Ambuja Cements Limited · NSE:AMBUJACEM
Ambuja Cements — Merger or Acquisition (August 2013)
20 slides from Ambuja Cements's merger presentation, Aug 30, 2013
Slide 1: Acquiring Majority Stake in ACC
Strength. Performance. Passion. Acquiring Majority Stake in ACC Investor Meetings Short title, Department, Date yymmdd, Classification © 2012 Legal entity 1
Slide 2: Disclaimer / Safe Harbor
Disclaimer /Safe Harbor Cautionary statement regarding forward-looking statements This presentation may contain certain forward-looking statements relating to Ambuja Cements Ltd. (“ACL”, or “Company”) and its future business, development and economic performance. These statements include description
Slide 3: Agenda
Agenda Transaction Fundamentals Key Take-Aways Minority Shareholders Conclusion © 2013 Ambuja Cements Ltd. 3
Slide 4: ACL acquires Holcim's 50.01% equity stake in ACC
ACL acquires Holcim’s 50.01% equity stake in ACC Evolution of current to target shareholder structure Interlinked transaction steps Step I: Acquire 24% in Holcim India Step II: Merge Holcim India into ACL Target Structure 40.79% 0.29% 40.79% 0.29% 0.29% Holcim Holcim Holcim 76% 76% 61.39% 24% 24% Ho
Slide 5: Fair and Arms Length Transaction
Fair and Arms Length Transaction Historical ACL/ ACC Swap Ratio (1) Historical ACL/ ACC Swap Ratio (1) 9.0x VWAP Swap Ratio 8.0x 60 Day 6.6x 7.0x 90 Day 6.6x 6.6x 6 Month 6.6x 6.0x 1 Year 6.8x 5.0x Jul-12 Oct-12 Dec-12 Feb-13 May-13 Jul-13 3 Year 7.1x Historical Ambuja / ACC Swap Ratio 5 Year 7.0x (
Slide 6: Value creation opportunity
Value creation opportunity • More efficient capital structure & EPS accretive Improve • Re-investment of cash into business Structure • Collaboration under ‘India Management’ structure Unlock • Synergy potential of approximately INR 900 crore (USD 150 mio) Synergies through supply chain and fixed co
Slide 7: Agenda
Agenda Transaction Fundamentals Key Take-Aways for Minority Shareholders Conclusion © 2013 Ambuja Cements Ltd. 7
Slide 8: The five key take-aways for minority shareholders
The five key take-aways for minority shareholders 1• Unique opportunity to acquire ACC at attractive price of USD 115 per ton (EV/ Ton) Below ACC historic implied price range of USD 124-126 per ton (1) Major Indian cement companies trade at USD 112-132 per ton 2• Economically, most favourable deal s
Slide 9: Unique opportunity to acquire ACC at unprecedented price
1 Unique opportunity to acquire ACC at unprecedented price Enterprise Value per ton of cement [USD] 160-215 112-132 153 110-115 124-126 ACC implied ACC value at Trading multiples Precedent ACL implied valuation at historic 1-5 of large producers2 transactions valuation at announcement year VWAP1 in
Slide 10: Most favourable deal structure; minorities have to approve
2 Most favourable deal structure; minorities have to approve • The proposed combination of cash and equity is more beneficial Use of cash is for minorities compared with other options, e.g., all stock most beneficial More EPS accretive Less dilution of minority shareholding Equity is more expensive
Slide 11: Unlocked synergy potential of USD 150 mio will improve EPS and dividend prospects
Unlocked synergy potential of 150 mio will improve EPS and 3 dividend prospects in ACL Committed synergy potential to be realized under India Management Committee over two years [USD mio] 130-150 • Bottom line impact 70-80 through cost savings over two years in both 60-70 companies • Further EPS acc
Slide 12: Supply chain optimisation through clinker and cement swaps
Supply chain optimisation through clinker and cement 3 swaps bears total saving potential of USD 60-70 mio Current situation Optimal distribution model Initial saving potential [mio USD] ACL Inputs: Cement ACL Market Demand, cost, network, etc swaps + 52-60 Plants ACC logistics Market Linear optimiz
Slide 13: Illustration of swap opportunities across pan-India footprint
Illustration of swap opportunities to be replicated across 3 pan-India footprint and micro markets ACL ACC From current scenario… …to the optimized scenario Grinding un it Grin ding units BCT Integrated unit Plant Gagal Nalagarh Darlaghat Roorkee Bathinda Ropar Dadri Rabriyawas Tikariya Lakheri Fara
Slide 14: Initial saving potential of USD 70-80 mio in fix costs and shared services
Initial saving potential of USD 70-80 mio targeted in fix costs 3 and shared services between ACL and ACC Saving break-up [USD mio] • Change role of procurement from a virtual to an integrated support organisation Process standardisation and centralisation Procurement 45-50 Vendor consolidation glob
Slide 15: Solid all-India footprint, debt-free balance sheet and cash flow generation
Solid all-India footprint, debt-free balance sheet and cash 4 flow generation positions Ambuja well relative to its peers ACL / ACC Madras UltraTech Jaypee Dalmia (2012, in Rs. Crores) (Illustrative) Cements Dec 2012 Mar 2013 Mar 2013 Mar 2013 Mar 2013 Total Capacity (MTPA) 58.5 54.0 32.6 17.1 12.5
Slide 16: Ambuja has sufficient funds to support its investments
4 Ambuja has sufficient funds to support its investments Historic Ambuja Cash-Flow [INR crore] 1786 1834 1505 2010 2011 2012 • Cumulative free cash flow build-up in excess of INR 5,000 crores over past 3 years* • INR 450-550 crore cash on balance sheet once transaction closes at Ambuja alone • Expec
Slide 17: Interim step - focus on cost synergies and performance delivery first
Interim step - focus on cost synergies and performance 5 delivery first ACL acquires 50% in ACC Unlock USD 150 mio Future step from Holcim synergy Q3, 2013 – Q2, 2014 Q2, 2014 - 2016 To be decided • Use short-term moderation in • Formalise strategic • Evaluate full merger of India to strengthen plat
Slide 18: Agenda
Agenda Transaction Fundamentals Key Take-Aways for Minority Shareholders Conclusion © 2013 Ambuja Cements Ltd. 18
Slide 19: Conclusion
Conclusion • Unique opportunity to acquire majority stake in ACC – a top quality company – for USD 115 per ton • Proposed deal structure with cash and equity combination backed by strong economic rationale, higher EPS accretion, lower minority shareholder dilution and subject to approval by minority
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