The Rs 15,000 A V Birla group has made its first overseas acquisition. The three Birla group companies "" Grasim Industries Ltd, Thai Rayon Public Co and Indo Bharat Rayon "" have bought 50 per cent stake in a Canadian wood pulp unit, forming a joint venture called A V Cell Inc. The Canadian JV partner is the $1.4 billion wood products major, Tembec Inc (holding the remaining 50 per cent stake). The entire annual production of dissolving grade chemical wood pulp, used in the production of viscose staple fibre, will be exported to the three Birla companies. Kumaramangalam Birla, the A V Birla group chairman, said that acquisitions will continue as a means of growth; the group wants to consolidate its position as a world leader in VSF production.
Though the cost of acquisition was a mere Canadian $1 for the ailing firm, the partners have put in an equity infusion of $5.6 million to revive the wood pulp unit. The Canadian government has also given the partners a grant of $1.35 million, since it owns preference shares in the company worth a sizeable $7.5 million. The Birla group found its overseas investment more beneficial than setting up a greenfield project in Punjab as earlier planned; the saving in interest burden is roughly $320 million.
