Aditya Birla Group firm UltraTech today announced the acquisition of debt-ridden JP Group’s cement plants for nearly Rs 17,000 crore (about $2.5 billion), making it the biggest deal in the sector.
UltraTech Cement said it entered into a binding memorandum of understanding with Jaiprakash Associates Ltd for the acquisition of its identified cement plants having a total cement capacity of 22.4 mtpa (million tonnes per annum) situated in Madhya Pradesh, Uttar Pradesh, Himachal Pradesh, Uttarakhand, Andhra Pradesh and Karnataka.
Under the deal, these plants have been valued at Rs 16,500 crore.
The deal would further include a 4 mtpa plant under implementation at a cost of Rs 470 crore, UltraTech said in a statement.
A number of Indian and foreign players were said to have been in the race for these cement plants.
UltraTech said the assets will give it access to the newer markets of Satna, UP East, Himachal Pradesh and coastal Andhra where it does not have a presence as of now.
“Upon consummation of the proposed transaction, the company’s cement capacity will stand augmented to 90.7 mtpa (current 68.3 mtpa),” it added.
The two groups have agreed to an enterprise value of Rs 16,500 crore for the deal, which is subject to definitive agreements and necessary regulatory approvals, the statement added.
The new MoU follows calling off an earlier deal wherein UltraTech was to acquire two cement plants in Madhya Pradesh from Jaiprakash Associates, which has been selling its cement and power assets to pare debt and improve balance sheet.
JP Associates said in a separate statement that headwinds of the economy have impacted all companies which had borrowed to invest in brick-and-mortar segment, currently reeling under severe pressure. The power sector is witnessing never-seen-before challenges with capacity utilisation and tariffs at all time lows.
It further said that Jaypee group has taken steps to deleverage its balance sheet through sale of two hydropower projects in HP, sale of cement assets in Gujarat, Jharkhand and Haryana, and also sale of wind power assets in Gujarat and Maharashtra.
In January 2015, JP Associates had signed an agreement with UltraTech to sell two of its MP-based cement plants.
However, pending amendment to the MMDR Act, the proposed transaction ran into rough weather.