The acquisition of Atlantis, US-based Columbian Chemicals Company (CCC) for $875 million will help the Aditya Birla Group become a global player in the carbon black sector with an annual production of 2 million tonnes.

Kumar Mangalam Birla, chairman, Aditya Birla Group spoke to FE?s Smita Joshi Saha on the deal and the challenges ahead.

When did you start thinking of making an acquisition in the carbon black space and why CCC?

The group?s philosophy has been to grow its core business and we?re looking to grow either though greenfield projects and brownfield ventures. There is a demand-supply gap in carbon black and we are doing a greenfield expansion in India, we did brownfield in Thailand. There weren?t too many small players with global reach.

Also, an acquisition takes equal amount of effort whether it is big, medium or small. There weren?t too many credible players in key markets like North America and South America, but then we found CCC. And it took us 15 months to close the deal.

Was the high debt on the books of Aditya Birla Nuvo the reason for it not acquiring CCC?

Nuvo has its own growth plans and capital allocation plans and has chosen to stay focussed on carbon black in India. So, we are looking at brownfield expansions at two of our locations, Gummidipoondi in Tamil Nadu and Patalganga in Maharashtra. We are also looking at a possible new location in Andhra Pradesh. So, as of now, we want to keep Nuvo and CCC as separate companies.

You have acquired CCC via three different entities. Why not one entity?

The two operating companies (Alexandria Carbon Black and Thai Carbon Black), are taking debt on those two balance-sheets and the third one (SKI Investment) is to be able to complete the financing.

By how much will this acquisition help you lower costs?

We are looking for a synergy of about $50 million. Some of it will come from raw material, whereas some of it will come from logistics and technology, which itself will give us .01% improvement in yield.

Isn?t the deal expensive at a multiple of 6.5 times Ebidta?

I think it is fairly priced from both the seller?s and buyer’s point of view.

What will be the challenge going ahead?

The next big challenge for us is to make the integration happen and we would take it one step at a time.