Compat stays Holcim-Lafarge merger
The Competition Appellate Tribunal (Compat) has stayed the exit of Lafarge from India till the next hearing on 9 May 2016, thus delaying the Lafarge-Holcim merger. This comes as a reversal to the Competition Commission of India's (CCI) approval to Lafarge's exit plans from India. Dalmia Cements which is opposing the sale process has filed a petition in the Compat against the CCI's decision.
Lafarge: A profile
Established in 1833, Lafarge is a world leading French company that specialises in cement, construction aggregates and concrete. Lafarge entered in India in 1999 with the acquisition of Tata Steel's cement activity. It has 6 cement plants in Chattisgarh, Jharkhand, Rajasthan, Haryana and West Bengal with a total capacity of 11 million tons. In July 2015, Lafarge merged with a Swiss Cement Company, Holcim.
The Larfarge-Holcim merger
French cement major Lafarge and Swiss Cement giant Holcim had announced their merger in 2014 to create the world's largest building material company, LafargeHolcim. However, the merger raised eyebrows of competition regulators in various countries.
What is CCI?
Competition Commission of India (CCI) is a regulatory body that ensures fair competition in the market for the welfare of the consumers. The CCI checks monopolistic tendencies in the market which may lead to market failure and affect consumer behaviour. It approves mergers and acquisitions to ensure that companies do not resort to anti-competitive practices or abuse dominant market positions.
CCI approves Lafarge-Holcim merger
The Competition Commission of India cleared the merger of Lafarge and Holcim subject to condition that both the companies will have to sell capacities of 5MT in Eastern India. Holcim through its control of ACC and Ambuja Cement controled 10.7MT in Eastern India while Lafarge has a capacity of 7.8 MT Eastern India. Together they exceeded 40% of the capacity in the region.
Birla to acquire 2 plants from Lafarge
Birla Corporation Ltd. announced that it will acquire 2 plants worth 5.15 MT of capacity from Lafarge for Rs.5,000 crores. The plants were put on sale after CCI had asked Lafarge to reduce its capacity in Eastern India for a go ahead of the global merger with Holcim. However, the purchase by Birla is conditional on the procurement of limestone mining rights by Birla.
Lafarge deal to sell plant runs into trouble
Birla Corporation planned to seek legal remedy after Lafarge stated its "inability to proceed with the agreement". The finalisation of the agreement would have led to a sale of 2 plants of Lafarge in Eastern India to Birla Corp for Rs.5,000 crores. These 2 plants in Chhattisgarh and Jharkhand would have given an edge to Birla in the market.
MMDRA prohibits sale of limestone mines
Lafarge was unable to sell its 2 plants to Birla Corp. because the new Mines and Minerals (Development and Regulation) (Amendment) Act bars the transfer of rights of limestone mines attached to the cement plant.
Lafarge to exit India
In order to continue with the merger of Lafarge with Holcim after the plan to sell 2 cement plants in Chhattisgarh and Jharkhand to Birla Corp. ran into trouble, Lafarge would now seek to exit from India. Lafarge had taken permission from CCI to sell its 11 million tonnes cement business in India. It has received 9 bidders for assets valued at Rs.10,000 crores.