In a move that will make it the number one player in carbon black globally, the Aditya Birla Group has bought loss-making Columbian Chemicals for an enterprise value of $875 million. The stake, to be funded entirely through borrowings, has been bought from One Equity Partners. Said Kumar Mangalam Birla, chairman ABG, ?The deal will be give us a combined capacity of $2 million tonnes per annum and we will be infusing debt to the tune of $450 million. While we do not plan to merge the $ 1-billion Columbian Chemicals with Aditya Birla Nuvo, synergies of $50 million would be possible.?
Santrupt Misra, CEO, Birla Carbon and director HR of the Aditya Birla Group, said, ?Columbian Chemicals gives us access to markets that we currently do not serve giving us more reach.? The deal will help Birla Carbon expand its footprint in North America, South America, Brazil, Germany, Italy, Spain, Hungry Korea and China.
The global capacity of carbon black in 2011 is expected to be about 14.26 million tonnes with demand expected to be around 10.3 million tonnes. The maximum demand is expected to come from China and other Asian markets.
The acquisition, being made through Alexandria Carbon Black Company, Thai Carbon Black Company along with SKI Investment, an Aditya Birla Group Company, will be completed in six months. According to Standard & Poor?s Columbian is the world?s third-largest carbon black manufacturer after Cabot and Evonik. The closely-held company has around 9 per cent global market share. According to speciality chemicals consulting firm Notch Consulting, Evonik and Columbian Chemicals together controlled 20% of the 12.7-million tonne per annum (tpa) global carbon black capacity in 2009. Evonik?s carbon black division has also been put on the block after it was identified by the company as a non-core unit.
Headquartered in Marietta, Georgia, Columbian Chemicals operates 16 plants in nine countries, including the US, Canada, Brazil, Germany, Spain, South Korea and China, employing 1,300 people. Last year, One Equity Partners, the buyout arm of JP Morgan Chase, managing $8 billion in PE investments, decided to initiate the sell-off process.
For the Aditya Birla Group, carbon black is a strategic area for growth. Hi Tech Carbon, the carbon black business of AB Nuvo, caters principally to the domestic market and has a 37 % share. It has two manufacturing facilities, in Renukoot in Uttar Pradesh and Gummidipoondi in Tamil Nadu.
Their combined capacity stands at 300,000 tpa, including a recent greenfield capacity expansion at Patalganga.