Tega, Apollo Tie Up To Acquire Mining Equipment Supplier Molycop For ₹1.5 Billion

Shares of Tega Industries dipped by over 2% in the opening trade on Thursday after the company, in partnership with funds managed by affiliates of Apollo, signed a term sheet to acquire mining consumables company Molycop for approximately $1.5 billion.

Upon completion, which is expected to take place by the end of the year, Tega will become the controlling shareholder of Molycop, while Apollo Funds will hold a significant minority stake.

The acquisition is expected to position Tega Industries as a global manufacturer of “critical-to-operate” consumables for the mining, mineral processing, and material handling industries.

Post-acquisition, Tega’s initial focus during the first eight quarters will be on operational and business integration. The combined company will look to offer a comprehensive mill optimization solution.

“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,” said Gaurav Pant, a partner at Apollo.

Global Expansion

The transaction increases Tega’s global footprint. While Tega has a strong presence across Europe, the Middle East, Commonwealth of Independent States (CIS), Latin America, and Africa, Molycop has established operations in the US, Canada, Latin America, and Australia.

Additionally, Molycop’s 13 manufacturing facilities and three joint ventures will expand Tega’s reach to 26 global manufacturing sites.

Argus Partners and Latham & Watkins are serving as legal advisors, while J.P. Morgan and PwC are providing financial and strategic advisory services.

Analyst Take: Sell On Good News?

Analyst Kush Ghodasara noted that the charts have discounted the news development in its recent rally from ₹1,780 to ₹2,110. Momentum indicators such as the RSI and MACD have shown some negative divergence, and the stock is trading below 5-day SMA making the momentum weak. He advised selling at current market price, with target price at ₹2,013 and ₹1,858 for a stop loss at ₹2,110.

Stock Watch

Tega Industries' shares closed 0.73% lower at ₹2079.65 on Wednesday, following a 2.3% gain in the previous session.

On a year-to-date basis, Tega has seen strong demand, with the stock gaining 32.65%.

However, retail sentiment on Stocktwits has remained ‘neutral’ for a while.

For updates and corrections, email newsroom[at]stocktwits[dot]com.