India’s Ultratech Cement has acquired an 80 per cent stake of the UAE’s ETA Star Cement Company (Star Cement) for $380m.
Ultratech has been engaged in negotiations to buy the stake since the first quarter of 2010 as it looks to increase its presence in the GCC cement market.
“The deal has now been signed and the final transactions are taking place,” a source from Star Cement says. “It is a good deal for both companies because business in the UAE is not as good as it was two years ago. Star Cement needed a cash injection and Ultratech was looking to acquire interests in the [GCC] region.”
The source added that the terms state that the hierarchy of Star Cement will remain the same for 12 months, but after that period Ultratech can bring in its own management team.
Star Cement has a capacity of around 7 million tonnes-a-year (t/y) and has manufacturing plants in the UAE, Bahrain and Bangladesh. Ultratech has acquired management control in all locations.
“This is a good move for Ultratech,” a GCC-based cement analyst says. “Net margins in the region are still around 40 per cent. That is way above the global average of 30 per cent.
“Ultratech would not be allowed to buy an 80 per cent stake in a Saudi [Arabian] cement company due to ownership restriction so UAE cement companies could be the subject of more takeovers in the future.”
A UAE-based cement industry source says that it is a good price for Star Cement, but a major asset, a cement bulk terminal in Sudan, is not part of the deal.
“It is a good deal [for Star Cement], but it has to be remembered that Ultratech has not bought [the company’s] Sudan operations,” a UAE cement source says. “[Ultratech] has no interest in that area.”
Ultratech Cement is a subsidiary of India’s Aditya Birla Group and is India’s largest cement manufacturer. The acquisition of Star Cement pushes the company’s cement capacity up to 52 million-t/y.