HPL acquisition by Chatterjee reaches final stage

26-Jul-05

A concrete proposal, drafted in a way that addresses the government's concerns, has been faxed to Writers' Buildings six days before the July 31 deadline. This is a sign of Chatterjee's rush to honour the time limit of July 31. With this detailed proposal to the Bengal government to acquire its 36.87% holding in Haldia Petrochemicals (HPL) by Chatterjee, negotiations have reached the final stage. The government made it clear last week that it would rethink its planned stake sale if the deadline of July 31 slipped by. Earlier the State Government had received a letter from Deutsche Bank and a contract drafted by law firm Amarchand Mangaldas. Agreeing to pay around Rs 29 per share, the cost of his acquisition will be almost Rs 1,560 crore. Deutsche Bank has promised Rs 1,160 crore, the remaining Rs 400 crore will have to be brought in by the NRI businessman. Chatterjee plans to acquire the state's stake through a leveraged buyout (LBO). In such deals, more than 70% of the money for an acquisition is borrowed from banks and financial institutions, in this case it is Deutsche Bank. The letter from Deutsche Bank has been attached to buttress Purnendu's claim that he has arranged the funds. An Escrow account - with US$266 million or Rs 1,160 crore - has been opened with the bank to facilitate the acquisition. A separate deal will transfer the 14.5 crore shares the state government had acquired from the Tatas.