Aditya Birla Nuvo divests carbon black operation
Aditya Birla Nuvo, a company within India’s Aditya Birla Group, has divested its carbon black businesses to another group company, SKI Carbon Black (India) Pvt. Ltd. The company says the decision to divest was approved in a committee meeting held on 6 April, and the carbon black business will be divested at an enterprise value of Rs 14.51 billion (£173.2 million).
Explaining the rationale behind shifting the carbon black activities from one group business to another, Aditya Birla Nuvo stated: “Considering that multi-national tyre manufacturers prefer to engage with carbon black player having global delivery capabilities – to benefit from consistency in quality, supply assurance and R&D support – the scale and global positioning in the carbon black sector has become increasingly important.” It then noted that its carbon black manufacturing operations are restricted to India and only account for two per cent of global industry capacity. In the financial year ending 31 March 2012, carbon black operations earned Aditya Birla Nuvo Rs 19.43 billion (£239.9 million), 6.9 per cent of the company’s total revenues.
Some think there may be more to the deal than the group has publicly disclosed. In its results for the quarter ending 31 December 2012, Aditya Birla Nuvo stated its carbon black business “remained under pressure due to cheaper imports and lower off-take from tyre manufacturers.” This hardly reads as sales literature for business recipient SKI, but in an article published 9 April Bloomberg opines that Aditya Birla Group chairman Kumar Mangalam Birla intends to merge all the group’s carbon black units under SKI Carbon Black (India) and then possibly sell shares in the combined company. Bloomberg says this information comes from “two people familiar with the matter.”
One of Bloomberg’s two unnamed contacts said that Columbian Chemicals Co., which the Aditya Birla Group acquired in late January 2011 for US$ 875 million, will also be merged with SKI. Upon closing the Columbian deal in June 2011 it was said that the Aditya Birla Group had become the “world’s number one carbon black producer” with a total annual capacity of 2 million tonnes. The Bloomberg source indicates that the new entity may sell shares in an initial public offering as early as next year.
Aditya Birla Nuvo will utilise the proceeds of the carbon black divestment to reduce debt and strengthen its balance sheet. “This will support the company’s growth plans and ensure greater focus in other businesses,” it wrote in a statement. The transaction is expected to be consummated during the first quarter of the current financial year, subject to requisite approvals including shareholders approval.
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