The Tata group, which became world’s fifth-largest producer of steel after acquiring UK steel producer Corus, is now set to transform into the second-largest producer of soda ash in the world.
In a bid to go one-up on Chinese manufacturers of synthetic soda ash, Tata Chemicals Limited (TCL), is set to acquire the soda ash business of US-based General Chemical Industrial Products Inc (GCIP) for $1 billion (Rs 3,937 crore.)
This is the second Indian acquisition in the US soda ash space in as many months. Earlier, India's Nirma bought out Searles Valley, the California-based producer of soda ash. Soda ash is used to manufacture glass, detergents and fertilisers.
"We believe natural soda ash would be the way forward in a world concerned about climate change and energy conservation. Besides, it costs much less," said P.K. Ghose, CFO, TCL. Tata Chemicals’ share price closed 7.7 per cent down at Rs 305 on the Bombay Stock Exchange.
“The share price has taken a beating in the market meltdown. The fundamentals of the company are strong. The current acquisition will help it to build a cost-effective business model,” said Chintan Mehta, a research analyst with Asit C Mehta Securities.
GCIP had a total production of 2.5 million metric tonne per annum (MMTPA) in 2007, which, combined with the 3 MMTPA for TCL, would catapult the combine over FMC Wyoming, the world's second-largest producer of soda ash with annual capacities of 5 MMTPA. Solvay Chemicals of the US, the world's largest producer, produces 7-8 MMTPA of soda ash per year. TCL bought GCIP from private equity buyout fund Harbinger Capital Partners, GCIP's majority shareholders in the US, who had bought GCIP in 2003.