Ambuja cement and ACC have released a statement announcing that they are not proceeding with a proposed merger deal, citing “some constraints to implement a merger” but did not divulge any further details.
“The development is sentimentally negative for both the companies, as it will have much lesser synergetic benefits than envisaged earlier,” retail brokerage Sharekhan wrote in a note. However, the companies have not abandoned the proposal completely and maintained that the merger “remains the ultimate goal”.
The two cement giants had announced in May last year that they were considering a merger to achieve operational and financial efficiencies, although they had not disclose a value.
The two cement companies, owned by Swiss-based LafargeHolcim Ltd, said that they had reached an agreement for the sale and purchase of materials and services with a view to maximise synergies.
If the companies had gone ahead with the deal, the merger would have fetched them a capacity of 63 million tons, leading the parent-company LafargeHolcim closer to the market leader Ultratech Cement of the Aditya Birla Group which has an annual capacity of nearly 70 million tons.
On late Monday, after the companies announced that they are putting the merger on hold, Ambuja Cement Ltd slid as much as 4.8 percent and ACC Ltd fell as much as 2.2 percent
Ambuja Cement shares clocked their biggest intra-day fall since July 10, 2017.