Tata Chemicals purchases US soda ash co for $1 bn

GCIL had revenues of $400 million in 2007 and is debt free. Harbinger Capital Partners, a privately owned hedge fund sponsor which invests in public equity and hedging markets across the globe, is GCIP’s majority shareholder. The transaction is subject to shareholders’ and regulatory approvals, which would take around two months.

Homi R Khusrokhan, managing director, TCL said, “Acquiring the US-based asset at a time when the rupee has strengthened against the dollar is a strategic business move for TCL.” Explaining the rationale behind the acquisition, he said that producing soda ash is core business for TCL, which is already well placed in the global and domestic market.

“This acquisition will give us ownership of yet another low cost source of producing soda ash,” said Khusrokhan. The merger will provide TCL access to markets in North America, Latin America and the Far East. The acquisition, however, had TCL’s shares tumbling on the BSE on Thursday, where they dipped 7.27 per cent to close at Rs 305.

With the GCIP buy, the group will command 14 per cent of the world’s soda ash capacity. Over 50 per cent of this capacity will come through the natural route, an economical way of producing soda ash than the synthetic route. The acquisition would be partly funded through debt and the rest through equity. “We have a strong balance sheet and raising funds would not be an issue,” said PK Ghose, chief financial officer, TCL.

In December 2005, TCL had bought a 63 per cent stake in UK-based Brunner Mond Group for Rs 508 crore, and the remaining shares in 2006, for Rs 290 crore. This had raised its soda ash capacity to about 3 million tonne, accounting for 8 per cent of the global market. Lazard and Standard Chartered Bank acted as financial advisers to TCL on the transaction.

TCL, a manufacturer of inorganic chemicals, fertilisers and food additives, had a turnover of close to Rs 6,000 crore in fiscal 2007.

TCL’s chemicals business accounts for 56 per cent of its global revenues, and fertilisers, the rest.

Ratan does it again

•Tatas to become largest soda ash producer in the world

• Takeover to be funded through debt and equity

• TCL to get access to markets in North America, Latin America and Far East

• TCL shares fall over 7 per cent after the takeover announcement