Ultratech buys Jaypee Cement unit
MUMBAI: Aditya Birla Group flagship company Ultratech Cement on Wednesday announced acquisition of Jaypee Group's Gujarat cement unit for an enterprise value of Rs 3,800 crore.
"We will infuse equity to the tune of Rs 150 crore and Jaypee Cement (JCCL) debts of Rs 3,650 crore will be transferred to the books of Ultratech. With this acquisition, our cement capacity increases to 59 mtpa and with projects underway, it will stand raised to 70 mtpa by 2015. The transaction will be accretive in the next three years," Aditya Birla Group chairman Kumar Mangalam Birla said on Wednesday while announcing the deal. "Ultratech will save Rs 350 crore by way tax benefits and other synergies," Birla said.
The sale will help Jaiprakash Associates reduce its debt by 15%, chairman Manoj Gaur said in New Delhi on Wednesday. JCCL is a wholly owned subsidiary of Jaiprakash Associates.
"The Ultratech board at its meeting held today (Wednesday) approved the acquisition of the Gujarat cement unit by way of a demerger, comprising of an integrated cement unit at Sewagram and grinding unit at Wanakbori," said an Ultratech release.
The combined capacity of both the divisions of the Gujarat unit is 4.8 mtpa with a 57.5 MW coal-based thermal power plant, limestone reserves for over 90 years at current capacity and a captive jetty at Sewagram.
Investment adviser S P Tulsian said it's a very good buy for Ultratech. "Jaypee Cement with two units in Gujarat and Andhra Pradesh has debts of Rs 7,903 crore. If you remove the Gujarat unit for Rs 3,800 crore, the Andhra unit will not be able to fetch Rs 4,250 crore. That means you sell a unit for which you can't even recover your full debt."
Shares of Ultratech cement closed 1.6% up at Rs 1,732 in a flat Mumbai market on Wednesday while shares of Jaiprakash Associates gained 6% to close at Rs 43. The deal was announced after the closure of the market hours on Wednesday.
O P Puranmalka, whole-time director at Ultratech, said, "Besides giving us a stronger production base in Gujarat to serve the local market, it will also bolster our coastal footprint enabling us to cater to other regions of India and exports."
"The transaction will also help us realize logistics gains and be value accretive in the medium term," said Kailash Birla, the CFO of Ultratech.
The proposed transaction is subject to the approval of shareholders, creditors, regulators and sanction of the scheme of arrangement by high courts. The transaction is likely to be closed in 7-9 months.
Standard Chartered was the adviser to the deal while Axis Capital provided independent fairness opinion. Amarchand and Mangaldas and Suresh A Shroff & Co were the legal adviser while Bansi S Mehta & Co were the valuation expert.
"We will infuse equity to the tune of Rs 150 crore and Jaypee Cement (JCCL) debts of Rs 3,650 crore will be transferred to the books of Ultratech. With this acquisition, our cement capacity increases to 59 mtpa and with projects underway, it will stand raised to 70 mtpa by 2015. The transaction will be accretive in the next three years," Aditya Birla Group chairman Kumar Mangalam Birla said on Wednesday while announcing the deal. "Ultratech will save Rs 350 crore by way tax benefits and other synergies," Birla said.
The sale will help Jaiprakash Associates reduce its debt by 15%, chairman Manoj Gaur said in New Delhi on Wednesday. JCCL is a wholly owned subsidiary of Jaiprakash Associates.
"The Ultratech board at its meeting held today (Wednesday) approved the acquisition of the Gujarat cement unit by way of a demerger, comprising of an integrated cement unit at Sewagram and grinding unit at Wanakbori," said an Ultratech release.
The combined capacity of both the divisions of the Gujarat unit is 4.8 mtpa with a 57.5 MW coal-based thermal power plant, limestone reserves for over 90 years at current capacity and a captive jetty at Sewagram.
Investment adviser S P Tulsian said it's a very good buy for Ultratech. "Jaypee Cement with two units in Gujarat and Andhra Pradesh has debts of Rs 7,903 crore. If you remove the Gujarat unit for Rs 3,800 crore, the Andhra unit will not be able to fetch Rs 4,250 crore. That means you sell a unit for which you can't even recover your full debt."
Shares of Ultratech cement closed 1.6% up at Rs 1,732 in a flat Mumbai market on Wednesday while shares of Jaiprakash Associates gained 6% to close at Rs 43. The deal was announced after the closure of the market hours on Wednesday.
O P Puranmalka, whole-time director at Ultratech, said, "Besides giving us a stronger production base in Gujarat to serve the local market, it will also bolster our coastal footprint enabling us to cater to other regions of India and exports."
"The transaction will also help us realize logistics gains and be value accretive in the medium term," said Kailash Birla, the CFO of Ultratech.
The proposed transaction is subject to the approval of shareholders, creditors, regulators and sanction of the scheme of arrangement by high courts. The transaction is likely to be closed in 7-9 months.
Standard Chartered was the adviser to the deal while Axis Capital provided independent fairness opinion. Amarchand and Mangaldas and Suresh A Shroff & Co were the legal adviser while Bansi S Mehta & Co were the valuation expert.
ABDUL WAHAB
PGDM 3rd
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