Holcim Ltd, the world's second largest cement producer, has made a $800 million bid to acquire Associated Cement Company Ltd, India's largest cement manufacturer.

In a major consolidation effort in the cement industry, the Zurich-based Holcim entered into a strategic alliance with Ambuja Cement [Get Quote] India Ltd to acquire a majority stake through an open offer in ACC at Rs 370 per share.

ACIL, where Gujarat Ambuja Cements Ltd [Get Quote] holds 60 per cent stake, currently holds 13.8 per cent stake in ACC and intends to increase its shareholding to 50.01 per cent, subject to necessary regulatory approvals, GACL and Holcim said in a joint statement in Mumbai on Thursday.

Holcim has entered into an agreement with private equity investors (AIG/GIC) of ACIL to acquire their entire 40 per cent shareholding.

Simultaneously, Holcim has also entered into a share subscription agreement with ACIL for its proposed subscription of $600 million towards capital, subject to necessary regulatory approvals.

Post these approvals, Holcim will have 67 per cent equity capital in ACIL and the balance would be held by GACL.

ACIL also owns 94 per cent of ACEL and Holcim, through ACIL, is also making an open offer to acquire its entire public shareholding at Rs 70 per share.

The global cement major intends to invest totally $800 million in India for these two acquisitions, which will be financed entirely through internal accruals and existing credit facilities.

ACC shares closed at Rs 341.75 on the Bombay Stock Exchange on Thursday.

Holcim's bid to buy out ACC is the first major foray by a foreign company into the Indian cement industry which has been seeing consolidation for the past few years. The sector's annual growth has been estimated at around 8 per cent.

At present, France's Lafarge is the only other foreign firm to have forayed into India.

Holcim's turnover for FY 2003 was $9.4 billion and it has a current market capitalisation of $12 billion. Holcim has been evaluating several options to participate into the growing cement markets of India for some time.

The board of directors of both, Holcim and Gujarat Ambuja, have agreed to form a long-term strategic alliance to participate in the growing cement markets in Indian sub-continent.

Both the partners, apart from participating in the growing cement markets of India, also aim to strengthen their cement trading activities in South Asia, Middle East and the adjoining regions in the Indian Ocean.

Holcim also intends to use India as a platform for its IT and R&D procurement and also to source talented Indian manpower for its international operations.

Additional inputs: Agencies