Coromandel International has entered into a definitive share purchase agreement to acquire a majority stake in Liberty Phosphate.

Coromandel has signed the agreement with Liberty promoters, under which, it will acquire a maximum of 56.28% stake in the company at the rate of Rs 241 a share. Coromandel also indicated that it will launch an open offer to acquire a further 26 per cent stake in the company from all public shareholders at the rate of Rs 241 a share as per the guidelines of market regulator, the Securities Exchange Board of India (SEBI).

At the rate of Rs 241 a share, Coromandel International's stake in Liberty Phosphate will be valued at Rs 196 crore and the while company will be valued at to Rs 348 crore compared to the current market capitalization of Rs 308 crore. This means that Liberty Phosphate is valued at 0.7 times its sales and 3.6 times its operating profits for financial year 2012. Its return on equity in the financial year stood at 47.36 and return on capital employed was 49 per cent.

Kapil Mehan, MD, Coromandel International, believes that the acquisition will help the company reduce risks. The deal to acquire Liberty Phosphate will be funded by the company's intern accruals.