Bilt Buys Malaysian Co For $261m.
Deal to catapult company into worlds top 50 paper companies.
India's leading paper manufacturer Ballarpur Industries (Bilt) bought 75% stake in Malaysia’s largest pulp and paper mill company, Sabah Forest Industries (SFI) in a $261 million deal.
The buyout will bring in the much needed forest land, about 300,0000 hectares, for Bilt's raw material besides paper and pulp capacities.
JP Morgan is set to acquire another 20% in SFI for $18-20 million, which can be bought back by Bilt over three years. Bilt is also negotiating acquisition of another 2.8% from the Sabah state government. The deal is expected to be closed within four months.
Bilt has bought Sabah from Malaysia's Lion group, who said that competitive advantage of the business has diminished and it did not have sufficient incentives to operate it. However, Bilt V-C Gautam Thapar seems to think otherwise. In an interview with a leading financial daily Thapar was quoted saying that although the business might not have made sense for Lion, which is focussed on steel and retail businesses, the deal made great sense for his company.
He said Bilt would invest around $500 million to set up a new pulp plant at the existing site in Malaysia, on top of the buyout amount, but it would happen over 5-6 years. For now the company, which has a 4.800,000 tpa paper capacity will add another 3.500,000 tpa at its India plants. SFI’s 1.500,000 capacity will take Bilt’s capacity to 1 million tpa, which will catapult the firm into the top 50 paper companies in the world in terms of capacity. Currently, it is ranked 93 in the $370 billion global paper market.
Another aspect Thapar said the company will play on was that most of the paper made by Sabah was exported, but it was not of the quality that Bilt provides. He added that the main attractions were the areas like forests, easy supply of raw material, strategic fit for growth and regional presence.
Besides, the acquisition will enhance Bilt's revenues by over $100 million (about Rs 460 crore). Last year, Sabah had profit of $9.62 million.
The domestic paper industry which, is growing at 10% per annum, against the global growth of 11.1% is expected to gain great momentum with such deals.
