Ambuja Cements and Holcim India Merger
(5 pages of text)
Case (Pub Mat)
On July 24, 2013, the management of Ambuja Cements Limited announced the merger of Holcim (India) Private Limited with Ambuja Cements in a two-stage process. First, Ambuja Cements would buy a 24 per cent stake of Holcim (India) from Holderind Investments Ltd. of Mauritius for ?35 billion. Subsequently, Holcim (India) would be merged with Ambuja Cements. The management of Ambuja Cements projected huge synergy from the merger, whereas proxy firm advisors called it corporate misgovernance. The case gives students an opportunity to analyze this two-step transaction to determine whether it compromised the interests of minority shareholders. The case also presents an opportunity to estimate the marginal impact of the transfer of cash and the cancellation of shares on the stock price of the acquiring company.
Mergers in India are usually intra-group mergers and this sometimes complicates the analysis of the merger. The same promoter controls the shares of both companies, and special adjustments are required while computing the post-merger number of shares and performing the accretion-dilution analysis. This case presents an opportunity for the instructor to discuss with students how such mergers can be analyzed. This case should ideally be discussed in mergers and acquisitions or business valuation courses in a graduate-level program. This case can also be discussed in an advanced corporate finance course, where mergers and acquisitions are covered as a separate module.
India, Large, 2013
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