By Hritam Mukherjee
(Reuters) -Ambuja Cements, India’s No.2 cement maker, said on Tuesday it would buy a nearly 47% stake in rival Orient Cement for 37.91 billion rupees ($451 million), but analysts raised doubts about the deal winning regulatory approval.
Ambuja, part of billionaire Gautam Adani’s ports-to-power conglomerate, said it would buy the entire 37.9% stake held by Orient’s large shareholders, including Chairman CK Birla, and the rest from public shareholders in a deal that values the company at 81 billion rupees. This would trigger an open offer for an additional 26% stake in Orient.
This is the latest among a host of deals in the cement sector recently and the second by Ambuja this year as the firm aims to topple UltraTech Cement, part of the Aditya Birla group, from the top position.
Orient — which UltraTech and Sajjan Jindal’s JSW Cement were also interested in, per local newspaper Economic Times — has two cement plants in the south and one in western India.
Ambuja, which expects the deal to boost Adani’s market share by 2%, said it would pay 395.40 rupees per Orient share, a 12% premium to the stock’s closing price on Monday.
Orient’s shares jumped 7.5% to a record high of 379 rupees but soon reversed course to trade at 346.7 rupees, below the offer price, which analysts said was a sign of worries about potential regulatory concerns.
“Considering the backdrop of a slew of deals in recent past, investors are concerned if the deal will receive approval from the country’s competition regulator,” said Ashutosh Murarka, a research analyst at Choice Broking.
Ambuja acquired Penna Cement for $1.25 billion this June, and a month later, UltraTech bought a controlling stake in India Cements for $472 million and is awaiting regulatory approvals for the deal.
The dealmaking has plagued the industry with oversupply, which combined with above-average monsoons, drove prices to five-year lows last quarter. UltraTech, however, said on Monday, it was seeing early signs of a recovery.
Ambuja’s shares were down 1.3%, while UltraTech shares rose 0.6%.
(Reporting by Hritam Mukherjee in Bengaluru; Editing by Abinaya Vijayaraghavan and Savio D’Souza)
