German specialty chemical company Lanxess will acquire Gwalior Chemicals Industries Limited’s (GCIL) chemical business for Rs 536 crore. The two companies have entered into a definitive agreement and the sale would take place on a cash and debt free basis.

Gwalior Chemicals plans to use the proceeds of the sale towards its power generation business and manufacturing of high value specialty chemicals at Ankleshwar. The company has already indentified the products for its high value specialty chemical business.  

Though the transaction is still subject to shareholders’ approval and necessary merger control clearances, the process is expected to be completed by September 30, 2009. Lanxess will take over a debt of Rs 156 crore on the closing of the transaction. An equity value of Rs 380 crore will accrue to Gwalior Chemicals post the subtraction of the estimated debt and the deal related expenses.  

Lanxess will acquire the business at a 90% premium on its book value. It will acquire Gwalior Chemicals’ entire chemicals business including the manufacturing units at Nagda, Madhya Pradesh and the wind power businesses located in Maharashtra and Madhya Pradesh. Gwalior Chemicals (GCIL) will, however, retain its manufacturing site at Ankleshwar, Gujarat.

GCIL will consider the distribution of up to Rs 100 crore to its shareholders. The company plans to distribute the amount through a large one time dividend payout or a share buyback. The distribution process is expected to be executed immediately after the receipt of the consideration.

The transaction would mark Lanxess’s first acquisition in India. Lanxess’ chairman, Axel C Heitman said, “GCIL’s business complements the portfolio of the Basic Chemicals business unit and will strengthen our production base in the exciting Indian markets.”

Lanxess is expanding its presence throughout Asia and is also acquiring the business and production assets of Chinese firm Jiangsu Polyols Chemical Co. Ltd., for an undisclosed amount. The transaction is expected to close in the third quarter of 2009. The medium-sized company, which was founded in 2006, is located in Liyang, west of Shanghai.

GCIL produces benzyl as well as sulphurchloride products. The company caters to the agrochemicals, pharmaceuticals, flavour and fragrance industries.

Headquartered in Mumbai, GCIL was founded in 1978. It employs around 400 people. The company achieved sales of Rs 375.5 crore and PAT of Rs 27.7 crore on standalone basis, for the year ended 31st March 2009.  

Lanxess is a specialty chemicals company with operations in 23 countries across the globe. The company employs 14,600 people. It operates in the area of development, manufacturing and marketing of plastics, rubber immediate and specialty chemicals.  

PriceWaterhouseCoopers, Corporate Finance acted as the exclusive financial advisors to the deal and Wadia Ghandy & Co. acted as the legal advisors.

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