Jaiprakash Jumps After $2.4 Billion Sale of Cement Unit to Birla

  • UltraTech Cement deal to include little or no equity component
  • Acquisition will increase UltraTech's cement capacity by 33%

Jaiprakash Associates Ltd. shares jumped the most since November after it announced plans to sell its cement units to Indian billionaire Kumar Mangalam Birla’s UltraTech Cement Ltd. at an enterprise value of 165 billion rupees ($2.4 billion).

Jaiprakash Associates shares rose as much as 8.1 percent Monday, after the company said over the weekend it signed a binding memorandum of understanding on the sale. UltraTech will take on the Jaiprakash cement operations’ debt while paying little or no equity, people with knowledge of the matter said, asking not to be identified as the information is private.

The deal will increase UltraTech’s capacity by 33 percent to 90.7 million tons and give it access to markets in six Indian states, including Uttar Pradesh and Madhya Pradesh. Jaiprakash, which built India’s only Formula One track, has sold hydroelectric power plants, wind-power assets and other cement operations to cut debt.

UltraTech last week called off the acquisition of two individual cement plants in Madhya Pradesh from Jaiprakash as well as some mining leases. The company failed to get court approval for the transaction because of a law that prevents the transfer of mines through means other than auctions.

The new deal would include the cement assets from the canceled sale, according to the people. The transaction will be structured in a way to avoid the need for similar approvals, the people said. Representatives for Jaiprakash and UltraTech said they couldn’t immediately comment. 

UltraTech will also pay an additional 4.7 billion rupees to complete the construction of a grinding unit, according to the statement. ICICI Securities Ltd. advised Jaiprakash on the deal, while Standard Chartered Plc was the adviser for UltraTech, the people said. 

KKR & Co. and JSW Cement Ltd. had also bid for Jaiprakash’s cement assets, people familiar with the matter said last month.

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