Haldia Petro, Rhone Capital jointly acquire US-based Lummus Technology

Haldia Petrochemicals Ltd (HPL), a flagship company of The Chatterjee Group (TCG), and Rhone Capital, a global private equity firm, have jointly acquired US-based Lummus Technology from McDermott International. The enterprise value of the deal is estimated to be $2.725 billion (approximately ₹20,590 crore).

HPL will invest close to 57 per cent of the enterprise value, which works out to approximately ₹11,736 crore, to fund the acquisition. The deal will be partly funded by equity and partly by debt, said a senior company official, refusing to divulge further details. State Bank of India is the lead banker in the deal.

Lummus Technology is a leading master licensor of proprietary technologies in the refining, petrochemicals, gas processing and coal gasification sectors, as well as a supplier of proprietary catalysts, equipment and related engineering services. It has around 130 licensed technologies and more than 3,400 patents and trademarks.

The move would enable Lummus Technology to function as a ‘standalone’ autonomous entity and have the required flexibility and agility to develop its core competencies further, said a press statement issued by HPL, which has its manufacturing facility at Haldia in West Bengal.

“This landmark development would significantly accelerate India’s progress towards self-reliance in the materials technology space. HPL, with its two decades of experience in manufacturing best-in-class polymer products and downstream chemicals, would partner with Lummus in evolving technological improvements for these segments,” the release said.

Lummus and HPL together will be in a position to provide a more compelling ‘value proposition’ to the clients of Lummus in India and abroad, it added. The deal would also give a major boost to HPL’s policy initiative to pivot upstream investments in the broader oil to chemical sector.

“Our investments are both strategic and long term, most of which span across 25 to 30 years. We have primarily focused on knowledge-based enterprises, and as such Lummus is a great addition to our portfolio. Leading with innovation, it delivers sustainable value to clients in the areas of materials technology. HPL, being a long-term client of Lummus, can share its customer experience and collaborate with Lummus to co-create innovations for the benefit of the industry,” Purnendu Chatterjee, founder Chairman of TCG, said in the release.

Rating downgrade

Meanwhile, India Ratings and Research (Ind-Ra) recently downgraded HPL’s long-term issuer rating to ‘IND AA-’ from ‘IND AA’ and placed it under Rating Watch Negative (RWN).

The downgrade follows the likely increase in net debt on account of the acquisition of Lummus, the rating agency said in its rating drivers.

According to Ind-Ra, HPL is raising a debt of $520 million through a foreign currency term loan in a step-down subsidiary, Haldia Technology Services, to fund the acquisition. The remaining $180 million is likely to be funded through cash balances at HPL.

“HPL has also taken lenders’ approval to take out up to $180 million to fund the equity and incidental expenses. At the end of FY-20, HPL had already given $114 million (approximately ₹8.62 billion) against the $180 million. HPL intends to infuse the balance $66 million plus incidental expenses during FY21. As at the end of FY-20, HPL had a debt of ₹39.9 billion and cash of ₹21.4 billion post the payment of ₹8.62 billion towards the acquisition. During FY21, the gross debt is likely to increase by ₹40 billion and the cash balances would decline by another ₹7 billion owing to the acquisition,” the rating agency said.