Indian giant Tata pays £93m for British Salt

British Salt produces around half of the UK's pure salt at its facility at Middlewich in Cheshire, for uses including food manufacturing, animal feed and water softening.

It will become part of Tata Chemicals' Brunner Mond business, the UK's only soda ash and sodium bicarbonate producer.

The deal – subject to regulatory clearance – comes three years after Lloyds Development Capital, the private equity arm of Lloyds Banking Group, backed the firm's management buyout from its US private equity owner.

British Salt employs around 125 people and also sells a range of white rock and brown rock salt for de-icing roads, car parks and train platforms.

Chief executive Bill Thompson said the combination with Northwich-based Brunner Mond provided the firm with a "major opportunity" to achieve further growth in its chosen markets.

It currently produces almost 500,000 tonnes of salt each year for the UK and growing export markets.

"Given the strategic alignment of our businesses, as well as the significant combined expertise and resources, this acquisition provides a major opportunity to achieve growth in our chosen markets and to add value to our existing customers," said Mr Thompson.

"We would also like to thank LDC for its continued support over the last three years – at a strategic, operational and financial level – which has helped further develop a business with an excellent reputation and pedigree for quality manufacturing and customer service. We now look forward to the next chapter of our growth with Brunner Mond."

LDC was part of a banking club which bought the business for 100m in 2007 from US Salt Holdings, a vehicle backed by American investment firm Wachovia Capital Partners.

LDC director Carl Wormald and investment manager Jon Pickering led LDC's original 34.5m investment and subsequent exit. Other banks, which included HSBC, put in debt financing, which has since been repaid.

No figure was put on how much Lloyds earned from the deal, but it is believed to have made a return of about 2.5 times its original investment.

Mr Wormald said: "This is an optimum outcome for all parties. The acquisition represents a highly strategic move by Brunner Mond, providing an important presence in several growth markets across Europe.

"It also provides an excellent opportunity for British Salt's customers and employees, becoming part of a leading European manufacturing group and ultimately one of the world's largest and most geographically diversified chemical groups with a worldwide reputation for innovation, quality of customer service and commitment to sustainability.

"The transaction is testament to the quality of British Salt's product, customer service, processing innovation and people, which we've continued to support and develop over the last three years."

In 2009, British Salt sold its depleted salt caverns to EDF Energy for the power firm to develop a fast-cycle gas storage facility. LDC is also on course to receive a deferred payment worth "tens of millions of pounds" from this.

Martin Ashcroft, managing director of Brunner Mond, said: "This acquisition represents an excellent opportunity for Brunner Mond to leverage its manufacturing and processing expertise to accelerate the growth of British Salt, which has already achieved an enviable reputation in several fast-growing and non-cyclical markets. This provides further opportunities for both organisations' customers around the world."

Brunner Mond was bought by Tata in 2006 and traces its roots back to 1874, when the soda ash plant was built in Cheshire.

Its products are used in animal feed, flue gas treatment and suppressing explosions.

"In terms of valuation, it is attractive," said Mehul Desai, analyst with KR Choksey Shares and Securities. "The acquisition also fits in terms of business strategies and we remain positive on this acquisition for Tata Chemicals."

The deal means Lloyds has exited seven firms this year worth around 800m. It has a portfolio of more than 60 companies valued in excess of 2bn and has invested nearly 250m this year in 10 companies.

British Salt's investors were advised by Deloitte and DLA Piper. Ernst & Young and Addleshaw Goddard advised Brunner Mond.

The salt of the Earth

SALT is one of the world's oldest forms of currency.

In Roman times soldiers were given an allowance to buy salt, hence the word salary.

In ancient Egypt, slaves were traded for salt and it was used to preserve Egyptian mummies. Until relatively recently, salt bars were the standard currency of Ethiopia.

In the UK rock salt is mined in Cheshire, on Teesside and in Northern Ireland.

To produce white salt, brine is evaporated after removal of impurities.

Water is forced into a bore-hole drilled into an underground salt bed or dome to dissolve the salt. The saturated raw brine is then withdrawn and pumped to the purification plant.