ACC & Orient Cement Merger: Adani's Mega Cement Move In Detail

In a move to create a single, pan-India cement platform under the Adani Group simplifying the group structure, the board of directors of Ambuja Cements, part of Adani Group, had given its nod to the merger of ACC and Orient Cement.

ACC, Orient Cement Merger Details:

The merger is to be done through equity swap with 328:100 merger ratio for ACC and 33:100 for Orient Cement. It implies ~9% premium for Orient Cement and at par for ACC (announcement day CMP). The transaction is likely to be completed over next one year, subject to requisite approvals.

Earlier, it announced merger of Sanghi Cement at 12:100 swap ratio and will pay Rs 321.5/share to eligible shareholders of Penna Cement. Post merger of ACC, Orient, Sanghi and Penna, the promoter’s stake will fall to 60.94% from 67.65%.

Merger Rationale: The merger is in alignment with the group’s long-term vision of consolidation and sustainable growth. It will help in simplifying the corporate structure and eliminate/reduce the duplication in corporate functions and various agreements (MSAs), streamlining the operations with effective resource/capital allocation.

It will optimise manufacturing and logistics network across plants and will save in branding and sales promotion related spends resulting in Rs100/tonne cost saving. Notably, AdaniAmbuja Cements and Adani ACC brands will continue to operate as usual under one unified corporate structure, depending on the leading product brands in their respective segments.

Also Read: RBI Unveils Bank Stats 2024-25: Assets, NPAs Exposed

Brokerage View On Adani's Cement Amalgamation Move

The merger aligns with Ambuja’s strategic plan to increase cement capacity to 155m tonne by FY28 (from 107m tonne currently) through efficient capital allocation and optimising operations via targeted cost saving of Rs530/tonne through deploying its financial, managerial and operational resources more effectively. We see the merger as strategically positive with medium-term value creation driven by scale, cost efficiency and improved operating leverage.

Valuation: At the current market price (CMP), the stock trades at 18.1x/14.4x/11.5x FY26e/FY27e/FY28e EV/EBITDA on Bloomberg estimates. Currently, we do not have any rating on the stock. Risks: Higher pet coke and diesel prices and demand slowdown.