INDIA BUSINESS WORLD - March 1st - March 15th - 2008
TATA CHEM SELLS SHARE IN TCS & TIC TO BUY US CO'S SODA ASH BIZ
TATA Chemicals (TCL) has mobilised nearly Rs 450 crore by selling its investments in two group companies — Tata Consultancy (TCS) and Tata Investment Corporation (TIC) — to part-fund its acquisition of the soda ash business of the US-based General Industrial Products for $ 1 billion (Rs 4,000 crore). The balance money for the deal, which makes TCL the world's second largest soda ash maker with a combined capacity of 5.5 million tonnes per annum and 14% share of the global market, is being organised through debts and internal resources.
TCL plans to raise another Rs 70 crore by selling more equity in these two firms. It will mobilise nearly Rs 680 crore from its cash reserves. The balance Rs 2,800 crore will be debt. The company is in talks with ABN Amro, HSBC, StanChart and Calyon Bank.
TCL has sold nearly 1.3 million shares of TCS between February 21 and February 27, and 5.2 million shares in TIC on February 13. While TCL sold shares of TCS in the open market, it off-loaded TIC shares to Tata Sons. Post divestment, TCL holds 9, 90,544 shares in TCS and 2, 97,400 shares in TIC.
Industry sources said raising funds through debt instruments may not be easy for TCL, given the tight liquidity condition in the global money markets. However, they feel that the company will manage to sail through. "TCL may have to pay a higher interest for the debt," said a banker.
"The acquisition will help TCL in the long term. TCL will get access to the company's cheap natural resources which provide cost advantage over synthetic raw materials as well as an opportunity to hedge against the commodity cycle," said the banker. TCL will have access to North America, Latin America and the Far East.
The foreign firm produces natural soda ash which uses less energy, capital and raw materials than synthetic soda. It has facilities and mines in Wyoming, 100 years of extractable trona ore.
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