Tata Chemicals is raising its holding in EPM Mining Ventures Inc. (Canada’s TSX Venture Exchange-listed exploration-stage potash development company) from 15.9 per cent to 30.6 per cent, for an estimated $41 million.
According to the latest deal, a subsidiary of Tata Chemicals will subscribe to eight million fresh shares and eight million share warrants, convertible into as many shares of EPM, for a little over $16 million. The warrants are convertible into shares within 12 months of the share issue at a price of C$2 per share, which should entail a further $16 million in investment. Tata Chemicals spokesperson did not reply to an e-mail query regarding the total deal amount till the time of posting this article.
Simultaneously, Tata Chemicals has also struck a deal with the founding shareholders of EPM, Lance D’Ambrosio and Jeff Gentry, to acquire around 4.37 million shares at the same price of C$2 per unit. Post-acquisition of shares, subscription to fresh shares and conversion of warrants into equity, Tata Chemicals will own around 30.6 per cent.
EPM holds the lease to mine potash across 95,172 acres of land, as granted by the US government in April this year. It holds 40 per cent stake in Emerald Peak Mineral that controls 6,409 acres of land, leased from the State of Utah in the USA.
EPM’s primary focus is its project on the Sevier Dry Lake in Utah, for producing sulphate of potash and other beneficial minerals. EPM intends to use the proceeds of the offering for further evaluation of its properties and for general working capital purposes.
EPM shares were last traded at C$1.7 per unit at the TSX. This means Tata Chemicals is acquiring shares at 17 per cent premium to the current market price.
In May this year, the chemicals firm of the Tata Group had acquired 15.9 per cent stake in EPM, pursuant to the amalgamation of Yukon Inc. with EPM. Tata Chemicals, through a subsidiary, had held 16.7 million shares of Yukon which were acquired for around $11.2 million and post-amalgamation, received as many shares of EPM.
At the same time, EPM has disclosed the resignation of Stephen M. Jones as the CFO & secretary of EPM, effective immediately, although he will remain a member of the EPM board of directors. The board has appointed Spencer Thunell, currently the director (finance) and controller of EPM’s subsidiary Peak Minerals, Inc., as the interim CFO and has commenced a process to locate a suitable successor.
Tata Chemicals’ Global Inorganic Expansion
EPM is Tata Chemicals’ second strategic overseas deal this year and fourth within the past 12 months. Early this year, Tata Chemicals had announced an investment of $290 million to acquire 25.1 per cent stake as a strategic investor in a greenfield, port-based, ammonia-urea fertiliser manufacturing complex in the Republic of Gabon.
Last December, Tata Chemicals, through a subsidiary Brunner Mond, had bought 100 per cent stake in British Salt Ltd, a UK-based chemical company producing pure white salt. The deal value stood at £93 million or Rs 673 crore. In 2010, it had also acquired a small South African firm Grown Energy for $1.1 million. The company is engaged in the exploration of bio-fuels in Mozambique.
In the past, however, the firm had struck much larger deals – acquiring General Chemical for over $1 billion in early 2008 after snapping up Brunner Mond in 2005. This came as a part of the big bang push made by the Tata Group in overseas acquisitions across businesses that included deals such as the acquisition of the UK-based steel major Corus and automobile major Jaguar Land Rover during 2005-08.
Tata Chemicals, which also holds a majority stake in Indian public-listed firm Rallis India, is into salt, soda ash, industrial chemicals and water purifiers, besides various agri-related businesses. For the year ended March, 2011, it had revenues of Rs 11,060 crore, with net profit of Rs 653.47 crore.