Jindal Poly Films Ltd has struck a deal to acquire the global biaxially oriented polypropylene (BOPP) business of ExxonMobil Chemical for an undisclosed sum. ExxonMobil is the world’s largest company in terms of revenues and is into oil &gas, besides chemicals business. Although the deal amount stands undisclosed, it is likely to be running into multi-million dollars, given the asset involved.
The deal involves acquisition of five BPOO production units located across the US and Europe. These include two units in the US in Georgia and Oklahoma, and facilities in Belgium, the Netherlands and Italy in Europe. The acquisition also includes a technology centre and a sales office in New York and an office in Luxembourg. The business employs around 1,500 people across geographies.
The agreement was signed on October 26, 2012, and the transaction remains subject to necessary approval from regulatory authorities.
In a report earlier this year, Financial Times said that ExxonMobil had mandated JPMorgan for the divestiture. The business comprised some 0.26 million tonne capacity, of which a little over half was in Europe.
This would give a major boost to Jindal Poly Films, which currently has BOPP and BOPET combined capacity of 0.34 million tonnes. Mapping this capacity to the business being acquired, ExxonMobil’s operations could have revenues in the region of $330 million, as per VCCircle estimates. BOPP films are a chemical derivative, used by food packaging, consumer products and textile sectors.
In another international deal of similar size, Vision Capital acquired Vitopel from DLJ Merchant Banking Partners and JPMorgan Partners. Vitopel is the market leader in BOPP film production in Latin America and generated more than $300 million in sales in 2011.
Closer home, Max India sold its polypropylene film manufacturing unit to Germany’s Treofan last month for Rs 540 crore ($97 million). Max Speciality Films has an output capacity of about 52,000 tonnes of BOPP film per annum.
If the valuation of this deal in terms of capacity is taken as a benchmark, Jindal Poly Films could be shelling out as much as Rs 2,700 crore ($500 million) in the latest acquisition.
Jindal Poly Films scrip crashed 4.67 per cent to close at Rs 212.5 a share on the BSE in a weak Mumbai market on Friday. This possibly reflected apprehensions over how the firm would fund the acquisition and a lack of clarity over the deal value.
The stock price has moved up 50 per cent since December 2011.
The public-listed firm closed FY12 with revenues of Rs 2,364 crore, with net profit of Rs 135 crore. It had reserves of around Rs 1,675 crore as of March 31, 2012.
This is not the first time the BC Jindal Group firm has eyed global expansion in the BOPP film business. In 2003, it had acquired French firm Rexor, S.A., but earlier this year, it sold 60 per cent stake in this venture.
Jindal Poly Films has significantly scaled up through greenfield and brownfield expansion of capacity over the past eight years in India.
Two years ago, the company also said that it was investing up to Rs 660 crore in Jindal India Powertech Ltd, a power generation firm.
(Edited by Sanghamitra Mandal)