Birla lassoes Swedish pulp & fibre maker for third kill of the year

Aditya Birla Group on Monday said it has bought Swedish pulp and fibre maker Domsjo Fabriker for $415 million — its second acquisition in three days and the third this calendar year.

The deal is seen helping the world’s largest viscose staple fibre (VSF) manufacturer further strengthen its position.

Kumar Mangalam Birla, chairman of the $30 billion (Rs133,350 crore) Aditya Birla Group, said the pulp and fibre business would help the group meet its ambitious target of becoming a $65 billion conglomerate by 2015. This business currently brings in $2 billion in revenues for the group.

“This is a significant milestone for our VSF business, which is presently growing at 7%,” said Birla.

VSF, a man-made fibre produced from wood pulp, is an intermediate product used for the manufacture of apparels, textiles and other dress materials.

Birla said acquisition of the “profit-making company” will help the group meet its target of raising capacity from the current 750,000 tonnes per annum (tpa) to 1 million tpa by 2013.

Birla said two group companies — Thai Rayon Public Co Ltd (Thailand) and Indo Bharat Rayon (Indonesia) — will invest $180 million for the acquisition.

The group will also take a $235 million debt to fund the deal, including $160 million through a special purpose vehicle.

Domsjo, which has close to 375 employees, also has a $75 million capital expenditure plan under which the capacity would be increased from the current 210,000 tpa to 255,000 tpa by 2012.
Domsjo posted revenue of $390 million last financial year.

The acquisition also underlines the race between Chinese and Indian companies for securing raw material sources.

“There is a lot of pressure for natural resources, especially from Chinese companies. And this acquisition helps us get access to these resources,” said Dev Bhattacharya, group executive president - corporate strategy and business development.

“The acquisition will further help us in achieving our goal of complete backward integration in the VSF business, which currently stands at 52%,” said K K Maheshwari, director, Aditya Birla Group.

Once the group reaches a capacity of one million tonne, its total captive supply would be at 64%, he said.

Swedish bank, ABG Sundal Collier was the merchant banker for the Bilra Group.

Aditya Birla Group’s earlier two acquisitions this year include that of US-based carbon black maker Columbian Chemicals for $875 million in January and of the chloro chemicals business of Kolkata-based Kanoria Chemicals and Industries for Rs830 crore last Saturday.

Kumar Mangalam Birla in conversation with DNA.

Two acquisitions in two working days. Are we meeting tomorrow or some time in the coming week for another?
Kumar Birla: (Laughs). No. I’ll like to give you (all) a break.

How much time did it take for the acquisition to close?
We were looking at this acquisition for almost a year now but active discussion started 3 months back.

What does this mean for the company and the group?
The acquisition of Domsjo, which is a world-class company, is a very significant milestone for our pulp and fibre business. It has synergistic fit with us. The pulp and fibre business is a core business of the Aditya Birla Group and it will help the group grow and meet with its plans in the future.   

With this acquisition, what is the overall strategy for future? Say, by 2015, how much revenues and capex has been planned?
We are taking an “acquisitive” approach as we try to grow. We are looking become a $65 billion group by 2015. And we should be able to able to grow by then. On capex, we are working and will be ready to share the numbers soon.