After years of being in the works, Kumar Mangalam Birla’s UltraTech Cement is finally acquiring the cement business of Basant Kumar Birla-led Century Textiles and Industries Ltd in a share-swap deal for an enterprise value of Rs 8,621 crore.
The merger was approved by the boards of both the companies on Sunday.
The cement business consists of three integrated units in Madhya Pradesh, Chhattisgarh, and Maharashtra with a total capacity of 11.4 million tonnes (mt) and a 2mt grinding unit in Bengal.
For the year ended March 31, 2018, it had reported a revenue of Rs 4,306 crore and contributed over 53 % to the turnover of Century Textiles.
While the transaction will be completed in 6-9 months after obtaining all the approvals, it will see the cement capacity of UltraTech crossing 100mt to touch almost 110mt. It will also position UltraTech as the third-largest cement player globally, excluding China.
The transaction is subject to the approval of shareholder s and creditors, stock exchanges, the NCLT, the Competition Commission of India and other regulators.
UltraTech Cement will issue one share for every 8 shares of Century to the latter’s shareholders. It will thus issue 1.4 crore new shares to the shareholders of Century. While the equity value of these shares is a little over Rs 5,600 crore, UltraTech will also acquire around Rs 3,000 crore of debt, taking the total enterprise value to Rs 8,621 crore.
The acquisition is expected to strengthen UltraTech’s presence in the eastern markets, apart from extending its footprint in the central, western and southern markets.
After the acquisition, the Kumar Mangalam group firm’s capacity in the east will increase by 4.4mt to over 16mt. According to the company, it will now become a competitive and vigorous player in the eastern region.
The acquisition also comes with limestone reserves of over 35 years and power capacity to meet 85% of the requirements.
Kumar Mangalam Birla, the grandson of group patriarch B. K. Birla, was inducted into the board of Century in 2006. He was appointed the vice-chairman in 2015.
In a regulatory filing with the stock exchanges, Century said it was undertaking the demerger to deleverage its balance sheet, including reduction of debt, besides unlocking the value of the cement division.
The company said the deal will enable the growth of its other businesses, particularly real estate. The company has four divisions – cement, textiles, pulp and paper and real estate. “The company requires capital to modernise and grow these businesses. The current leverage and cash flow profile constrains this growth,” Century said.
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