INDIA: Adani Group completes the acquisition of ACC Ltd. through Ambuja Cements Ltd. to begin another chapter in the history of India’s oldest continuously operating cement company.
On August 1, 1936, 10 Indian cement manufacturers came together to form The Associated Cement Companies Ltd. under the chairmanship of Sir Nowroji B. Saklatval and J.R.D. Tata and Ambalal Sarabhai on the chessboard
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F. E. Dinshaw, the man recognised as the founder of amalgam, died in January 1936, just months before the company was founded. In 1947, the company established India’s first cement plant at Chaibas in Bihar.
Since then, ACC has adapted to the needs of the nation and given shape to some of India’s most iconic infrastructure projects, from the Bhakra Nangal Dam in 1960 to the Mumbai-Pune Expressway at the turn of the century.
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In 1988, Associated Cement Companies found itself in the middle of a messy public drama involving some of the biggest names in India Inc. history.
Nusli Wadia of Bombay Dyeing, then ACC chairman Nani Palkhivala, then ACC vice-chairman Pallonji Shapoorji Mistry and Darbari Seth, then chairman of Tata Chemicals.
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In March of that year, ACC sought to expand its small capital base of Rs 40.84 crore and offered a convertible debenture issue worth Rs 26.81 crore to employees and shareholders. A convertible bond is a type of long-term debt issued by a company that can be converted into shares of stock after a certain period.
But by April, it looked like the number would be signed, so the “big boys” – the Wadias and the Tatas were called in. They agreed to the purchase, only to have their applications rejected by the Palkhivala-led ACC Council in early May.
The reason was that they were all Benami. “Several large applications totalling Rs 24.5 crore, some on shareholder forms and some on withdrawal forms, were made in favour of persons or companies different from and other than the applicants,” ACC said in a statement.
Wadia claimed that “gaining control of ACC was not motivating at all. It’s a duck raised as an afterthought.” Tata’s Seth also categorically said that “control was not a motivating consideration or indeed a dominant consideration”.
“The Corporation (ACC) is a jewel which can rightfully adorn the crown of any miscreant,” said India Today in an article (“Controversial Issue”) which appeared in its June 15, 1988 edition. But it was not to be.
In January 2005, Swiss Holcim Ltd., then the world’s largest cement producer agreed to acquire a 67% stake in Ambuja Cement India Ltd., which at the time held a 13.8% stake in ACC. The $800 million deal was the largest foreign direct investment in India’s cement sector.
Holcim simultaneously made an open offer to ACC shareholders through Holdcem Cements Pvt. and Ambuja Cement India, to acquire a majority stake in ACC.
Subsequently, Ambuja Cement India’s stake in ACC increased to 34.69%. It is worth mentioning here that Ambuja Cement India bought its 13.8% stake in ACC from the Tata Group in three tranches between 1999 and 2001.
On September 1, 2006, The Associated Cement Companies Ltd was officially renamed ACC Ltd. Since then, however, ACC’s performance has been lacklustre at best. For the past decade, the company has played second fiddle to Ambuja Cements, trailing market leader UltraTech Cement Ltd by a wide margin.
Not surprisingly, when Holcim decided to sell its India business, suitors of all shapes and sizes flocked.
Gautam Adani now has a part of Indian history
In April this year, Bloomberg reported that Holcim was considering a potential sale of its Indian businesses, including Ambuja Cements.
The move was seen as part of a global strategy to focus on key markets. The Swiss firm was said to be in early-stage talks with JSW and Adani Group, and at one point even ArcelorMittal and UltraTech Cement were considered likely suitors.
However, on May 15, Holcim agreed to sell its 63% stake in Ambuja Cements to the Ahmedabad-based conglomerate. As part of the deal, Adani inherited Ambuja’s controlling interest in ACC. On August 19, Adani Group made an open offer of $3.9 billion to buy the remaining shares of the cement maker. In one fell swoop, Adani became the second largest cement producer in India.
“What makes cement an exciting business is a scope for growth in India, which exceeds that of all other countries even beyond 2050,” Adani Group chairman Gautam Adani said in a statement after the completion of the open offer on Friday.
Both Ambuja and ACC will benefit from synergies with Adani’s integrated infrastructure platform, particularly in raw materials, renewable energy and logistics, the statement said.
“It’s these neighbourhoods that ultimately drive a competitive economy,” Adani said. “All these dimensions have led us to become the largest and most efficient cement producer by 2030 at the latest.”
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