Know Why Ambuja Cements Fell Down To 4% and ACC to 1.34 %
Here is the correct reason why Ambuja Cement recently fell down to 4%. On BSE, Ambuja Cement fell down to 3.79 % and ACC fell down to 1.34 %. On Tuesday, after the cement makers called off their long-due merger, the share of Ambuja Cement fell down to 4 %. According to the market watchers and researchers, the transfer of mines between both the companies was actually out of their budget. Since it was proving uneconomical, so the companies decided to put the merger on hold.
On the other hand, the senior official stated that the merger is their prime goal. They informed exchanges about their ultimate goal of the merger.
This news of keeping merger on hold has weekend the stock of Ambuja cement to 3.66 percent to Rs 252.70 on the BSE. However, ACC declined 1.8 percent to Rs 1,631.85.
The merger is kept on hold and it is not called off according to the recent news.
The Ambuja Cement stated that if EV is any benchmark to go by, then ACC was cheaper that Ambuja (ACEM).
Before this recent twist, there are two viewpoints that play the key roles.
According to some technical analysts, it is to be believed that there will be a favourable exchange ratio by implying a merger arbitrage for ACC holders. However, some of the technical analysts believe that Ambuja Cement could buy ACC at the less favourable rate. This can imply a gain for Ambuja holders. However, this way or that way, both trades knock off with the recent event.
Ambuja Cement stated that the board has approved an arrangement with ACC for sale and purchase of materials on mutually- agreed conditions. The cement maker added that with a view to maximizing synergies and unlocking additional value for shareholders. This can be expected by the company.
It was stated that the companies initially went public with their announcement of the potential merger in May 2016. Regarding the merger, the official heads of the company also revealed that the decision is yet pending. The decision will depend on the recommendation received from the special committee and the audit committee.
Few technical analysts believe that the merger could have led to rationalisation and savings of Rs 500-1,000 crore annually.
This could be done from cross-branding and cross-bagging as well as sales and marketing in the long term as per some of the veteran analysts.