Conch offer shows price just one factor in Lafarge deal

China’s Anhui Conch lost out in the race to acquire Lafarge India despite the fact that its offer of INR95bn (US$1.4bn) was higher than the INR94bn bid submitted by Nirma Group, the eventual winners.

In an article published today, Mint examines some possibilities behind Anhui’s failure. The paper dismisses suggestions that the Competition Commission of India intervened directly to block its bid but does lend support to the idea that Lafarge was happier to reach agreement with a domestic firm.

A senior executive at Spark Capital Advisers said: “Large M&A deals are not only about pricing. One point of discussion was about who would manage the risks of owning the assets from the time of getting into a share purchase agreement till the consummation of the deal. The seller found Indian promoters more practically and tactically suited to manage such risks.

“The financial ability of the buyer to close the deal is very significant, so is the ability of the buyer to clear all the regulatory requirements. M&A transactions tend to be very time-consuming processes, so when you announce a deal, you want to be doubly sure that there should be no external factor that can emerge to derail the transaction”.

He also noted that “sovereign considerations can also come into play if it’s a cross-border transaction”. A successful bid from Anhui would have given the firm a considerable stake in the Indian market, something that no Chinese firm currently enjoys. Concern that this might have been resisted by elements of the Indian establishment might explain Lafarge’s decision to sell to Nirma.