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Birla Carbon to acquire Columbian Chem for $875 m

Special Correspondent

To become leading player globally in carbon black business


The acquisition will be financed through debt

Continues to focus on Indian operations


— PHOTO: PAUL NARONHA

SCALING UP:Aditya Birla Group Chairman Kumar Mangalam Birla (right) and Birla Carbon CEO and Director HR of the group Santrupt Misra at a press conference in Mumbai on Monday.

MUMBAI: The Aditya Birla Group has moved a step closer to its stated intention of being a significant global player in its major businesses of cement, aluminium and carbon black when it announced on Monday that it entered into a definitive agreement to acquire Atlanta-based Columbian Chemicals Company (CCC) from One Equity Partners, the merchant banking arm of J. P. Morgan Chase & Co for a consideration of $875 million.

The 100 per cent stake in CCC was bought by the Aditya Birla Group through its associates Alexandria Carbon Black Company and Thai Carbon Black Company which will pick up 21 per cent each while SKI Investment, a group company, will pick up 58 per cent stake. The deal is expected to achieve closure in the second half of the current calendar year.

Aditya Birla Group Chairman Kumar Mangalam Birla said, “The acquisition of Columbian Chemicals will be funded wholly by debt with about $450 million on the books of CCC and the balance e on the books of Aditya Birla Group associate companies Alexandria Carbon Black Company and Thai Carbon Black Company.

“The CCC acquisition catapults Birla Carbon to become the leading player globally in this sector, by raising its annual production to two million tonnes. We look upon the carbon black business as a core business that has a strong growth potential in terms of revenues and earnings.''

Plant planned in A.P.

Mr. Birla added that the price being paid for the acquisition was for technology, customer franchise and geographical reach of CCC.

“It will remain an independent company and for now will not be merged. Aditya Birla Nuvo, which is in carbon black, is listed in India and CCC does not fit in with Nuvo's expansion plans, all of which are in India. We are expanding at Patalganga and Gummidipondi and are looking at setting up another plant in Andhra Pradesh. So we will continue to focus on Indian operations through Nuvo.''

The synergy gain from the acquisition will be to the extent of $30-50 million annually on a recurring basis. “This will happen in spite of not merging operations with Nuvo and will emerge from operational efficiencies, economies of scale, rationalisation of facilities and rationalisation of product mix.''

The target company's revenues are around $1 billion and the combined entity will have revenues of around $2 billion. CCC had an operating profit of $140 million but is a loss making company and was largely impacted by the downturn in the automobile industry in 2008 onwards

Santrupt Misra, CEO, Birla Carbon, said, “The main customer of carbon black, the automobile industry is not slowing down but the rate of growth is coming down.''

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