On Sunday, May 20th it was announced that the cement business of BK Birla group’s Century Textiles and Industries would be acquired by UltraTech Cement Ltd, part of the Aditya Birla group, in what can be termed as an all-stock transaction.
In accordance with the plan, each and every Shareholder of Century Textiles would receive one share of UltraTech for every eight shares held. Furthermore, managing director K.K. Maheshwari revealed over the phone that Ultratech would bear the debt of Century’s cement business that amounts up to Rs 3,000 crore.
The total enterprise value of Century’s cement business amounts to Rs8,561 crore.
The announcement made on Sunday marks the successful acquisition that was a plan which was being discussed for nearly eight years, it also merges the cement businesses of the two groups into one firm.
It also benefits BK Birla group as the company can now exit its non-core businesses and focus more on real estate.
Century Textile has a total capacity of 11.4 million tonnes per annum (mtpa) and a 2 (mtpa) grinding unit in West Bengal, also its assets consist of three integrated units in Maharashtra, Madhya Pradesh, and Chhattisgarh.
The official statement published by UltraTech reads as follows:
“This transaction gives us (UltraTech)the opportunity to further strengthen our presence in the extremely competitive, highly uneven, and fast-growing central and eastern markets, also it would enable us to extend our footprint in the western and southern markets in the country.”
As per reports, once the transaction is completed, The capacity of UltraTech would rise to 109.9 mtpa, that includes its overseas operations. Once this materializes, it would make UltraTech the world’s third-largest cement maker outside China.
Maheshwari claims that this transaction is part of the Birla family’s plan to consolidate its cement businesses within one company.
“A few of these (acquired) plants are really old and would require a significant amount of capital expenditure in order to get a complete makeover,” as per Maheshwari
The transaction is expected to be finalized within the next six to nine months and is subject to regulatory approvals.
Also, on Sunday via a press statement, UltraTech announced that Walker Chandiok & Co. and Bansi S Mehta & Co. were the independent joint valuer’s. Khaitan & Co. and Trilegal are the legal advisers, while Axis Capital provides the fairness option.
Back in December 2017, the operating rights of its viscose filament yarn business were sold by Century’s board for a tenure of 15 years on a royalty basis to Grasim, an Aditya Birla group company.
For the current year as on 31st March, Century reported revenue of Rs4,306 crore and operating profit of Rs492 crore (excluding non-recurring items). Whilst its Debt stood at Rs4,300 crore.
UltraTech has also been keen on buying the cement assets of its insolvent competitor Binani Industries. The company has already made a bid of Rs7,990 crore for Binani’s cement plants, while it faces some stiff competition from the Dalmia Bharat group.