GHCL seeks to abort USG deal

Gujarat Heavy Chemicals (GHCL), which had lost the bid to acquire Romanian company Uzinele Sodice Govora (USG), has filed a lawsuit seeking the termination of the Romanian soda ash-maker's acquisition by Europe-based Ciech Group. GHCL, India's largest soda ash manufacturer, claims that its permission is needed for the stake sale in USG.

In December last year, Poland-based Ciech Group had signed an agreement with Romania's State Assets Recovery Authority (AVAS) to acquire USG for around $200 million. Earlier, when USG fell into a financial crisis it had mortgaged certain assets with the Indian company, which it claims gives it a stake in the firm.

According to the suit filed with a Romanian court early last month, GHCL is seeking termination of USG's ownership rights transfer to Ciech Group, and annulling of a sales agreement between Ciech Group and SC Begacom (a shareholder in USG).

The suit was yet to come up for hearing, sources close to the development said.

When contacted, a Ciech spokesperson confirmed the development.

"GHCL wants absolute nullity to the sale-purchase contract of shares concluded between AVAS, SC Begacom and Ciech having as subject novation of the sale-purchase contract of shares.

And the same with the contract concluded between AVAS and Ciech regarding the transfer to Ciech of the ownership right shares of US Govora," he stated in an e-mail reply.

He, however, added that Ciech was of view that it was the legal owner of the USG shares. The deal was registered on December 4, 2006, with the Register Court Riavest at Timisoara, Romania. "We have strong conviction that GHCL activities and calculations will not make any impact on the legal business," he added. GHCL Managing Director P Sampath also confirmed the development. However, he did not elaborate on the issue nor did he mention the reasons for the legal suit.

The Indian company was also in the fray to acquire USG, a 200,000 tonne soda ash producer. Earlier in 2005, GHCL had acquired S C Bega Upsom, a 300,000 tonne soda ash maker. If USG acquisition had materialised, the Indian company would have become the third or the fourth largest soda ash manufacturer in the world.

The acquisition has resulted in Ciech, the soda ash maker division of Ciech Group, becoming the second largest manufacturer of the chemical in the world.