Adding to its string of cross-border acquisitions, Tata Group firm Tata Chemicals Ltd has bought 100% stake British Salt Limited, a United Kingdom-based chemical company that produces pure white salt, for £93 million or Rs 673 crore.
The deal to acquire private equity owned British Salt was done through Tata Chemical's wholly owned subsidiary Brunner Mond. The deal will be entirely debt financed with no recourse to Tata Chemicals, said the firm in a statement.
The share price of Tata Chemicals went up by more than 2% in morning trade to Rs 379.45, before coming down to Rs 375 levels. The $70 billion Tata Group has completed several major acquisitions, several of them coming in UK. Tata Steel had acquired steelmaker Corus for $12.9 billion in 2007 followed by Tata Motors buying Jaguar Land Rover businesses from Ford Motor Company for $2.3 billion in 2008.
British Salt is one of UK's largest manufacturer of pure dried vacuum salt and enjoys a market share of 50% in the country. British Salt owns brine wells in the UK with residual life of 50 years. It employs 125 people, and produces approximately 800,000 tonnes of pure white salt every year.
This acquisition provides an opportunity to secure long term brine supplies for Brunner Monds operations. Tata Chemicals had acquired UK's Brunner Mond, which has operations in Kenya and Netherlands in 2005 for $113 million.
Pure white salt is used in making water softeners, chemical industry, food processing, textiles & tanning, among others. British Salt is also active in the gas storage business and has a promising business model which has a potential to generate additional cash flows for the business, added the Tata Chemicals statement.
UK mid-market PE firm LDC bought British Salt from its previous owners US Salt Holdings LLC in a £100-million management buy-out in 2007. US Salt had bought British Salt from its previous owners, Stavely Industries plc in 2000 for £80 million. LDC, part of the Lloyds Banking Group, sold the gas storage facility of British Salt to EDF Energy in July 2009.
Tata Chemicals had revenues of Rs 9,543.79 and a net profit of Rs 724 crore in FY10. According to its AGM presentation, the vacuum salt business accounted for 7% of the revenues while soda ash constituted a major 45%. Other major contributors were fertiliser and urea. The company's net debt to equity ratio fell from 1.11 to 0.81 from FY09 to FY10.
Tata Chemicals subsidiary Rallis India recently acquired a majority 59% stake in Bangalore-based seed company Metahelix Life Sciences Pvt Ltd for Rs 125 crore. The Tata group firm has done some big acquisitions like in March 2008 it acquired US-based General Chemical Industrial Products Inc for $1 billion to become the world’s second largest maker of soda ash.