Aditya Birla buys Swedish pulp maker for $340 mn

The $30-billion Aditya Birla Group (ABG) is at it again. Just a day after announcing the acquisition of Kanoria Chemicals, the company today announced a bigger buyout. The group has taken over a leading Swedish speciality pulp and bio-refinery company, Domsjo Fabriker, for $340 million (Rs 1,508 crore).

The group will spend $75 million as capex, an amount that has already been committed for taking the total payout to $415 million. The deal will be routed through two Birla group companies — Thai Rayon Public Company and Indo-Bharat Rayon of Indonesia. While the two subsidiaries will pay $180 million; another $160 million was raised via a special purpose vehicle created for this acquisition. Another $75 million was raised backed by Domsjo’s books. Domsjo’s turnover last year was $390 million.

With this acquisition, ABG will become the world’s largest pulp manufacturer, which will be used in viscose staple fibre (VSF). Group company Grasim is a leading VSF player. It will also help the group’s market share in speciality pulp to go up to 80 per cent from the current 52 per cent, giving them ample room for raw material security.

The Swedish company has a production capacity of 210,000 tonnes, which the company plans to increase to 255,000 tonnes by 2012.

“The acquisition of Domsjo Fabriker, with the most environmentally-friendly technology, marks a significant milestone for our pulp and fibre business. Its cutting-edge technology and production process, coupled with a state-of-the art bio-refinery, add significant value to our pulp and fibre operations. Its high quality pulp will enable us to enhance the supply of top quality premium VSF to our customers,” said Kumar Mangalam Birla, chairman ABG.

Domsjo's pulp finds primary use in the textile segment. Around 25 per cent of the production is used in premium applications, such as binding agents for medical products, particularly pharmaceutical tablets and in castings (wraps) for the food industry. Also, its bio-refinery wing enables the company to extract the full value from its operations by the production of ethanol and lignosulphate as by-products. Ethanol obtained from its bio-refinery is used in bio fuel, paint and printing sectors. Lignosulphate is used as a plasticisers in concrete, ceramics and dye pigments among others.

Domsjo has around 400 high-skilled staff and a strong management, which ABG wants to continue with.

“As a large-quantity manufacturer of speciality pulp, Domsjo has a synergistic fit with us. There is a great opportunity for further growth of the company. Going forward, our intent is to expand the innovation and research and development efforts at Domsjo as part of our global R&D efforts,” said K K Maheshhwari, business head, Pulp and Fibre division of ABG.

Birla emphasised the group’s hunt for raw material resources. From pulp to coal to feed its cement sector needs. Birlas are also in the race to acquire Whitehaven coal for $3.4 billion.