Mumbai: Tata Chemicals Ltd agreed to buy US-based General Chemical Industrial Products Inc. for $1 billion (Rs3,940 crore), extending India’s second largest business group’s record overseas acquisitions.
Tata Chemicals will acquire the maker of soda ash from Harbinger Capital Partners, the company said in a statement on Thursday.
Tata group chairperson Ratan Tata has acquired UK-based tea distributor Tetley and that country’s biggest steel maker, Corus Group Plc., as he uses his dominance of industries from autos to software to fund an overseas push. Tata is also the front-runner to acquire Ford Motor Co.’s luxury Jaguar and Land Rover brands.
“They may seem to be growing fast but then India is a growing story and if you have the financial muscle, why not?” Rohit Nagraj, an analyst with Angel Broking Ltd, said in Mumbai. “As a conglomerate they have been able to integrate the acquisitions well,” Nagraj said.
Shares of Tata Chemicals fell by 7.27% on Thursday to close trading at Rs305 on the Bombay Stock Exchange.
The acquisition is subject to shareholder and regulatory approvals, the statement from the company said.
General Chemicals produces natural soda ash, which uses less energy, capital and raw materials than synthetic soda, the company said on its website. The privately held company has facilities in Wyoming, the statement said.
Tata Chemicals had Rs1,350 crore of cash, including investments, as of March, Nagraj said. The acquisition will make Tata Chemicals the world’s second biggest soda ash maker, he added.
Tata Chemicals manufactures and sells soda ash, cement, sodium bicarbonate and food additives, including edible salt and cooking soda. Its fertilizers division produces urea and phosphate for agricultural use.
In December 2005, Tata Chemicals bought UK-based Brunner Mond Group, raising its soda ash capacity to about 3 million tonnes, accounting for 8% of the global market.
Operations of the company remain small when compared with its international peers, Moody’s Investors Service said last month. It rates the company’s foreign currency bonds at Baa3—the lowest level of investment grade.
The combined group will command about 14% of the world soda ash capacity, Rohan Gupta, an analyst with Emkay Share and Stock Brokers Ltd, said in Mumbai. He rates the stock as “buy.”
“Funding shouldn’t be a problem as they will be able to raise debt and may have to liquidate some of their investments,” he said.
The Tata group had revenue of $28.8 billion in the year ended 31 March—the equivalent of about 3.2% of India’s gross domestic product, according to its website. The combined market value of 27 companies including Tata Chemicals, Tata Motors Ltd, the nation’s largest truckmaker, Tata Consultancy Services Ltd, and Tata Steel Ltd reached $59.6 billion on 24 January, the website said. The group employs about 289,500 people.
Tata Motors was selected by Ford as the preferred bidder for the UK-based luxury brands this month.
Ratan Tata’s biggest overseas acquisition is the $13 billion purchase of Corus Group that he sealed in a bidding contest 12 months ago.