Chatterjee Group acquires Basell Polyolefins

India, which has been eager to make its mark in the global economic scenario through its fast growth rate and highly successful entrepreneurial class, has made its mark in the international petrochemical sector. The promoters of Basell - BASF and Royal Dutch/Shell have succumbed to US pressure and selected the consortium led by Chatterjee, slighting a rival bid by the National Petrochemicals Company of Iran. Purnendu Chatterjee along with New York-based private equity funds have emerged as the winners in the race to buy Basell Polyolefins, for an estimated 4.4bn euros ($5.7bn). This acquisition is India's largest overseas takeover and the first such cross-border leveraged buyout (LBO) involving an Indian entity. Merrill Lynch has arranged approx 3.3bn euros of high-yield debt for the acquisition, and the balance 1-1.3bn euros will be pumped in by the partners as equity. The debt will be serviced by the cash flows of Basell. Basell has an annual revenue of 6.7bn euros (about Rs 37,900 crore) from 20 factories across 5 continents. Netherland headquartered Basell is the world's largest producer of polypropylene (PP), with a capacity (including joint ventures) of 8m tons. It is Europe's largest polyethylene producer with a capacity of 2.5 million tons. With the Basell acquisition, the Chatterjee group (TCG) will challenge the dominant position of Reliance Industries (RIL)- the Ambani promoted enterprise, which only recently has acquired Trevira. RIL has, till date, been the sole Indian company to make its mark globally in basic manufacturing industry with its huge capacities in petrochemicals and petroleum refining. Capacity at RIL include 1.1 million tons of PP and 0.5 million tons of PE (polyethylene). TCG and Access hope to take advantage of the continuing petrochemical upcycle and rising prices and the absence of large capacities in the coming years to consolidate Basell's position. TCG is expected to take the board of Haldia into confidence. Haldia Petrochemicals, which not only uses Basell technology, but is also promoted by the Chatterjee group, will also be one of the beneficiaries of the deal. With the buyout of European petrochem major Basell, TCG and Haldia will emerge as one of world's leading producer of polypropylene and ethylene. Purnendu Chatterjee is an alumni from IIT Kharagpur. An NRI, Chatterjee received both his masters and doctorate degrees from the University of California, Berkeley. Chatterjee shot into fame in India after he played an important role in setting up joint sector Haldia Petrochem Ltd (HPL). Chatterjee currently holds 43% stake in the Rs 5,170-crore HPL. He founded 'The Chatterjee Group', which is an affiliate of the New York-based Soros Fund. Chatterjee has also made equity investments in outsourced technology-based services, real estate, aviation, and financial services.