Life Insurance Corporation (LIC) of India owns a minority stake of ₹7,047 crore in both Ambuja Cements and in its subsidiary ACC. And now with a new owner taking over India’s second-largest cement company, it is going to be a big bonanza for the life insurer, a report by Business Standard stated.
LIC owns a 6.3 percent stake worth ₹4,602 crore in Ambuja Cements and a 5.66 percent stake worth ₹2,445 crore in ACC.
Banking sources told BS that LIC and other shareholders will have the option to exit both companies at a huge profit once the acquirer makes an open offer for them.
Last week, Adani Group and JSW Group submitted non-binding bids for Ambuja Cements to its Swiss parent, Holcim. India’s largest cement major, UltraTech Cement, is also in the race.
But bankers told the market daily that due to potential objections from the Competition Commission of India, its offer may not be favoured since Holcim wants a quick exit.
"After the acquisition of Holcim’s stake, the acquirer will have to make an open offer to the rest of the shareholders in keeping with the Securities and Exchange Board of India rules. Bankers said it would give LIC an opportunity to exit at a profit," the report stated.
LIC has been holding these shares for a long time. When the open offers are made, they can exit companies, along with other minority shareholders, noted the report.
"The acquirer will pay around $6 billion (based on Wednesday’s share price) to buy the 63 percent stake held by Holcim in Ambuja Cements. The acquirer will have to spend another $4 billion for buying shares in the open offers for both Ambuja Cements and ACC," added the BS report.
Bankers further informed BS that all bidders have stitched up funds for the transaction with Adani tying up with West East-based sovereign funds.
JSW Group is getting a clutch of private equity firms to back the transaction. UltraTech Cement will not have any problem raising funds for the transaction, they added.