CG Alert – Holcim and Ambuja Cements Deal


On July 24, 2013, the Board of Directors of Ambuja Cements Limited considered and unanimously approved a proposal to amalgamate Holcim (India) Private Limited with Ambuja Cements Limited pursuant to a Scheme of Amalgamation under 391-394 of the Companies Act.

As per the Scheme, Ambuja Cements will first acquire from Holder Investments Mauritius Limited a 24% stake in Holcim India for a cash consideration of Rs 3,500 crores followed by a merger of Holcim India into Ambuja Cements. The intra-group transactions will result in Ambuja Holding 50.01% stake in ACC Limited.

InGovern Research Services Private Limited has released a corporate governance alert note on the Scheme of Amalgamation recommending shareholders of Ambuja Cements to vote AGAINST the proposal for the following reasons and initiate actions as suggested below:

  • Rs.3,500 crore is paid out of Ambuja Cements to Holcim. Effectively, Holcim is taking an indirect dividend without losing control of both Ambuja Cements and ACC.
  • Holcim gets Rs.3,500 crore and 10.85% additional shares in Ambuja Cements, while giving away 19.42% beneficial interest of ACC. Minority shareholders of Ambuja are indirectly paying for the shares of Holcim in ACC.
  • From a pure valuation perspective, there is a balance. The valuation of ACC isn’t excessive and the swap ratios are reasonable.
  • If the transaction was structured for operational synergies as the management claims, they should have rather gone for a merger of these two entities at appropriate valuations.
  • Minority shareholders of Ambuja Cements should oppose this transaction. Institutional and retail investors of Ambuja should vote against this proposal. Institutional investors should question the Board of Ambuja Cements for proposing such a structure.
  • As per SEBI circular dated Feb 4th 2013, the company should call the shareholder meeting as a postal ballot through e-voting. 2/3rd of minority shareholders (majority of minority shareholders) would need to approve the transaction.
  • Minority shareholders can petition and challenge the transaction in the High Court.
  • ACC minority shareholders might not be currently affected due to this transaction, but in future, if Holcim tries to merge ACC and Ambuja, this may be done at the expense of ACC shareholders by undervaluing ACC. Cash of Ambuja will be used to increase shareholding in ACC.


The full note can be downloaded from here: Corporate Governance Alert – Scheme of Arrangement of Holcim – Ambuja Cements