Acquisition of GC by Tata Chem

7/29/2019 Acquisition of GC by Tata Chem

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Basics of the Deal

Tata Chemicals, a chemical company focusingthe production of Iodized Salts and Soda ash,acquired General Chemicals, a chemical

company based in Wyoming USA for a sum of$ 1 billion ( Rs 3940 crores ) ($1 = Rs 39.12) inFebruary 2008.

Tata Chemicals purchased 100% of the sharesof General Chemical from Harbinger CapitalPartners who are the majority shareholder.


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Reasons for Acquisition

GCIP owned GCSAP which had a capacity of2.4 million TPA while Tata Chem. had acapacity of 3.5 million TPA ( 8% of world

production) GCSAP also owns the worlds largest trona ore

deposit and is also the worlds most

economically recoverable site for the same.

This deposit has 134 billion tonnes of Tronaash


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Finances involved

Tata financed the deal by taking on $500

million (term financing route( ECB ) and $ 350

million (bridge financing route).

The deal added $400 million to Tata Chem

topline, resulting in an increase of $121

million in the EBITDA.

Stock lost 7% and closed at Rs 305/- from Rs

333/-


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Ramifications of the Deal

Financial Ramifications

PESTLE Ramifications

Company Internal Ramifications


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Sodium carbonate( Soda ash)

Natural Occurrence - Sodium carbonate crystallizes from water toform three different hydrates:

1. sodium carbonate decahydrate (natron)

2. sodium carbonate heptahydrate (not known in mineral form)

3. sodium carbonate monohydrate (mineral thermonatrite).

4. Trona, trisodium hydrogendicarbonate dihydrate(Na3HCO3CO32H2O)(Na3HCO3CO32H2O)

Mined in several areas of the US, Turkey, Kenya

Artificial production (The processes)

1. Barilla and kelp

2. Leblanc process

3. Solvay process

4. Hou's process


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Soda Ash World Production Share by

Country


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Cash Cost production in USD for soda

ash


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Price Index of India and US; Indexed,

2006= 100


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World Soda Ash Consumption and

Demand


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STRENGTH1.The acquisition of GCIP catapulted Tata Chemicals to theposition of the world's second largest soda ash maker.

2. It enabled Tata Chemicals to make over 50 per cent of itssoda ash through the natural route, which is not only moreeconomical for making soda ash than the synthetic route.

but is also immune to commodity cycles as GCIP'ssubsidiary, General Chemical (Soda Ash) Partners (GCSAP), isa significant soda ash producer in the US with a capacity of2.5 million TPA of natural soda ash

WEAKNESS

1. Too much dependence on the GCIP with respect toNorth,Latin American markets.

2. Difference in Culture & Ethics .

OPPORTUNITIES1. General Chemical (Soda Ash) Partners (GCSAP), is asignificant soda ash producer in the US with a capacity of2.5 million TPA of natural soda ash.

2. It provides access to the world's largest and mosteconomically recoverable trona ore deposits that is thenconverted into natural soda ash.

3.GCSAP has significant reserves of extractable trona orefrom its current mines for which it has long term Federal,State and private leases.

4.The merger will provide Tata Chemicals access tomarkets in North America, Latin America and Far East.

THREATS1. Environmental issues and clearances for expansion of

GCIP.2. Increase in prices of coal and petroleum products.

3.It was season of recession and severe economicdownturn.

SWOT


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GC PerspectiveThere are a number of very obvious advantages that come to mind.

The first is the global play. Tata Chemicals has businesses in India, the

UK (Brunner Mond), Kenya (Magadi Soda) and now in the US.GeneralChemical has been global for decades we ship 40 per cent of our

products worldwide. In Europe, for example, we have been selling

soda ash as one of Brunner Monds main competitors.One of the

tasks, as part of the integration process, was to take care of that.

The second advantage is the reputation. Tatas reputation is sterling

even within the soda ash industry. We got stronger because of our

association with Tata and the other entities also got stronger because

of their association with General Chemical.

Third, GCs access to capital and people is better now. We were run

by hedge funds and financial players for a decade, so we were always

on a shoe-string budget. We will now be able to go after

opportunities we see as very beneficial. Our workforce has always

been very lean; having access to the engineering group of Tata and to

the depth of management in Brunner Mond and Magadi will be very

good for us.

DeLyle

Bloomquist,

President

and CEO ofGC


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Findings & Observations


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Tata Chemicals Financials Before &

After Acquisition

Total Income in Rs Crores

Income generated by General Chemical before acquisition

Rs 1564.8 Crores


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After Acquisition

Profit After Tax In Rs. Crores


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After Acquisition

Net Worth In Rs. Crores


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After Acquisition Earnings Per Share in Rs.

Current Share Price 20th Dec 2012 347.05

Share Price Jan 2008 328.90, Feb 2008 - 330.20


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Bibliography

1. http://www.domain-

b.com/companies/companies_t/Tata_Chemicals/20080131_tata_chemicals.html

2. http://moneymatters.blog.com/tata-chemicals-limited/

3. http://www.business-standard.com/india/news/tata-chemicals-acquires-general-

chemical/312178/

4. http://www.tata.in/media/interviews/inside.aspx?artid=ymiXNwonrYg =

5. http://www.tata.in/media/interviews/inside.aspx?artid=WR1emhgllz4 =

6. http://www.youtube.com/watch?v=-AD0cg1Ucf4
http://www.domain-b.com/companies/companies_t/Tata_Chemicals/20080131_tata_chemicals.htmlhttp://www.domain-b.com/companies/companies_t/Tata_Chemicals/20080131_tata_chemicals.htmlhttp://moneymatters.blog.com/tata-chemicals-limited/http://www.business-standard.com/india/news/tata-chemicals-acquires-general-chemical/312178/http://www.business-standard.com/india/news/tata-chemicals-acquires-general-chemical/312178/http://www.tata.in/media/interviews/inside.aspx?artid=ymiXNwonrYghttp://www.tata.in/media/interviews/inside.aspx?artid=WR1emhgllz4http://www.youtube.com/watch?v=-AD0cg1Ucf4http://www.youtube.com/watch?v=-AD0cg1Ucf4http://www.youtube.com/watch?v=-AD0cg1Ucf4http://www.youtube.com/watch?v=-AD0cg1Ucf4http://www.tata.in/media/interviews/inside.aspx?artid=WR1emhgllz4http://www.tata.in/media/interviews/inside.aspx?artid=ymiXNwonrYghttp://www.business-standard.com/india/news/tata-chemicals-acquires-general-chemical/312178/http://www.business-standard.com/india/news/tata-chemicals-acquires-general-chemical/312178/http://www.business-standard.com/india/news/tata-chemicals-acquires-general-chemical/312178/http://www.business-standard.com/india/news/tata-chemicals-acquires-general-chemical/312178/http://www.business-standard.com/india/news/tata-chemicals-acquires-general-chemical/312178/http://www.business-standard.com/india/news/tata-chemicals-acquires-general-chemical/312178/http://www.business-standard.com/india/news/tata-chemicals-acquires-general-chemical/312178/http://www.business-standard.com/india/news/tata-chemicals-acquires-general-chemical/312178/http://www.business-standard.com/india/news/tata-chemicals-acquires-general-chemical/312178/http://www.business-standard.com/india/news/tata-chemicals-acquires-general-chemical/312178/http://www.business-standard.com/india/news/tata-chemicals-acquires-general-chemical/312178/http://moneymatters.blog.com/tata-chemicals-limited/http://moneymatters.blog.com/tata-chemicals-limited/http://moneymatters.blog.com/tata-chemicals-limited/http://moneymatters.blog.com/tata-chemicals-limited/http://moneymatters.blog.com/tata-chemicals-limited/http://www.domain-b.com/companies/companies_t/Tata_Chemicals/20080131_tata_chemicals.htmlhttp://www.domain-b.com/companies/companies_t/Tata_Chemicals/20080131_tata_chemicals.htmlhttp://www.domain-b.com/companies/companies_t/Tata_Chemicals/20080131_tata_chemicals.html


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Acquisition of GC by Tata Chem