The Calcutta-based Tega Industries Ltd’s $1.5-billion acquisition of the US-headquartered Molycop, a critical material supplier to copper and gold miners, will transform the Indian company into a multinational corporation with 13 manufacturing footprints across key global mining regions.

This is the second-largest international buyout by any Bengal-based entity, after Haldia Petrochemical’s $2.75-billion acquisition of Lummus Technologies in 2020. It will not only raise Tega’s consolidated annual revenue nearly tenfold to ₹15,000 crore, making it one of the state’s largest companies, but also create jobs locally.

The company management, led by Mehul Mohanka, plans a global capabilities centre (GCC) in Calcutta as part of the reorganisation of the Omaha, Nebraska-headquartered Molycop, employing close to 500 people over time to offer back-office services to the global enterprise.

“It took me close to a year to convince them about the deal. This brings two complimentary product manufacturers, Tega and Molycop, together for the benefit of the customers,” Mohanka, managing director and group CEO of Tega, told The Telegraph.

“At the end, it is a proud moment for us at Tega and for the state of Bengal, which will have a homegrown multinational with operations across the world.”

Molycop makes “grinding media”, used by miners to extract metals from rocks. Its clients are mostly copper and gold miners from across the world — from Mexico and Chile to Indonesia and Australia. It complements Tega’s business, focused on the mineral processing industry.

The Tega management expects to earn $100 million of synergy benefit by bringing the operations of Tega and Molycop together and sharing the costs. One of the proposed changes is the relocation of the Molycop HQ from Omaha, home of the legendary investor and philanthropist Warren Buffet, to a more “strategic” location, possibly Singapore or the UAE.

However, the manufacturing base will remain widespread, shielding each local operation from the vagaries of tariff-related trade uncertainties.

Tega

Tega is partnering financial investor Apollo Fund, which has $840 billion worth of assets under management, for the acquisition of Molycop from its owner, American Equity Partners (AEP). Tega will hold a 77 per cent stake and Apollo, the remaining 23 per cent.

Mohanka said his meeting the AEP boss in 2017 at Tega’s Dahej plant was when it occurred to him that the companies might work together in the future. The leveraged buyout structure would mean the $1-billion debt sitting on the balancesheet of Molycop will now have to be refinanced by Tega and Apollo. To arrange the $500 million, Tega will stump up $361 million, part of it through the sale of shares worth ₹3,300 crore, to seal the deal by December/ January.

Following the share sale, which the Tega board approved on Saturday, the holding of promoter Mohanka’s family will come down from 74.8 per cent to around 65 per cent. The Tega boss emphasised that the loan on the books of Molycop would have no bearing on Tega, and that the Indian company was protected against any default, if at all, on the loan.

There is also a plan to bring the debt down to $450-500 million over two to three years. As part of the road map, Apollo will infuse $220 million as preferential equity to Molycop, bringing down the debt to $780 million from day one. Tega management guided investors in an analyst call last week that Molycop would sell some non-core assets over time to raise $75 million, which will also help pare down debt.

“Our goal is to expand EBITDA margins from about a current 11.5 per cent to 15 per cent and deliver long-term value without adding any additional fixed costs,” Mohanka said.