Tata Chemicals to Hive off US Soda ash Business
Tata Chemicals, one of the largest soda ash manufacturers in the world, is planning to hive off its US soda ash unit. While the likely valuations are not yet confirmed, the markets are estimating a valuation of around $1 billion expected by Tata Chemicals. That would be roughly 30% of the current market cap of Tata Chemicals, which stands at $3.50 billion.
Tata Chemicals is open to going with PE funds or with strategic partners to sell the stake. In the last few months, there have been a number of big deals in the global soda ash market with big names including Solvay of Belgium looking to hive off soda ash business. However, Tata Chemicals has refused to confirm as to whether it is even considering the sale.
Soda Ash is derived from the mineral called Trona. Trona is a sodium carbonate compound that is processed into soda ash or into bicarbonate of soda. The state of Wyoming in the United States has the largest reserves of Trona in the world and it is estimated to have Trona reserves to the tune of nearly 127 billion tonnes.
Tata Chemicals is among the largest producers of soda ash in the world with a capacity of 5.5 million tonnes per annum (MTPA). Tata Chemicals relies heavily for its supplies of Trona on the Wyoming mines in the United States and the Lake Magadi mines based in the African nation of Kenya.
One of the reasons Tata Chemicals is looking to sell the US soda ash unit is the sharp fall in demand in the US. North American output fell 18% in the last 12 months for Tata Chemicals and that was mainly driven by demand compression in the aftermath of the COVID 19 pandemic. Its US sales fell from $479 million to $388 million.
Soda ash finds extensive use in detergents, pharmaceuticals, glass, paper and also in water treatment. Tata Chemicals has been gradually restructuring its product lines. Two years back, it hived off its salt manufacturing unit to Tata Consumer Products since it was more of an FMCG product. Tata Chemicals may focus more on the high growth Indian markets.
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