Baring Private Equity Asia Group to pick $240 million stake in Lafarge India

Lafarge-India-careerMUMBAI: Ending weeks of discussions, Baring Private Equity Asia Group has emerged as the front runner to pick up a strategic 14 to 15% stake in Lafarge India, the Indian arm of Lafarge SA – the world’s largest building-materials company — for $240 million (200 million euros) said multiple sources directly involved.

The deal values the Indian arm of the French cement multinational at 1.5 billion euro and will help in funding its ongoing Rs 6000 crore capex programme at a time when globally the company is under severe pressure to restructure its business and reduce the high leverage on its consolidated books.

This transaction is also likely trigger a new trend amongst local subsidiaries of similar sized global corpotrations to try and raise funds locally in growth markets if the parent battles larger corporate stress.

Baring officials are currently at the Paris headquarters of Lafarge negotiating the final contours of the deal. “There is at least a 15-20 per cent difference between the Baring offer and the other bidders,” said one of the sources mentioned above.

“By the end of this week, they should be able to come to a conclusion. Some of the other bidders have already been told that their offers are not aggressive enough,” he added.

Singapore’s sovereign investment fund Temasek and bulge bracket marquee funds Carlyle and Advent were the others who had made to the final shortlist. Standard Chartered Private Equity was also expected to put in a bid, but resisted away in the end.

Interestingly, Lafarge SA has assured a 15% IRR and will buy back the shares of its Indian arm from Baring in 4 to 5 years time. However the fund is not likely to have a put option thereby barring them from selling the same shares of a rival cement company.

Baring Asia spokesperson Richard Barton declined on comment on market speculation. Lafarge India spokesperson also did not want to comment.

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