Sanmar to buy Trust chem unit
The flagship of the Chennai-based Sanmar group, Chemplast Sanmar, has signed an agreement to acquire the chemical business unit of Trust Chemical Industries at Port Said in Egypt.
The deal, valued at around $200 million (about Rs 900 crore), is expected to provide future growth opportunities for the company.
The chemical business belonging to Trust Chemical Industries owns a caustic soda plant with a capacity of 200,000 tonnes per annum, which commenced operations a little over a year ago.
The plant also has facilities to manufacture chlorine-based products such as hydrochloric acid, chlorinated paraffin wax, sodium hypochlorite and ferric chloride among others, said a company statement.
N Sankar, chairman of the Sanmar group said the one-year-old Port Said facility unit was a low power cost unit and the acquisition was expected to give the company future growth opportunities.
The company expects to fund the acquistion through a combination of debt and equity.
The Egypt unit is expected to add about $40 million a year to the topline of the company, he added. The company intends to operate this as a separate business, headquartered at Port Said, and is in the process of identifying a management team for the unit.
On completing the acquisition, the group will also evaluate the possibility of expanding the product range to ethylene dichloride (EDC) and vinyl chloro monomer (VCM), among others. This will, however, call for significant capital investments.
Chemplast Sanmar has embarked on a significant capital expenditure programme of converting the caustic soda facilities at Mettur to membrane process, installing a coal-based power plant of 50 MW capacity at Mettur, and setting up a greenfield PVC manufacturing facility at Cuddalore with a capacity of 170,000 tonnes per annum based on bought-out VCM.
To fund the expansion, the company is in the process raising about Rs 200 crore through equity resources on rights basis (share capital as well as premium).
If EDC or VCM manufacturing is taken up at the Port Said facility, it could become a possible supply source for the company in future, but such decisions will be taken on an ongoing basis depending upon the independent economics of both entities, the statement added.
The group has also entered into a memorandum of understanding to acquire majority stake in an engineering unit in Germany involved in SG iron castings, and design and machining of auto components therefrom. The acquisition, when completed, will see the group acquiring 80 per cent of outstanding equity capital of the company valued at Euro 16 million.
The Group has appointed Ernst & Young Pvt Ltd as advisors in the transaction.
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