JSW Group plans to compete aggressively with Adani Group for assets of Holcim AG's local cement businesses, two sources said on Tuesday, setting the stage for a bidding battle to become the country's second-biggest player in the industry.
The steel-to-cement JSW Group's chief Sajjan Jindal told the Financial Times on Tuesday it would make a $7 billion bid for Holcim subsidiaries Ambuja Cements Ltd and ACC Ltd.
But a source with direct knowledge said the deal value could go much higher, even double, as both JSW and Adani run by India's richest man Gautam Adani, chase ready-made assets that will immediately give the winner a big presence in the market.
India is the second largest cement producer in the world and accounts for more than 7% of the global installed capacity, according to government data.
A second source with direct knowledge said that JSW considers ACC and Ambuja as a 'crown jewel' and the company was 'very aggressive and will fight (Adani) tooth and nail'.
JSW Group, Adani, Holcim, Ambuja Cements and ACC did not immediately respond to requests from Reuters for comment.
JSW has said it will offer $4.5 billion in its own equity and $2.5 billion from undisclosed private equity partners for the bid. Ports-to-coal group Adani is planning its cement foray by acquiring the Indian companies.
Switzerland's Holcim will review bids from both Adani and JSW, but a deal would depend not just financial but on other contractual terms, one of the sources and another person said.
Once the deal talks progress with a company, Holcim is determined to insert a break-fee clause to get 'high' compensation if the transaction fails, said one of the sources.
Holcim has been trying to diversify away from its core business of cement and aggregates to focus more on building technology amid increased emphasis on sustainability.
Ambuja and ACC have a combined capacity to make at least 66 million tonnes a year, with plans to expand. Any buyer of the two companies will become the second-biggest player in the country after UltraTech Cement's 120 million tonnes.
JSW has a cement capacity of about 14 million tonnes a year, which it wants to lift to 25 million by next year.
Some media reports indicated on Tuesday that global steel giant ArcelorMittal was also 'evaluating the possibility of bidding' for ACC and Ambuja. ArcelorMittal did not respond to a request for comment.