Tata Chemicals Limited has acquired US-based soda ash-maker General Chemical Industries Products Inc for $1.05 billion (about Rs 4,000 crore), to become the world's second-largest producer of soda ash.
The announcement was made exactly a year after Tata Steel, another Tata group company, acquired British steel major Corus.
TCL is now the third largest manufacturer of soda ash and sodium bicarbonate in the world, with a production capacity of close to 3 million tons per annum. The acquisition will add another 2.5 MTPA to take total capacity to 5.5 MTPA, next only to the US-based FMC Chemicals.
The company had bought 63.5 per cent stake in the UK-based Brunner Mond Group for about Rs 508 crore in December 2005. It also holds a 33 per cent stake in Indo Maroc Phosphore SA, Morocco, which makes phosphoric acid.
The latest acquisition will help Tata Chemicals make half of its soda ash from natural soda ash, which costs only half the production cost for manufacturing synthetic soda ash. TCL is one of the largest synthetic soda ash producers in the world, along with a few players in China.
Soda ash is mainly used in glass and detergent production and it contributed 40 per cent of TCL's revenues of Rs 4,563 crore for the first nine months of 2007-08. The rest of the revenues are from its fertiliser and other inorganic chemicals business.
"This is a historic occasion for Tata Chemicals which was started in 1939. The acquisition will help us access markets in North America, Latin America and the Far-East," said Homi Khusrokhan, managing director, TCL at a press conference in Mumbai.
GCIP's subsidiary General Chemical (Soda Ash) Partners (GCSAP) has mining and manufacturing facilities located at the Green River basin in Wyoming, USA.
The Green River basin is the largest and most economical natural soda ash mine (trona) in the world. GCSAP shares the Green River basin with three other producers of soda ash, OCI Chemical Corporation, FMC Corporation and Solvay Mineral.
TCL signed the definitive agreement to acquire 100 per cent equity of the privately held GCIP from Herbinger Capital Partners, a private equity player with majority shareholding. The acquisition, subject to US regulatiory clearances, will be done through debt and equity funding, said TCL executives.
A profit-making and debt-free company, GCIP is estimated to have a turnover of over $400 million, said TCL executives. In November 2007, the Gujarat-based soap and personal care producer Nirma had acquired the Searles Valley Minerals (SVM), one of the top five producers of natural soda ash in the US with a turnover of $300 million.
Lazard and Standard Chartered Bank acted as financial advisors to TCL on the transaction.
TCL shares fell 7.27 per cent on the Bombay Stock Exchange on Thursday, from Rs 328.90 during the close of trading on Wednesday, to Rs 305 at close.