Tega Industries shares fall up to 4% after firm announces intent to acquire Molycop; all you need to know

Apollo Funds is a high-growth, global alternative asset manager.

In its regulatory filing, Tega Industries on Wednesday said, "Tega Industries (NSE: TEGA), in consortium with funds managed by affiliates of Apollo (NYSE: APO) (the “Apollo Funds”), has today entered into a term sheet to acquire Molycop, a leading global supplier in grinding media for the mining industry, from an affiliate of American Industrial Partners (AIP) at an enterprise value of ~USD 1.5 billion."

This strategic, complementary acquisition will establish Tega Industries as one of the world’s leading designers and manufacturers of ‘critical-to-operate’ consumables for certain production steps in the mining, mineral processing and material handling industries with an innovative and differentiated product portfolio, the press release said.

"The two entities, Tega Industries and Molycop, together delivered $1.73 billion (nearly ₹15,207 crore) in revenue and $217 million (around ₹1,906 crore) in EBITDA (as per the latest available annual audited financial statements), reflecting consolidated performance prior to minority interest adjustments," the company added.

About Molycop

Molycop is a supplier of grinding media to the mining industry, with a focus on the manufacture and sale of grinding media and chemicals for use in both semi-autogenous grinding (SAG) mills and ball mills. These products are critical to mineral extraction/processing of multiple minerals, but more specifically copper and gold.

The company's client network covers 400+ mines in 40 countries. With a history spanning over 100 years, Molycop is recognised for its innovation, scale and reliability in supporting the mineral processing industry, the press release added.

Grinding media, as per reports, are objects, such as steel balls, ceramic cylinders, or steel rods, used in mills to reduce the particle size of materials through impact and abrasion.

What companies said on the development

Mehul Mohanka, Managing Director and Group CEO of Tega Industries, said, “I met Mr Kim Marvin, General Partner of American Industrial Partners (AIP), for the first time in 2017 at our Dahej plant in Gujarat, and a part of me always knew that we would make a meaningful association someday. I am glad to see that the day has arrived in Tega's 50th anniversary year, a momentous occasion since my father founded the company. With this strategic acquisition, and in partnership with Apollo Funds, we will accelerate innovation, greatly expand market reach and create significant value for our customers.”

Gaurav Pant, Partner, Apollo, said, “This transaction will position the Molycop and Tega organisations to invest in additional technology and capabilities and to continue their commitments to deliver reliable, high-quality products and solutions to industrial customers. For Apollo, this is a great example of pairing strategic equity and debt within a flexible, hybrid solution, and we look forward to partnering with the talented management team of Molycop and Tega to accelerate growth and drive value creation.”

Commenting on the acquisition, Jim Anderson, CEO of Molycop, stated, “Joining forces with Tega and Apollo Funds will open up an exciting new chapter for Molycop. The synergy is clear to see. Our shared values and complementing strengths will help us accelerate our strategy, innovate better, and serve customers across the globe more effectively.”

What's in it for Tega Industries?

Upon completion, Tega Industries will be the controlling shareholder of Molycop, with the Apollo Funds owning a significant minority equity interest. Tega's priority in the first 8 quarters post transaction closure will be operational and business integration.

"With complementary product baskets across the milling value chain between the two companies, Tega will be able to offer a comprehensive mill optimisation solution to serve a larger share of its customer needs. Tega's established presence in Europe, the Middle East, the Commonwealth of Independent States, Latin America and Africa will be bolstered by Molycop's activities in the US, Canada, Latin America and Australia. Molycop will benefit from Tega’s expertise and presence in growth areas of EMEA, and the addition of Molycop's 13 manufacturing facilities along with 3 joint ventures will bring Tega closer to its customers with a combined presence in 26 global manufacturing sites," the company said.

Advisors to the deal

Argus Partners and Latham & Watkins LLP are serving as legal counsel to Tega Industries and the Apollo Funds. In addition, J.P. Morgan and PwC are providing advisory services to Tega Industries and the Apollo Funds.

About Tega Industries

Tega designs and manufactures ‘critical-to-operate’ consumables for the mining, mineral processing and material handling industries 'with an innovative and differentiated product portfolio'. Established in 1976 and headquartered in Kolkata, the company has a presence in over 92 countries.

Last seen, the stock was trading at ₹2,036.40 on the NSE, down over 2%.