UltraTech Cement set to acquire Kesoram's cement business in a Rs 5,379-crore deal

UltraTech Cement Ltd. announced on Thursday, 30 November 2023, its plans to acquire the cement business of Kesoram Industries Ltd. in a significant all-stock transaction valued at Rs 5,379 crore. This strategic move is aimed at bolstering UltraTech's capacity in the fiercely competitive cement sector.

As part of the deal, UltraTech will issue one share for every 52 shares of Kesoram, ultimately granting UltraTech ownership of two integrated cement units located in Karnataka and Telangana. The offer price under this arrangement is Rs 173.15, representing a substantial 24.1% premium over Kesoram's last closing price of Rs 139.45.

UltraTech, in an official statement, expressed its anticipation of expanding its market presence in the western and southern regions of India. The company sees this deal as a strategic move to navigate the highly fragmented market successfully.

The proposed acquisition aligns with UltraTech's overarching goal of achieving a robust 200 million tons per annum (mtpa) cement capacity in India. The company believes that this transaction will expedite the realization of this ambitious target.

Simultaneously, Kesoram Industries announced the withdrawal of the demerger scheme of its arm, Cygnet Industries. Instead, the company has approved a new scheme of arrangement with UltraTech Cement for the demerged company.

Kesoram Industries' cement business comprises two integrated cement units situated in Sedam in Karnataka and Basantnagar in Telangana, boasting a total capacity of 10.75 mtpa. Of this capacity, 8.50 mtpa is clinker-backed, while 2.25 mtpa is surplus grinding capacity. Additionally, the cement business includes a 0.66 mtpa packing plant in Solapur, Maharashtra.

Following the announcement, UltraTech's scrip on the Bombay Stock Exchange (BSE) closed 3% higher at Rs 9,000.65 on Thursday, 30 November 2023, reflecting positive market sentiment towards the strategic acquisition.