Financial Daily from THE HINDU group of publications
Wednesday, Nov 27, 2002
Mergers & Acquisitions
Lafarge still eyeing L&T's cement biz
KOLKATA, Nov. 26
THE Indian outfit of the French cement major, Lafarge, is quite keen to acquire the cement business of L&T once the management finalises the modus operandi of demerging it into a separate company.
Industry sources said that Lafarge is still nurturing its earlier hopes of acquiring the cement business of L&T. The company is currently waiting in the wings and watching the recent developments.
When Business Line contacted the spokesperson of Lafarge India Ltd, he gave a guarded reply. Mr Sivesh Sinha, the Chief Financial Officer of Lafarge India, only said that the company wants to expand its operations.
"We would certainly like to grow our business and create more value for our shareholders,'' Mr Sinha said and preferred not make any comment on issue of Lafarge's interest in L&T's cement division.
It may be noted that in 2000, Lafarge was one of the serious contenders for the cement business of L&T. They were quite ahead in the race along with other cement giants like Cemex and Holcim (previously known as Holderbank).
Industry sources said that acquisition of L&T's cement operations by Lafarge India is sound business proposition. The French major wants to grow in India and has already expressed its desire to acquire some units of Cement Corporation of India.
"However, the average efficiency levels of these units is quite low compared to that of L&T's. Even the slow pace of the current disinvestment programme will further delay Lafarge's plans of action,'' sources added.
Meanwhile, the L&T management has already informed the stock exchanges that they received a number of "proposal from potential investors'' for the cement business. However, it did not divulge the name of these investors. The potential investors are likely to conduct a due-diligence and then submit the offer.
The L&T management also clarified that all these proposals are subject to the clearance of the boards and the shareholders. It has also created a committee of directors to evaluate the spin-off plan and make recommendations to the board.
The valuation of the L&T cement business will be another crucial issue because there is no clear formula of assessing the value of cement capacities.
However, industry experts say that the current price of could range between $60 and $65 per tonne. By that measurethe value of L&T's cement business will be in the range of Rs 400 crore.
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