NRI, The Global
Indian
Chatterjee
the biggest takeover tycoon India has ever seen.
New Delhi, May 09 2005
The Indian Express
Dev Chatterjee reports
TCG’s Basell acquisition is the biggest M&A
deal ever struck by any Indian abroad. Will Purnendu
Chatterjee be able to pull off his biggest gamble
ever?
When 51-year-old non-resident Indian Purnendu Chatterjee
inked the $5.7 billion agreement in London on Thursday
morning, corporate analysts in India were busy calculating
the risk-to-return ratio of the deal that has made
Chatterjee the biggest takeover tycoon India has ever
seen.
Chatterjee — who is investing close to Rs 300
crore of The Chatterjee Group’s (TCG) funds in
the Basell deal — is joined by a host of investors,
including ICICI Venture Fund, Haldia Petrochemicals
Ltd and international investor Access International
who will shell out Euro 1-1.3 billion to buy out the
50:50 joint venture between BASF and Shell. Merrill
Lynch will invest Euro 3.3 billion to fund the debt
component.
For those who came in late, an IIT Kharagpur alumni,
Chatterjee is the founding shareholder of Haldia Petrochemicals
Ltd, an unlisted producer of polymers and chemicals,
in which the West Bengal government also holds a stake.
The Tatas hold a token 3 per cent stake in Haldia
while TCG holds 43 per cent stake.
The Indian impact
There will not be much impact of the deal on the
Indian polypropylene industry, where Reliance Industries
plays a dominant role. At present, Reliance is the
largest manufacturer of PP, PE and PVC in the country
with a market share of 45 per cent. In fiscal 2005,
its production volumes of PP, PE and PVC increased
3 per cent to 1,921,000 tonnes. Domestic demand increased
by 3 per cent during the year, reflecting the impact
of improvement in economy and stable prices.
‘‘Actually, the takeover is just a change
in the ownership of the company,’’ says
a Reliance official. ‘‘The volumes in the
world will remain the same and there will not be any
new capacity addition. Hence, we have nothing to fear,’’
he adds.
RIL operates the world’s largest grassroot,
multi-feed cracker at its Hazira petrochemicals complex
and its cracker produced 816,000 tonnes of ethylene
and 395,000 tonnes of propylene. As Basell does not
have any presence in the Indian market and Haldia
will take on Reliance’s might in future, analysts
say there will not be any implication on the Indian
petrochem industry.
Here comes the tycoon
Before sewing the Basell deal, Chatterjee has some
tough work to do at home. He has to first convince
the IDBI to reduce high cost loans worth Rs 3,000
crore for HPL so that it can participate in the Basell
deal as minority partner.
Chatterjee will also have to convince the Government
of West Bengal to let HPL invest in Basell which —
to put is simply — is like a small fish trying
to gobble a big one. HPL is also planning an IPO by
the end of 2005 which will see Chatterjee reducing
a part of his equity in favour of new investors. ’’
The experience of Haldia has given us the confidence
to go ahead and bid for Basell,’’ Chatterjee
was quoted in the media.
Though he did not give any details on how he will
raise funds for the $5.7 billion deal — which
pipped L N Mittal’s $ 4.6 billion bid for International
Steel of US — industry insiders say it will not
be difficult for the man.
In order to close these deals, Chatterjee will have
to rely on his 35-year experience — especially
his 10-year stint in McKinsey where he worked on a
number of M&A deals for clients. Chatterjee can
also look forward to US-based investor George Soros
of Soros Fund Management who helped him set up ‘The
Chatterjee Group’ which is now an affiliate of
the New York-based Soros Fund.
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