The long-due merger between the Swiss building materials maker LafargeHolcim’s Indian operations, Ambuja CementsBSE -3.79 % and ACCBSE -1.60 % Ltd, has been called off on Monday because of some “current constraints”.
Both ACC and Ambuja notified the stock exchanges on the decision to put off the merger talks.
“Pursuant to the extensive study undertaken by the Special Committee and the Board of Directors of the company, the board at its meeting held today, is of the view that there are some constraints to implement the merger,” said both Ambuja and ACC in a statement. “Consequently, the company is not pursuing a merger at this point of time, though it remains the ultimate goal,” the statement added.
The statement also said that the board has approved of an arrangement whereby there will be mutual sale and purchase of materials and services by both companies to maximise synergies. Analysts believe that ACC, which has bigger clinker capacity, could help Ambuja, and also save freight costs.
According to industry experts, the transfer of mines between the two entities was proving to be uneconomical. However, both ACC and Ambuja declined to comment.
The companies had first gone public with their announcement regarding their “potential merger” last year in May when they had said that a decision is dependent on the recommendation received from the special committee and the audit committee.
ACC has a cement capacity of 33.5 MT while Ambuja has a capacity of 29.65 million tonnes. Ambuja has also recently announced a capex of Rs 1,391 crore that it plans on spending on setting up a 3.1MT greenfield clinkerisation plant at Marwar Mundawa in Rajasthan. ACC, on the other hand, had announced a Rs 600-crore capital expenditure plan last year in March focused on setting up five ready-mix concrete plants along with undertaking debottlenecking across its projects in the country. The two companies have a combined capacity of 63.06 million tonnes annually.
In June in 2016, LafargeHolcim had agreed to sell assets held under Lafarge India Pvt Ltd to Nirma for Rs 9,400 crore including debt, as part of a deal to complete the India leg of the global merger of Lafarge and Holcim.