The Aditya Birla Group has announced that it will acquire Atlanta-based Columbian Chemicals Company, from One Equity Partners, the merchant banking arm of J P Morgan Chase & Co. The financial value of the deal was not disclosed but an Economic Times report pegs it at $800 million.
The Aditya Birla Group has bought the firm through its associates Alexandria Carbon Black Company, Thai Carbon Black Company Limited along with SKI Investment, a group company.
In 2006, DC Chemical, a South Korean petrochemical company and One Equity Partners jointly bought Columbian for about $600 million. In January 2009, One Equity bought DC Chemical’s entire stake for close to $150 million.
With Columbian Chemicals accounting for 9% of the global carbon black market share, the Aditya Birla group is looking at an expanded global footprint with this deal. The Aditya Birla Group is one of the most cost efficient manufacturers of carbon black with six manufacturing plants and operations across four countries while Columbian Chemicals, headquartered in Marietta, Georgia, operates 11 plants in nine countries, including the US, Canada, Brazil, Germany, Spain, South Korea and China, employing 1,300 people.
Carbon black, which the Aditya Birla Group regards as a core business, is a key ingredient to create the blackness in tyres and to increase its durability, and a raw material used in the making of printing inks, paints etc. The carbon black division of the Birla Group is currently has a production capacity of 780,000 metric tonnes a year and has a presence in India, Egypt, China and Thailand.
Aditya Birla is the fourth largest producer of carbon black and Columbian Chemicals is the third largest. The acquisition will give an edge to Aditya Birla to get elevated on the table. US based Cabot corporation and German beased Evonik Industries, which is also for sale, are in the first and second positions respectively.
“The acquisition of Columbian Chemicals catapults Birla Carbon to become a leading player globally in this sector by raising its annual production to 2 million tonne. We look upon the carbon black business as a core business that has a strong growth potential both in terms of revenues and earnings,” Kumar Mangalam Birla, Chairman, Aditya Birla Group, said, in a statement.
This acquisition will create a business which will have the advantage of cutting edge technology and low costs, and will have a truly global footprint, which will help us to achieve our vision to be a premium carbon black player, global in size and reach, Birla said.
The acquisition is subject to customary approvals. The deal is expected to attain closure in the second half of 2011.
“Columbian Chemicals’ world-class service coupled with that of Birla Carbon, positions us well. Additionally, Columbian Chemicals accords us access to markets that we currently do not serve, thus enhancing our geographic reach. Columbian Chemicals also has a very strong Research & Development team of scientists engaged in process, technology and innovative products development,” Dr. Santrupt Misra, CEO, Birla Carbon and Director, HR, of the Aditya Birla Group, said.
ANZ, BankAM, HSBC, RBS and StandChart are participating in the financing of the transaction and were also the financial advisors for this deal. KPMG were the tax and accounting advisors, and Shearman & Sterling LLP, the legal counsel of Aditya Birla Group.
For the year ended March 2010, the carbon black division of the Aditya Birla group posted revenues of Rs 1,160.87 crore and profit before interest and tax of Rs 227.33 crore.
Shares of Aditya Brla Nuvo were traded at Rs 750.25 at the time of closing today at BSE, slightly higher by 0.09%.
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