Nirma acquires Searles Valley of US
Ahmedabad, Nov. 27 Gujarat-based Nirma Ltd has entered into a definitive agreement for the acquisition of the US-based natural soda ash producer Searles Valley Minerals Operations Inc and Searles Valley Minerals Inc (collectively SVM) for an undisclosed amount, making the Indian company among the seven largest soda ash producers in the world with net sales in excess of Rs 3,500 crore per annum.
When contacted, Mr R. Joshipara, Vice-President (Finance), declined to disclose the financial details of the deal. “Our agreement with SVM prohibits us to disclose these details at this stage. We have yet to pass through various processes, legal and financial. The US laws are very stringent in this respect,” he told Business Line.
Nirma acquired SVM from an affiliate of Sun Capital Partners Inc and other minority shareholders for full ownership.
The definitive agreement for the acquisition, among other things, is subject to customary regulatory clearances, the company said in a statement here on Tuesday.
HSBC Securities and Capital Markets (India) Pvt Ltd advised Nirma on the transaction and J. P. Morgan Securities Inc. advised SVM.
Wilson Sonsini Goodrich & Rosati served as US Legal Counsel to Nirma with AZB Partners as Indian Counsel. Due diligence related to finance, employee and tax matters was conducted by KPMG.
SVM, a leading manufacturer of inorganic chemicals, is one of the five natural soda ash manufacturers in the US and is the only US producer of soda ash, sodium borates, boric acid and sodium sulfate utilising the solution mining method.
Solution mining offers major advantages in the reduction of labour costs compared to the conventional underground mining.
In addition to the solution mining processes, SVM produces sodium chloride from solar pond evaporation. SVM has three manufacturing facilities located at Argus, Trona and Westend, California, US. The Argus facility manufactures soda ash; the Trona facility produces boric acid, anhydrous borax and borax decahydrate; and the Westend facility produces sodium borate pentahydrate, sodium sulfate and sodium chloride. SVM owns some of its mineral reserves and also produces from long-term leases with the US Bureau of Land Management. Its total mineral reserves are in excess of 600 million tonnes, sufficient for 300-400 years of production at current production level. SVM has a combined production capacity for all products of over 1.9 million tonnes. It transports 80 per cent of its production by rail to domestic customers and to export markets through the ports of San Diego, California and LongBeach, California.
SVM also has a 67 megawatt per hour co-generation power plant, a short-line railroad and a joint venture in port operations at the Port of Long Beach. SVM leases and operates its own port and berthing facility in San Diego and owns a 31-mile short-line railroad that connects directly to the Union Pacific Railroad at Searles Station, California. As part of its logistic operations, SVM owns six locomotives, leases about 1,600 product hopper cars and about 175 coal cars.
Nirma, together with Saukem which was recently acquired by its associate Nirma Chemical Works Limited, is the largest producer of synthetic soda ash in India with a capacity of about one million tonnes per annum. The new acquisition will place Nirma among the top seven world producers of soda ash at a combined annual capacity in excess of two million tonnes. The acquisition will also earn Nirma and associates the unique position as the only company in the world to use three different techniques for production process namely Solvay in Porbandar, dry lime in Bhavnagar and solution mining in California. Nirma has so far been engaging in sale of soda ash in small and big packages. With SVM, Nirma will now be able to serve customers by bulk sales.
SVM achieved gross sales of $299.1 million in the fiscal year 2007. On a proforma basis, this constitutes 35 per cent of the consolidated sales of Nirma for the same period. Post the proposed acquisition, the net sales of Nirma would be in excess of Rs 3,500 crore.
The soda ash industry in the US, according to the United States Geological Survey, has a capacity of about 12 million tonnes. On this basis, SVM believes that it accounts for about 10 per cent of the US’ capacities. Except SVM, all other producers are based out of Green River in Wyoming and depend on underground mining. World capacity of both synthetic and natural soda ash is about 48 million tonnes and 90 per cent of the world production soda ash comes from Europe, US and Asia. In recent past, soda ash has witnessed encouraging growth in demand in Asia. However, the demand in more matured markets continues to be stable. Currently, Nirma’s brands with 32 variants are distributed through more than two million retail outlets across the country.
Post stabilisation of backward integration plans, the group has concluded two acquisitions, namely Saurashtra Chemicals Ltd (Saukem) and I. V. fluid, Medical Device and Critical Care Product business of Core HealthCare Ltd. While the former places the group as largest manufacturer of soda ash in India with combined capacity of one million tonnes, the later marks its entry into healthcare sector.
Currently, Nirma is setting up a 240 tonnes per day (TPD) caustic soda unit, based on membrane cell technology and augmenting utility capacities at an estimated cost of Rs 300 crore. Supplementing its mainstream activity of FMCG and chemicals, Nirma is also setting up a 1.5 million tonne cement plant in Mahua, Bhanvagar district of Gujarat. The acquisition of SVM, when completed, will be the third in row in three years time and will pace Nirma as an international player in soda ash. The Group now has more than 50 per cent of its revenue coming from new initiatives and investments.
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