approvals - is expected to close in the second half of 2022, helped by the fact that Adani doesn’t have sizable overlap. The company began reviewing new asset sales over the last year after the roofing acquisitions, and concluded negotiations with a handful of potential Indian buyers in about 3 months, Jenisch said.

‘Position of strength’

“That’s something important to us that we have a strong balance sheet,” he said in the interview, adding that quick completion, the right price and good fit were key to choosing the winning bidder. “It’s always wise to be in a position of strength and have the opportunity to realise transactions and not to think about, oh, how can I raise this money.”

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For Adani, the deal gives Asia’s richest person a foothold in the subcontinent’s fragmented cement sector. His group beat out other local companies including JSW Group, according to people familiar with the matter. Bloomberg News previously reported that Adani Group was in advanced talks with Holcim.

Adani Group is offering 385 rupees per share for Ambuja Cements, a 7.2 per cent premium to Friday’s closing price, according to Sunday’s statement. It will pay 2,300 rupees per share for ACC.

The conglomerate has been moving beyond its core business of operating ports, power plants, coal mines and renewable energy and into areas like data centres, airports, digital services, retail and media.

A first-generation entrepreneur with a net worth of about US$100 billion, according to the Bloomberg Billionaires Index, Adani has been looking to transform his company into a multi-sector juggernaut like Mukesh Ambani’s Reliance Industries. Adani overtook Ambani as Asia’s - and India’s - richest man earlier this year.

Adani’s motivation

The deal for Ambuja will transform Adani Group into a sizable player in the cement sector. Founded in 1983, Ambuja has a cement capacity of 31 million metric tons, and has 6 integrated manufacturing plants and eight cement grinding units in India, its website shows.

“Our move into the cement business is yet another validation of our belief in our nation’s growth story,” Adani, chairman of his namesake group, said in Sunday’s statement.

Adani Group’s flagship firm Adani Enterprises has 2 cement subsidiaries. Adani Cementation is planning to build an integrated facility in the state of Gujarat, according to a compliance report in November. The group established Adani Cement Industries in June 2021.

Barclays, Deutsche Bank and Standard Chartered worked with Adani on the deal. Holcim led the transaction with its internal deal team supported by BNP Paribas, JPMorgan Chase & Co and Perella Weinberg Partners. BLOOMBERG