CK Birla eyes Adani deal, Orient Cement stake up for grabs
Cement

CK Birla eyes Adani deal, Orient Cement stake up for grabs

Industrialist CK Birla has turned to Gautam Adani to sell his promoter stake in Orient Cement, a listed company, after rejecting initial offers from other domestic players that didn't meet his valuation demand. Talks between the two parties have been ongoing for the past few months, involving senior management executives from both sides. Birla had enlisted JP Morgan earlier in the summer to find a buyer for his business.

The promoter stake in Orient Cement, held by the Birla family and private investment vehicles, amounts to 37.9% with a current market value of Rs 3,878 crore. The company's stock price surged by 29% in the past three months in anticipation of a potential sale. Once the transition occurs, it will trigger an open offer for an additional 26% stake in compliance with takeover laws, requiring the incoming promoter or controlling entity to buy these additional shares from existing minority investors.

Adani Cement, which already owns India's second-largest cement capacity, is considering this opportunity. However, formal talks have only recently taken place, and there's no guarantee that the discussions will result in a transaction, as cautioned by insider sources.

Birla's expectations of a significantly higher valuation, doubling the current market price to factor in the control premium, could pose a challenge to the deal. Orient Cement is evaluating valuation benchmarks based on the Ambuja-ACC sale to Adani Cement, primarily due to access to limestone reserves that could potentially double the company's capacity to 16 million tonnes per annum (MTPA). While JSW Cement did express interest with a non-binding offer, it did not progress further.

Access to limestone reserves is a crucial factor in such deals, as it helps in increasing manufacturing capacities. Adani Cement's recent acquisition of Sanghi Industries for Rs 50 billion emphasised the importance of limestone reserves in determining premium valuation. Orient Cement's current footprint includes manufacturing plants in Telangana, Maharashtra, and Karnataka, supplying to 11 states in central, western, and south India. The company plans significant capital expenditure, particularly for its Karnataka unit, in the coming months.

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Industrialist CK Birla has turned to Gautam Adani to sell his promoter stake in Orient Cement, a listed company, after rejecting initial offers from other domestic players that didn't meet his valuation demand. Talks between the two parties have been ongoing for the past few months, involving senior management executives from both sides. Birla had enlisted JP Morgan earlier in the summer to find a buyer for his business. The promoter stake in Orient Cement, held by the Birla family and private investment vehicles, amounts to 37.9% with a current market value of Rs 3,878 crore. The company's stock price surged by 29% in the past three months in anticipation of a potential sale. Once the transition occurs, it will trigger an open offer for an additional 26% stake in compliance with takeover laws, requiring the incoming promoter or controlling entity to buy these additional shares from existing minority investors. Adani Cement, which already owns India's second-largest cement capacity, is considering this opportunity. However, formal talks have only recently taken place, and there's no guarantee that the discussions will result in a transaction, as cautioned by insider sources. Birla's expectations of a significantly higher valuation, doubling the current market price to factor in the control premium, could pose a challenge to the deal. Orient Cement is evaluating valuation benchmarks based on the Ambuja-ACC sale to Adani Cement, primarily due to access to limestone reserves that could potentially double the company's capacity to 16 million tonnes per annum (MTPA). While JSW Cement did express interest with a non-binding offer, it did not progress further. Access to limestone reserves is a crucial factor in such deals, as it helps in increasing manufacturing capacities. Adani Cement's recent acquisition of Sanghi Industries for Rs 50 billion emphasised the importance of limestone reserves in determining premium valuation. Orient Cement's current footprint includes manufacturing plants in Telangana, Maharashtra, and Karnataka, supplying to 11 states in central, western, and south India. The company plans significant capital expenditure, particularly for its Karnataka unit, in the coming months.

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