Hinduja Group company Gulf Oil Corporation Ltd (GOCL), through its UK subsidiary, has acquired 100 per cent stake in Houghton International Inc. from the US-based private equity fund AEA Investors, for $1.04 billion, subject to customary closing conditions.
An agreement to this effect was signed on Nov 6 between GOCL’s wholly owned subsidiary and the sellers.
“GOCL will operate Houghton as a separate company and the rest of Gulf’s operations will be able to leverage Houghton’s extensive base of industrial customers to offer them a complete end-to-end range of lubricants. In addition, there are various synergies that can be achieved in manufacturing, strategic sourcing and distribution,” a company statement said.
The deal will strengthen GOCL’s lubricant business in the automotive sector.
Houghton has a global footprint with sales in more than 75 countries, supported by 12 manufacturing facilities in 10 countries. The company clocked sales of $858 million and adjusted EBITDA of $132 million for the 12 months ended September this year. The deal values Houghton at 7.5x its trailing EBITDA.
Established in 1865, Houghton is into metal working fluids (MWF), especially strong in the North American and European markets. MWFs are mission-critical specialty chemicals, used for a variety of metal processing applications including metal cutting and removal, metal forming, drawing and stamping, heat treatment and quenching, corrosion prevention and hydraulic systems.
AEA Investors had acquired Houghton in 2007 and the very next year, the specialty chemical firm acquired DA Stuart Holding GmbH. Houghton also acquired Shell’s MWF business last year, which further strengthened its position in the $7 billion global market.
Hindujas being in the race for Houghton has been widely reported by the international media. While the deal routed through Gulf Oil fits in, in terms of strategic play, the transaction essentially means Gulf Oil is buying a company which is over three times in revenues and 10 times in EBITDA.
GOCL scrip was quoting at Rs 87.1, down 0.5 per cent on the BSE in a strong Mumbai market on Wednesday. The firm had reserves of Rs 372 crore for the year ended March 2012 and investors would be cautious on how the company finances the acquisition. GOCL share price, which doubled between November 2011 and October 2012, has declined 15 per cent over the past one month.
Hindujas, a UK-based NRI business family, own around 50 per cent stake in Gulf Oil. The group has business interests in automotive (Ashok Leyland), banking (IndusInd), ITeS (Hinduja Global Solutions), among others.
The latest acquisition would also mark the third such outbound deal valued at around $1 billion mark in the past one month. Tata Group firm Indian Hotels made an unsolicited bid to buy Orient-Express for around $1.2 billion and Rain Commodities said it was looking to buy Rutgers for around $915 million.
(Edited by Sanghamitra Mandal)