French cement major Vicat to take 51-per cent stake in Bharathi Cement
20 Apr 2010
In a bid to increase its presence in the Indian market, French cement major Vicat is set to acquire a 51-per cent stake in Bharathi Cement Company Ltd, promoted by Y S Jagan Mohan Reddy, MP, from Kadapa and son of late Y S Rajasekhara Reddy, former Andhra Pradesh chief minister.
Vicat will acquire a controlling interest in Bharathi Cement as a strategic investor through a reserved capital increase and would finance the deal with debt, the NYSE Euronext-listed company said. Though the size of the deal has not been disclosed, industry sources put it at about $200 to a tonne, which would translate into $500 million for Bharathi's 2.5 milion-tonne capacity.
The last big deal in the sector was clinched in 2008 with Irish company CRH's acquisition of MyHome cement at a valuation of $235 a tonne.
Prior to the deal, Jagan Mohan Reddy's Sakshi group was understood to have acquired a 69-per cent stake in Bharathi Cement with the remaining 31-per cent being held by its other co-promoters - India Cements, Dalmia Cement (Bharat) and Matrix Laboratories Ltd vice-chairman and founder N Prasad.
Bharathi Cement had already invested Rs700 crore in setting up a cement manufacturing capacity of two lines with 2.5 million tonnes per annum (mtpa) in Kadapa district of Andhra Pradesh with expansion plans to 5 mtpa by the end of 2010.
In India, Vicat is already a joint venture partner in Sagar Cements Ltd to build a 5.5 mt, $625 million cement plant at Gulbarga in Karnataka.
The first phase of the Sagar-Vicat project, of 2.75 mt capacity, is scheduled for commercial production by January 2012. Vicat also has a 6.6 per cent stake in Sagar.
According to S Sreekanth Reddy, managing director of Sagar Cements, Sagar did not see the Bharathi deal as a move against its interests. He added that the acquisition of Bharathi by Vicat would in fact be complementary to its operations since there was no overlap of markets between the Vicat-Sagar joint venture and Bharathi Cement.
According to a spokesperson for Vicat the Bharathi deal would not interfere with its joint venture with Sagar.
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