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Dangote Cement, Africa’s largest manufacturer of the building material has never hidden its ambitions to be a global player, meaning it may be able to revive its flagging Asian expansion plans by buying Holcim Ltd.’s stake in India’s Ambuja Cement.
Holcim Ltd, the world’s biggest cement maker, is considering a potential sale of businesses in India including Ambuja Cements Ltd., Bloomberg reports, according to people familiar with the matter.
Holcim controls 63.1% of Ambuja, which has a market value of about $9.6 billion. The Swiss giant is gauging interest in its controlling stake in Ambuja, the people said, asking not to be identified as the information is private.
Deliberations are in the early stages and may not lead to a transaction, the people said. Shares of Ambuja have gained more than 20% this month, partially fueled by market speculation about a potential merger.
Dangote’s Nepal Dreams Frustrated
Aliko Dangote, owner of Dangote Cement Plc, said in 2015 In an interview with Bloomberg, that the company hopes to complete a new cement plant in Nepal (a South Asian country) by the end of 2017. With an investment of $400 million, the plant would have had the capacity to produce some 2 million tons of cement.
The Nepal Department of Mines and Geology however disqualified Nigeria’s Dangote Cement in 2018 from applying for three limestone mine licences in an open bidding process.
The Investment Board Nepal (IBN) had approved the investment in 2013 before passing the application to the mining department, according to the Republica newspaper.
Department deputy director general Ram Prasad Ghimire claimed that Dangote’s proposals lacked essential documents on the required skilled manpower and it was not considered qualified for the next financial proposal.
Dangote Cement had applied for three mines: two in Dhading and one in Palpa. However, the Chinese company Huaxin and United Cements won two of the key limestone mining licences Dangote was bidding for.
Previously, Dangote Cement purchased a limestone mine in Makawanpur that was later found to be substandard. The Nigerian company has also faced opposition from local producers who have described the country as being self-sufficient in cement.
Dangote group General Manager, Hikmat Thapa, at the time said: “We are saddened by news that we are disqualified technically.”
Company officials in Kathmandu also claim that they were disqualified without considering Dangote’s experience in cement manufacturing in Nigeria.
Beyond incorporating Dangote Cement Nepal Pvt. Limited, in which it has 100% ownership, Dangote Cement has not made any investments in the subsidiary, MoneyCentral’s analysis of data from its financial statements show.
Ambuja Could Revive Stalled Asian Expansion Plans
If Dangote Cement is in the bidding for Holcim’s Ambuja cement assets it could help Dangote Cement revive its now stalled its Asian expansion plans.
With Holcim controlling 63.1% of Ambuja, it means Dangote would have to shell out at least $6 billion for the assets.
Dangote Cement has a market value of $11.46 billion with its shares up 32 percent in the past year.
Aliko Dangote is also Africa’s richest man with a net worth of $20 billion, according to Bloomberg Billionaires Index.
This means that Dangote could probably afford a cash and shares based offer for Ambuja.
Founded in 1983, Ambuja has a cement capacity of 31 million metric tons, and has six integrated manufacturing plants and eight cement grinding units in India, its website shows. Its subsidiaries include ACC Ltd., which is also publicly traded.
Dangote Cement Plc is Sub-Saharan Africa’s leading cement company, with a production capacity of 48.6 million tons per year across ten countries.
Aliko Dangote said in the Bloomberg interview that his fast-expanding cement company was also looking at possible opportunities in Brazil and South America.
The planned investment in Nepal marked the company’s first venture outside of Africa and Mr Dangote told Bloomberg that future expansion outside of Africa would largely happen through acquisitions.
MoneyCentral thinks the opportunity is here as we await Dangote’s next moves.