In a bid to achieve the audacious target of doubling the group's turnover to $65 billion by 2015, Kumar Mangalam Birla-owned Aditya Birla Group is in a major acquisitive mode. In its third acquisition so far this year and the second on the trot over the last two working days, the group on Monday announced the buyout of Domsjo Fabriker, a leading Swedish speciality pulp and bio-refinery company, for $340 million (Rs 1,507 crore).
The latest acquisition has been routed through its global companies, Thai Rayon Public Company ( Thailand) and Indo Bharat Rayon ( Indonesia), which have acquired the marquee pulp company from a Swedish consortium. The group will pump in an additional $75 million into expansion, taking the total cost to $415 million, which will be funded through a combination of debt and internal accruals.
Just two months ago, the group had announced the acquisition of Atlanta-based Columbian Chemicals Company from One Equity Partners for $875 million (Rs 4,016 crore), which catapulted the group to the position of the largest global producer of carbon black by volume. On Saturday, it acquired the chloro chemicals business of Kanoria Chemicals for Rs 830 crore, making it the largest caustic soda maker in India.
While the acquisitions made by the group in quick succession has surprised many, chairman Birla is quite clear about the plan of action: “I see the group growing through an acquisitive mode in many of our businesses,” he said, while terming the $65 billion revenue target by 2015 as “bodacious”.
But make no mistake. The group may seem to be in a hurry to attain the target, but the main objective behind the many acquisitions goes beyond just adding to its size. It is as much to do with linking raw material supplies to production increases. As access to raw materials becomes critical, the group has decided to hunt for sources of raw material, whether it is pulp fibre (Domsjo) to make viscose staple fibre or coal or any other raw material which will strengthen its position in the global market. “Gaining control of critical raw materials is in line with our strategic objective. For natural resources like pulp, there is pressure from Chinese companies and the race is only heating up. We will look at all geographies for resources, technologies and cutting-edge capabilities,” said Dev Bhattacharya, group executive president, strategy and business development, Aditya Birla Group.
Domsjo Fabriker brings the group closer to this goal of having a substantive part of its speciality pulp for its captive consumption. Speciality pulp produced by Domsjo finds primary use in the textile segment (viscose staple fibre and viscose filament yarn).
“The acquisition of Domsjo Fabriker, a world-class company, 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 biorefinery, add significant value to our pulp and fibre operations. Its high-quality pulp will enable us enhance the supply of top quality premium VSF to our customers,” said Birla at a press meet, here on Monday.
The group has a 25% share in the global VSF business, which contributes under 10% to the group's revenues of over $30 billion.
What's more, going by the revenues of Domsjo ($390 million), the valuation has gone in Birla's favour. Domsjo has an extensive investment programme for capacity expansion from its current 2,10,000 tpa to 2,55,000 tpa by 2012. “We are fully committed to Domsjo's growth. 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 Maheshwari, business head (pulp and fibre), Aditya Birla Group.
This marks the group's fourth acquisition in the pulp and fibre sector. The other were the Atholville Pulp Mill and the Nackawic Pulp Mill in New Brunswick, Canada and the Jingwei Fibres Company in China.
Considering that 50% of the group's turnover comes from overseas operations, it is quite likely that many of its acquisitions are expected to be made globally to further expand its footprint. Major Aditya Birla Group companies are Hindalco, Grasim, Aditya Birla Nuvo, Ultratech Cement and Idea Cellular.
Source: Times of India