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Nirma to acquire US firm for over $200m

In its first global acquisition that will catapult it into the top 10 global soda ash manufacturers league, Ahmedabad-based Nirma Ltd has announced that it has signed an agreement to acquire US-based natural soda ash producer Searles Valley Minerals Operations Inc and Searles Valley Minerals Inc (collectively known as SVM) from private investment firm Sun Capital Partners Inc and other minority shareholders.

Expected to be concluded by January 2008, the acquisition is to be made through a wholly-owned subsidiary of Nirma in US, which is in the process of being set up.

While company officials refused to divulge details of the deal citing confidentiality clauses, market sources said the acquisition is being done through an all-cash deal that could cost Nirma in excess of $200 million. The acquisition price is estimated to be at a discount to the $299 million turnover that both the SVM entities raked in last year, sources said.

The company is likely to finance the big ticket acquisition by taking upto 50% either on its Indian balance sheet or on balance sheet of the foreign subsidiary. The deal is subject to approval from US authorities.

The big ticket acquisition is slated to push Nirma to the top seven producers of soda ash in the world with a total capacity of 2 million tonnes per annum out of the global 48 million tpa capacity of synthetic and natural soda ash.
Nirma is the largest producer of synthetic soda ash in India with a capacity of about 1 million tonnes per annum.

The comapny had been evaluating three different international targets in the industry and had finally narrowed down on the natural soda ash manufacturer.

“Compared to synthetic soda ash, which is made in India and most parts of the world, natural soda ash offers a great cost advantage. We stratetically decided to acquire SVM because Nirma can now benefit through lower costs in the long run,” a company official said.

This is Nirma's first foreign acquisition and its third in three years after it acquired Saurashtra Chemicals' Porbandar unit in June 2005 for around Rs 300 crore and Core Healthcare's IV fluids business in February 2006 for around Rs 250 crore.

While HSBC Securities and Capital Markets (India) advised Nirma on the transaction and JP Morgan Securities advised SVM.

Source: Economic Times

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