L&T Concrete comprises 66 concrete plants located across India, in markets such as Delhi, Kolkata, Mumbai and Bangalore. It has an estimated market share of 25%. Citi is advising Larsen & Toubro on the deal.
Larsen & Toubro sold its cement division to Kumar Mangalam Birla in 2004 but held on to its readymix concrete business. In December 2007 it transferred the readymix business to a subsidiary, leading to market speculation that it was considering either a sale or a separate listing of the business.
Lafarge says the acquisition will be earnings accretive from 2009 and will establish it as the leader in the Indian readymix concrete market.
Readymix concrete is a type of concrete that is prepared by the manufacturer and delivered on-site in mixers. Lafarge believes that readymix concrete is poised for high growth in India, given that the construction market in the country is at an early stage of development and both housing and infrastructure are creating a demand for the product. The company's first greenfield readymix concrete plant in India started operating in April 2008.
Lafarge has a stated strategy to develop its aggregates and concrete business in emerging markets. It says that L&TÆs business provides both a platform to grow further and an experienced management team.
In tandem with other cement multinationals, Lafarge has enhanced its focus on India over the past decade and has adopted a strategy of growth through acquisitions. Lafarge entered India in 1999 with the acquisition of Tata Iron and Steel CompanyÆs (TiscoÆs) 1.8 million tonnes per annum (MTPA) cement and grinding facility for Rs5.5 billion ($130 million), giving it a strong presence in east India. At the time of the Tisco acquisition, LafargeÆs exposure to India was limited to a joint venture for clay roof tiles in Kerala. Soon thereafter, in early 2000, Lafarge announced it was consolidating its position in eastern India through the acquisition of RaymondÆs 2.24 MTPA cement facility for $180 million.
Lafarge is distributing its advisory business in India across banks. It was advised on its first India acquisition by DSP Merrill Lynch, on the Raymond acquisition by Kotak Mahindra and on its most recent L&T Concrete deal it is being advised by JM Financial. Lafarge says it plans to double its capacity in the next five years, suggesting there could be further advisory revenues up for grabs for the next bank to bring an interesting acquisition idea to one of the worldÆs largest cement players.
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