BILT's $500-mn deal to sell Malaysian arm falls through

The company had announced the transaction in September last year to reduce its debt worth Rs 6,300 crore

In a setback for the Gautam Thapar-owned Ballarpur Industries, the company’s plan to sell its Malaysian arm, Sabah Forest Industries (SFI), to Pandawa Sakti (Sabah) for $500 million (Rs 3,368 crore) has fallen through as the buyer couldn’t arrange cash. BILT had announced the transaction in September last year to halve its Rs 6,300-crore debt.

As the buyer failed to close the deal, Ballarpur invoked performance guarantees of $50 million. In 2007, BILT had acquired Malaysia’s largest paper company for $261 million.

BILT’s share price was flat to close at Rs 16.60 on the BSE on Thursday as the deal was crucial for the loss-making company. The company was on sale even as the financial metrics of Ballarpur fell. For FY 2015, the company reported a loss of Rs 161 crore on sales of Rs 4,181 crore (see chart) on a consolidated basis.

The Avantha group has been on an asset sale spree in the past two years. Another group firm, Crompton Greaves, sold its consumer durables business to a clutch of private equity firms in April last year for Rs 2,000 crore. In 2014, it sold its Korba power plant to the Adani group for Rs 4,200 crore. Pandawa Sakti, along with a strategic partner in China, was planning to set up a pulp mill with a capacity of about a million tonnes per year in Sabah, Malaysia and the project was to be funded by Chinese banks.

But despite three extensions, Pandawa Sakti couldn’t close the deal, leading to termination of the transaction. According to bankers, the options before BILT would be to either hunt for a new buyer or run the company for some more time.

On July 5, Ballarpur announced that its rival JK Paper made a non-binding offer to acquire two units of BILT Graphic Paper Products at Ballarpur and Asthi in Maharashtra. The valuation process of the two units is still on.

Ballarpur is not the only Indian company having tough time in finding a buyer for its foreign assets. Tata Steel is under pressure to sell its UK operations where it is losing £1 million a day. Similarly, Lanco, GVK and Adani Group are stuck with coal mines in Australia and are unable to develop these because of falling coal prices. Recently, after a long time, Tata Communications managed to sell its stake in Neotel, South Africa to a local company.