India's UltraTech to Acquire Kesoram's Cement Business for $645 Million

India's UltraTech to Acquire Kesoram's Cement Business for $645 Million
UltraTech Cement, a company based in India, has announced that it will acquire the cement business of Kesoram Industries in an all-stock deal worth 53.79 billion rupees ($645.41 million). The acquisition will strengthen UltraTech's position in the southern region of India. Under the terms of the deal, UltraTech will offer one share for every 52 shares of Kesoram, and will take ownership of two integrated cement units located in Karnataka and Telangana.
The agreement proposes an offer price of 173.15 rupees per share which is a 24.2% premium compared to Kesoram's previous closing price. UltraTech, the market leader, is aiming to enhance its capacity goals in the highly competitive Indian cement sector. This comes a few months after Ambuja Cements (ABUJ.NS), a smaller competitor owned by billionaire Gautam Adani, acquired a majority stake in Sanghi Industries (SNGI.NS).
"UltraTech already has one of the best brownfield potential in the industry. This deal, if it does go through, would be additive to that and help cement its capacity lead over others, even as other players with larger ambitions ramp up", said Satyadeep Jain, research analyst at Ambit Capital.
The transaction, expected to be completed within 9-12 months, will provide the company "the opportunity to extend its footprint in the highly fragmented, competitive and fast-growing Western and Southern markets in the country", UltraTech said.
UltraTech has announced that the proposed transaction will help it achieve its 200 million tons per annum cement capacity target in India. Currently, the company's consolidated capacity stands at 137.85 MTPA, with 23 integrated manufacturing units. The deal would leave Kesoram with its smaller business segment, which includes rayon, transparent paper and chemicals.