Ambuja's minority holders losers: analysts
Say restructuring is detrimental to minority shareholders as Ambuja will part with its huge cash balance Top brokerages said the complex deal between Ambuja Cements and ACC is unfavourable to Ambuja’s minority shareholders.
In a multi-layered transaction, Swiss cement maker Holcim, which holds majority stakes in both the Indian firms, will increase its stake in Ambuja to 61.3% from the current 50.01% once Ambuja buys Holcim’s 50.1% stake in ACC. Currently, Holcim owns 50% stakes in Ambuja and ACC.
“Prima facie the restructuring is detrimental to minority shareholder of Ambuja Cement as Ambuja Cement will be parting away with its huge cash balance of Rs 35 bn (Rs 3,500 crore), which is more than 90% of its CY12 cash on books, without any EPS (earnings per share) accretion,” said Emkay Global in a report.
At 12:45 pm on Thursday, Ambuja shares were down 11.2% at Rs 169.65. ACC shares had fallen 3.9% at Rs 1,183.
“Holcim has restricted minority shareholders' choice by using Ambuja ’s cash for ACC’s stake. The cash could have been used alternatively for a buy-back,” said Credit Suisse, in a client note.The investment bank said Ambuja’s proposal to buy an additional 10% stake in ACC over the next 24 months will make it a ‘net-debt company’. Deutsche Bank said Ambuja faces the risk of its valuations getting the discount of a holding company.Analysts said minority shareholders of ACC have got a better deal than those of Ambuja’s.
“ACC minority shareholders benefit from merger synergies, the creeping acquisition by Ambuja for a 10% stake in ACC over the next two years, which should support ACC prices; and Holcim’s direct stake of 50% in ACC reduced to an indirect stake of 30%,” said Credit Suisse, which said ACC’s minority shareholders benefit at the margin in the transaction.
Brokerage Jefferies said, “We expect a de-rating of ACEM (Ambuja) on 'holding company discount' concerns and prefer ACC as it would benefit from the proposed cost saving initiatives and ACEM’s proposal for a 10% creeping acquisition in ACC.”
“Prima facie the restructuring is detrimental to minority shareholder of Ambuja Cement as Ambuja Cement will be parting away with its huge cash balance of Rs 35 bn (Rs 3,500 crore), which is more than 90% of its CY12 cash on books, without any EPS (earnings per share) accretion,” said Emkay Global in a report.
At 12:45 pm on Thursday, Ambuja shares were down 11.2% at Rs 169.65. ACC shares had fallen 3.9% at Rs 1,183.
“Holcim has restricted minority shareholders' choice by using Ambuja ’s cash for ACC’s stake. The cash could have been used alternatively for a buy-back,” said Credit Suisse, in a client note.The investment bank said Ambuja’s proposal to buy an additional 10% stake in ACC over the next 24 months will make it a ‘net-debt company’. Deutsche Bank said Ambuja faces the risk of its valuations getting the discount of a holding company.Analysts said minority shareholders of ACC have got a better deal than those of Ambuja’s.
“ACC minority shareholders benefit from merger synergies, the creeping acquisition by Ambuja for a 10% stake in ACC over the next two years, which should support ACC prices; and Holcim’s direct stake of 50% in ACC reduced to an indirect stake of 30%,” said Credit Suisse, which said ACC’s minority shareholders benefit at the margin in the transaction.
Brokerage Jefferies said, “We expect a de-rating of ACEM (Ambuja) on 'holding company discount' concerns and prefer ACC as it would benefit from the proposed cost saving initiatives and ACEM’s proposal for a 10% creeping acquisition in ACC.”
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