1. Sebi Looking at Minority Interest in Holcim-
Ambuja Cements Deal
The Securities and Exchange Board of India (Sebi) is examining the terms of the
agreement between Ambuja Cements and Holcim to ensure that interests of minority
shareholders are protected as the Street gave a thumbs-down to the deal on Thursday
and corporate governance experts cried foul.
The Rs. 14,500-crore deal, announced on Wednesday night, is likely to become a test
case for the market watchdog after it committed in February this year to give minority
shareholders more powers to approve M&A transactions. Sebi has also armed itself
with the power to approve or reject such deals. “We are keeping a close watch to see if
listing and corporate governance norms have been followed properly,". “We have
enabled the rights of the minority shareholders. They have to vote properly. Their one
vote will change things.”
Ambuja Cements announced on Wednesday it will merge Holcim India with itself in a
two-step deal that will also make another Holcim group firm, ACC, its own subsidiary.
Ambuja will pay Holcim Rs. 3,500 crore for the 24% stake and issue shares for the
remaining. The Ambuja Cements stock crashed more than 10% on Thursday as
investors fretted over the cash transfer of Rs. 3,500 crore from the company through the
two-step merger. “In our view, Holcim is the clear winner; however, the reorganisation
is negative for Ambuja Cements’ minority shareholders while ACC minority
shareholders benefit at the margin,” said Anubhav Aggarwal, analyst at Credit Suisse.
The stock ended at Rs. 171, down 10.5%, slipping below its 200-day moving
average. Minority Shareholders Crucial
ACC fell 1.72% to end at Rs. 1,194.
“We expect a de-rating of Ambuja Cement, and prefer ACC as it would benefit from
the proposed cost-saving initiatives,” said Anand Agarwal, analyst at Jefferies & Co.
Sebi changed the rules in February this year, giving more powers to minority
shareholders in deals involving acquisitions, mergers and demergers. Issuance of new
shares requires passage of a special resolution under Section 81 (1A) of the Companies
Act, which means 75% of the shareholders have to vote in favour of it.
The changes made in February have made it more difficult for the management to
bypass minority shareholders. They stipulate that the percentage of public shareholders
voting in favour of the proposal has to be more than the percentage voting against it.
Proxy advisory firm Institutional Advisory Services (IAS) notes that if all the public

2. shareholders of Ambuja (49.4%) cast their vote, only 24.7% need to press the ‘no’
button for the deal to be defeated. If 20% of public shareholders cast their vote, the
resolution can be blocked with 10% voting against it. Sebi now also has the powers to
approve M&A transactions unlike in the past when only high court approval was
required for mergers or demergers.
Brokerages such as Bank of America Merrill Lynch, CLSA and Religare Capital
Markets cut their recommendation on Ambuja Cements, saying the deal will not benefit
minority shareholders.
"The fact that money is being taken out by the promoter is unjust,” Shriram
Subramanian, founder and MD of InGovern, a proxy advisory firm said. “Minority
shareholders of Ambuja Cements are also entitled to 50% of the cash given to the
promoters."
LIC, which holds nearly 6% in Ambuja Cements and is the largest public shareholder,
said it will take a considered view on the merger process.
The management of Ambuja Cements stoutly defended the transaction and Onne Van
Der Weijde, the managing director, took a dig at former chief executive officer Anil
Singhvi for criticising the deal on Wednesday.
"I think former CEOs should do the math before getting swayed by emotions. It’s a
fantastic opportunity and if you do a transaction like this, the most expensive way of
paying for it is in shares,” he added. “This is an acquisition of ACC at market price and
the market price is very attractive according to me. It is around $110-$115/tonne and as
a cement maker like Ambuja, if you can do an acquisition like this at market price,
without control premium, just do it, grab it. You will never get a first class asset like
ACC for this price with control deal any more in your life.”
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