The Hindu Business Line : Tata Chem to buy UK soda ash firm

SIX months after it was outbid in its open offer for an Egyptian fertiliser company, the Rs 3,008-crore Tata Chemicals Ltd (TCL) returned to the acquisition fray today, this time pursuing interests in soda ash.

The company informed the BSE that it had entered into two separate agreements for acquiring a majority stake in the UK based-Brunner Mond Group Ltd; the latter described on its Web site as Europe's second biggest manufacturer of soda ash and among the world's top five. It has manufacturing capability in the UK, the Netherlands and Kenya and a sales and distribution facility in Durban, South Africa.

"The investment in Brunner Mond Group Ltd may be made directly or through a subsidiary/associate of the company. Details of the transaction will be communicated on signing of definitive agreements, in due course," TCL's statement said. According to its Web site, Brunno Mond's main shareholders are a group of financial institutions, including Wayland Investment Fund, Barclays Bank, West LB, Citibank International and Aberdeen Asset Management. Management and employees hold five per cent of the equity.

No official word on cost to TCL, financial health of the British chemical company or its turnover was available. However, in its edition of November 21, Manchester Evening News, reporting on Brunner Mond's planned £10 million investment for a sodium bicarbonate plant in the Netherlands, pegged its turnover at £150 million (Rs 1,182 crore at Wednesday's exchange rate of Rs 78.80 per pound sterling). There was no confirmation of this figure here.

The original Brunner Mond & Company was formed in 1873 with first soda ash produced at its Cheshire works. In 1924, it acquired the Magadi Soda Company of Kenya. Two years later, it merged with three other chemical companies to form Imperial Chemical Industries (ICI). In 1991, Brunner Mond Holdings Ltd was formed by acquiring the UK and Kenyan soda ash businesses from ICI and "the heart of the original Brunner Mond was recreated as an independent company.''

It was listed at the London Stock Exchange in 1996, but has since returned to private company status as Brunner Mond Group Ltd. In 1998, the company acquired the soda ash business of Akzo Nobel in the Netherlands, which is now a wholly owned subsidiary of the group.

Today, on the BSE, the TCL share ended at Rs 215.75, up 5.8 per cent from the previous close of Rs 203.95.

TCL has been on an investment drive overseas since March 2005, when it decided to be the third equal partner in Indo Maroc Phosphore SA (IMACID) for a total consideration of Rs 166 crore. It had bought the required shareholding from the Moroccan Government-owned Office Cherifien des Phosphates (OCP) and Chambal Fertilisers and Chemicals Ltd.

In May 2005, TCL made an open offer for 1.475 million shares of $100 each of Egyptian Fertiliser Company (EFC) through a wholly owned subsidiary, Homefield International Pvt Ltd. Media reports had estimated that bid at $ 450 million (Rs 1956 crore). If that deal had gone through it would have added to TCL's portfolio 650,000 tonnes of urea and 400,000 tonnes of ammonia, besides the strategic benefit of being in a gas-rich region.

However, the bid failed. Both the IMACID stake and the interest in EFC tracked growth needs at TCL's fertiliser business, including at the erstwhile Hindustan Lever Chemicals Ltd's (HLCL) 1.2 million tonne-phosphatic fertiliser plant in Haldia. TCL has a 742,000 tonne-fertiliser capacity at Babrala with a 1,350 tonnes per day ammonia plant. But raw material prices had been rising and the two foreign investments - one made and the other failed - in the fertiliser business, were attempts to address it.

The likely stake in Brunner Mond is different in that it tracks growth requirements at TCL's soda ash business. Brunno Mond produces 1.6 million tonnes of soda ash; 900,000 tonnes at Cheshire, 330,000 tonnes in the Netherlands and 350,000 tonnes in Kenya. It also produces associated alkaline products and in Kenya, salt for the domestic market. The company employs around 1,000 people.

TCL had sometime ago raised $150 million from a FCCB issue, which it can use to part-finance purchases abroad. In fact, when the EFC bid was alive, its proposed funding had been through a mix of the FCCB issue, internal accruals and bridge loan.

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