Bilt acquires Malaysia’s top paper mill for $261 million

MUMBAI: Ballarpur Industries Ltd (Bilt), the Gautam Thapar steered flagship Thapar group company and J P Morgan (Asia Pacific) Ltd will buy Sabah Forest Industries Sdn, Malaysia’s largest pulp and paper mill, from Lion Forest Industries Bhd. for $261 million.

Under the deal, Bilt -the country’s biggest maker of writing and printing paper will take a 78% stake in Sabah Forest Industries Sdn, leaving 20% equity in J P Morgan, the company said. The move will also provide a steady supply of wood pulp for Bilt’s paper manufacturing plants in India.

Bilt has recently embarked on a plan to increase capacity of its Sinar Mas plant at Bhigwan in Maharashtra by another 3,50,000 metric tonne. The expansion will mean a higher intake of wood pulp, which is in hard to come by in India in view of environment concerns. At present, Bilt imports 60,000 tonnes of wood pulp and for manufacturing a tonne of paper, at least 0.6 tonne of wood pulp is needed.

Gautam Thapar, vice chairman & managing director, Bilt, told in New Delhi on Monday: “This acquisition is a strategic fit into our growth plans towards retaining leadership in India and growing our presence in the region. The acquisition will help us raise the annual capacity to 1 million tonnes in three years.

Gautam Thapar is a third generation scion from the Thapar family who soon after taking over from his uncle L M Thapar has slowly worked towards growing Bilt into a global scale company.

The Malaysian proposal was however discussed on and off since last year, B Hariharan, chief financial officer said. The acquisition will give the Thapars control of Malaysia’s biggest integrated pulp and paper mill with access to 2.89 lakh hectares (7.14 lakh acres) of forest land in the eastern Malaysian state of Sabah.

The company also operates a timber and plywood mill, a jetty and power and steam generation plant facilities, Bloomberg said.

Bilt’s acquisition is subject to due diligence and Malaysian government approvals.

Sabah Forest Industries operates the largest Pulp and Paper mill in Malaysia with Paper capacity of 1.44 lakh MTPA and Pulp capacity of 1.20 lakh per annum. SFI holds a concession for approximately 2,89,000 hectares of forest land by the State Government of Sabah. This concession is valid for 99 years from January 1, 1996 to December 1, 2094.

Bilt is India’s largest manufacturer of Writing and Printing Paper with 20% of the W&P market and approximately 55% of the coated paper market. Bilt has five paper mills in the states of Orissa (unit Sewa), Haryana (unit Shreegopal) and Maharashtra (Unit Ballarpur, Bhigwan and Ashti) together with a capacity of 480,000 tpa and a pulp mill in the state of Andhra Pradesh (unit Kamlapuram).

All of the units (except Ashti) possess captive power generation capacities and, with the exception of Bhigwan & Ashti, also possess captive pulp making capacity. Together, these Units give the company geographic coverage over most of the Indian market. The Malaysian company is a debt free company and company officials said the assets will be leveraged for the acquisition.

Gautam has been quoted earlier as saying that his first goals for any move are “financial’. Only after that does other issues such as market share come up for consideration.  The proposed sale will allow Lion Forest to seek “higher yielding potentials to enhance shareholders’ value,’’ Lion Forest said in the statement. It’s selling its stake as there is “no foreseeable significant expansion and growth potential’’ in Sabah Forest.

Lion Forest, part of the Lion group controlled by businessman William Cheng, which took over Sabah Forest in May 1997, last month said it slipped to a loss of US $ 7.4 million in the third quarter ended March.

It blamed the loss on a scheduled plant shutdown of its paper mill for annual maintenance.

With inputs from Bloomberg