Birla: Making way

Calcutta, July 18: German cement company Heidelberg is taking a controlling stake in S.K. Birla owned Mysore Cement, underlining the growing appetite of global cement companies for the Indian market.

The company will invest Rs 456.25 crore to pick up about 50.5 per cent in Mysore Cement.

However, Heidelberg has to come out with a mandatory open offer for another 20 per cent stake, which might cost it another Rs 106 crore.

The Mysore Cement board met in Calcutta today to finalise the arrangement whereby 665,000,00 fresh shares will be issued on preferential basis to the foreign company, while the promoters will sell 134,000,00 of its own shares.

Following this, Birla?s stake will come down to 5.3 per cent from 24.17 per cent.

According to the agreement, the preference share will be issued at Rs 54 ?13 per cent higher than the closing price on BSE today.

The promoter group will sell the share at Rs 72.5, which includes a non-compete fee of Rs 14.50 apiece.

After the conclusion of the deal, Heidelberg will nominate its people on the board where S.K. Birla will be a non-executive chairman and Sidharth Birla a director.

The German company today appointed Ashish Guha as its country head. He will join the Mysore Cement board.

Going by what Heidelberg is paying, the enterprise value of Mysore Cement, which has a 2-million-tonne capacity, works out to be $125 a tonne.

This makes the Mysore Cement?Heidelberg deal one of the most expensive deals in recent times.

Swiss major Holcim had paid $100 a tonne when it snapped up ACC in January 2005. But it paid double, about $200 a tonne for buying into Gujarat Ambuja earlier this year.

The money raised through preference shares would be used to retire debts as well as prune losses.

Mysore Cement was saddled with losses mounting over Rs 300 crore.

The company board today also approved the issue of 12,74,944 shares to IFCI in part conversion of their dues.

Following the deal, Heidelberg would further consolidate its position in India where global giants like Lafarge, Holcim and Italcementi already have a presence.

In March this year, Heideberg bought into the OP Lohia group?s Indorama Cement, which is located near Mumbai. This company has a capacity of 750,000 tonnes a year.

In the last 10 years, cement consumption in India grew approximately 7.5 per cent per year, driven by a booming housing industry and quick expansion of infrastructure.

In 2005, India was the second-largest cement consumer with around 135 million tonnes after China.