Specialty chemicals company Lanxess India Pvt Ltd is set to acquire the chemical businesses and some assets of Gwalior Chemical Industries Ltd for Rs 536 crore (€82.4 million), a cost that includes debt of Rs 156 crore (€24 million).
It is the first acquisition of Lanxess India, a subsidiary of Germany-headquartered Lanxess AG, and the deal is expected to conclude by the end of the third quarter of the current fiscal.
Dr Hans-Georg Schmitt, Lanxess AG’s Head of Basic Chemicals, told newspersons here that the company was only taking over the assets of Gwalior Chemical and not the shares. Gwalior Chemical will continue to remain an independent company. Lanxess and Gwalior Chemical are a perfect match for future growth, he said.
Further, Dr Schmitt added, “Lanxess will only acquire Gwalior Chemical’s operating business. The acquisition will be financed through internal accruals. We expect the deal to be EPS accretive as of 2010,” he said.
An agreement has been formalised between the two companies, pending approval from Gwalior Chemical’s shareholders and market regulator. Since the transaction involves an asset sale, Lanxess will not be required to go in for an open offer of Gwalior Chemical’s shares, a market-expert said.
Production sites
The Mumbai-headquartered Gwalior Chemical, in its first nine months of fiscal 2008-09 (ended March 31), clocked sales of Rs 297 crore (€45.7 million) and an above-peer EBITDA margin of approximately 18 per cent.
Gwalior Chemical, founded in 1978, produces benzyl and sulphur chlorides for the agrochemicals, pharmaceutical as well as flavour and fragrance industries. It has production sites in Nagda, Madhya Pradesh and in Ankleshwar, Gujarat.
However, Lanxess would be only taking over the Nagda plant of Gwalior Chemical and all future production would be concentrated here, Dr Schmitt said. The deal includes a transfer of 400 people to the specialty chemicals major.
Gwalior Chemical will, however, retain the Ankleshwar facility. The Nagda site occupies 20 hectares and has been continuously modernised and expanded. And another major capacity expansion is currently underway, providing the basis for further growth in the future, he added.
“Gwalior’s business complements the portfolio of the Basic Chemicals’ business unit and will strengthen our production base in the exciting Indian market,” said Dr Joerg Strassburger, Managing Director of Lanxess India.
Lanxess India is a hived-off division of Bayer Group’s chemical and plastics businesses. It has its headquarters in Thane, near Mumbai. It has a production facility in Madurai, Tamil Nadu, for leather chemicals and material protection products. The company is also building a new production facility for ion exchange resins and relocating its rubber chemicals site from Thane to Jhagadia, Gujarat. This project will be completed by 2010 with an investment of about Rs 325 crore (€50 million).
Lanxess achieved sales of Rs 748 crore (€115 million) in India in 2008 and currently employs about 200 people.
India is next to China, the company’s most important market in Asia, and is an integral part of Lanxess’ BRIC strategy.The BRIC countries represented about 16 per cent of the company’s group sales in 2008.
Takeover bid
In addition to the acquisition of Gwalior Chemical, Lanxess on Monday announced the takeover of the business and production assets of China’s Jiangsu Polyols Chemical Co Ltd. Both parties have agreed not to disclose the purchase price.
Source: The Hindu Businessline