The cement industry churns
05 Feb 2016
Global building materials major LafargeHolcim has decided to sell its stake in Lafarge India. “LafargeHolcim today announced that it is considering a divestment of its interest in Lafarge India with an annual cement capacity of around 11 million tonnes,” a Lafarge India statement said, adding that the divestment would require the approval of the Competition Commission of India (CCI) as an alternate remedy for the merger of the group’s legacy companies.
This comes two days after Lafarge India called off its Rs 5,000-crore deal to sell its two eastern India cement units (at Jojobera and Sonadih, with a combined capacity of 5 mtpa), and mining rights in the area, to Birla Corporation Limited (BCL), the flagship company of the MP Birla group.
LafargeHolcim, the entity formed after the global merger of Lafarge and Holcim in 2014, had agreed to make the sale to win approval from India’s anti-trust regulator to merge the Indian assets of the erstwhile companies. CCI’s conditional approval was subject to Lafarge India divesting 5.15 mtpa of its cement capacity in eastern India.
Mining rights
However, India’s new Mines and Minerals Development Act (2015) only permits the transfer of mining rights if the entire corporate entity is sold. The deal with BCL was subject to transfer of mining rights as well.
The company’s statement said, “LafargeHolcim is no longer in discussion with BCL for the sale of the Jojobera and Sonadih cement plants in Eastern India that was announced earlier,” adding that due to the current regulatory issues relating to the transfer of mining rights captive and critical to the two plants, LafargeHolcim was obliged to submit an alternate remedy to the CCI to ensure compliance with the order.
LafargeHolcim’s alternate remedy — to sell its entire stake in Lafarge India — is now under consideration by the CCI. “The group remains in dialogue with the CCI and will communicate any further updates to the divestment process in India in due time,” the company statement concluded.
BCL is contemplating legal action. In a filing to the exchanges, the company said, “Lafarge India has since informed their inability to proceed with the agreement. The company has since discussed the matter with its legal advisors and has decided not to accept their contention and is in the process of taking appropriate legal measures in consultation with lawyers”.