Kiri Dyes may acquire DYSTAR

Ahmedabad-based Kiri Dyes and Chemicals (KDCL) is in advanced stages of negotiation for acquiring the Germany-based DyStar Group, the global market leader for dyes and textile solutions that filed for insolvency a couple of months earlier for some of its subsidiaries. The insolvency filing included DyStar’s sites in Frankfurt, Leverkusen, Brunsbuttel, Geretsried, and Ludwigshafen.

The deal size is estimated to be about Rs 698-873 crore, including the liabilities. Kiri Dyes has got in a consortium of State Bank of India, Bank of India, Exim Bank and Corporation Bank for evaluation of the deal and has given them the acquisition financing proposal. The deal is expected to be complete by the end of this year. Kiri Dyes has already raised Rs 150 crore through qualified institutional placements. The company plans to raise the balance amount required for acquisition through a mix of equity and funding through a special purpose vehicle.

DyStar clocked sales of Rs 5,440 crore in the 2008 calendar year. Currently owned by Platinum Equity LLP, DyStar has the parentage of global chemical majors such as Bayer, Mitsubishi Kasei, BASF, Mitsui and Zeneca. Platinum is exploring strategic alternatives for DyStar, including total sell-off due to growing liabilities. Kiri Dyes expressed its intent to acquire Dystar and has signed a memorandum of understanding with Platinum Equity Advisors to this effect in September, according to sources.

Kiri Dyes has also drawn up a restructuring plan for Dystar Group which includes shifting some operations from Germany to the low-cost production base in India. Also, the company has proposed to relocate the headquarters of DyStar from Germany to Singapore. The acquisition, if  materialised, will put Kiri Dyes in the league of integrated textile chemical majors in the world, with over $1 billion turnover. In July this year, Kiri Dyes and China’s Zhejiang Lonsen Group set up India’s largest dye and dyestuff manufacturing facility at Padra near Vadodara. Both players floated a 60:40 joint venture company called Lonsen-Kiri Chemical Industries Ltd to put up a 50,000 tonnes per annum unit, which became operational this year.

The global dyes and intermediates market is estimated at $23 billion and is expected to grow at two per cent per annum. China ranks sixth globally in terms of exports, while India is 16th. The recent withdrawal of tax incentive to dye/dyestuff exporters in China has impacted dyestuff exports from China and created an opportunity for India.