MUMBAI, FEBRUARY 9: The bid of Gujarat Ambuja Cements Ltd (GACL) to take over cement giant ACC has run into rough weather with financial institutions questioning the acquisition method. FIs are keen that GACL should make an open offer for the ACC stake so that FIs can also sell the stake at the stipulated price of Rs 370 per share.GACL managing director N Sekhsaria has already been elected as vice chairman of ACC. ``Our earlier understanding was that it was only a strategic alliance. Now it seems to be a simple takeover. We also expect the SEBI to take a view on this deal,'' institutional sources said. FIs have not yet given their consent for the proposed $ 200 million overseas offering of GACL. The proceeds of this issue will be used to finance the takeover of ACC.It may be recalled that GACL has outbid French transnational Lafarge for buying out 7.2 per cent of the Tata group's stake in ACC for a whopping Rs 455 crore. It will also have the option to buy the remaining 7.2 per cent that the Tatascontinue to hold. The move, which could lead to the Tatas eventually exiting from ACC completely, is being seen as a volte face on their part who only six months back - before ACC's Rs 189 crore rights issue - had identified themselves as ACC's "rightful promoter group".Said an analyst, ``when GACL acquires the remaining 7.2 per cent, the total GACL holding in ACC would come to 14.4 per cent. This will make GACL as the new promoter of ACC.'' The takeover will give GACL immediate control over 19.4 million tonne of cement capacity, out of India's total of around 100 million tonnes, and following the completion of ACC's ongoing expansion it will rise further to 22.4 million tonnes by March 2001. GACL had also announced a greenfield expansion of five million tonnes by 2002.GACL will gain immensely by utilising ACC's large distribution network, which is spread across the four regions. The new combination will now have an all India market share of 20 per cent. Region-wise, ACC and GACL together will command amarket share of 28 per cent in north India, 21 per cent in the west, 24 per cent in the east and eight per cent in the south.ACC, hit badly by a sharp drop in price realisation in the eastern and southern markets, has slumped into the red reporting a net loss of Rs 19.79 crore during the third quarter ended December 31, 1999, against a profit of Rs 34.02 crore in the same quarter last fiscal.Earlier, GACL took over management control of the Delhi-based DLF Cement in a Rs 142 crore all-cash deal. DLF Cement will further make a preferential allotment to GACL in February, which will require an additional investment of around Rs 217 crore by the new promoters.
