The Aditya Birla Group has acquired Domsjo Fabriker, a leading Swedish speciality pulp and bio-refinery company, through its global companies Thai Rayon Public Company (Thailand) and Indo Bharat Rayon (Indonesia) for a consideration of $340 million from a Swedish consortium of six individuals.
The acquisition will be 70 per cent debt-financed and 30 per cent coming from internal accruals. The enterprise value of the business is $340 million and $180 million will be raised on the two group companies while $160 million will be as debt in a yet-to-be named special purpose vehicle (SPV). Domsjo's capacity expansion currently under way amounts to $75 million which is on Domsjo's books.
Addressing the media, Kumar Mangalam Birla, Chairman, Aditya Birla group, said, “The acquisition of Domsjo Fabriker, 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 viscose staple fibre (VSF) to our customers.”
The Aditya Birla Group's VSF capacity, currently at 7.50 lakh tonnes, will go up to one million tonnes annually by 2013 with the completion of the Domsjo's expansion.
K. K. Maheshwari, Business Head, Pulp & Fibre, Aditya Birla Group, said, “This acquisition is in line with our strategy of having a substantive part of our specialty pulp for our consumption through our captive sources. With Domsjo Fabriker, we are closer to this goal”.
“As a large quality manufacturer of speciality pulp, Domsjo has a synergistic fit with us. There is a great opportunity to further grow the company. Domsjo has an extensive investment programme for capacity expansion from its current 2.10 lakh tonnes to 2.55 lakh tonnes per annum by 2012. We are fully committed to Domsjo's growth and going forward intend to expand the innovation and research and development efforts at Domsjo as part of our global R&D efforts,” he added.
Mr. Maheshwari said the group's VSF business was around $2 billion and would go up to $2.7 billion post-acquisition. The expansion of the VSF business is under way and it is adding a capacity of 1.20 lakh tpa to its Vilayat facility in Gujarat at a cost of Rs.1,850 crore, 36,000 tonnes to its Harihar unit in Karnataka at a cost of Rs.450 crore, and expanding its Indonesia facility by one lakh tpa involving an investment of Rs.850 crore. “The pulp business will mainly grow inorganically,” said Mr. Maheshwari.
The speciality pulp made by Domsjo finds primary use in the textile segment (VSF and viscose filament yarn). It employs around 400 people and around 25 per cent of the production is used in premium applications such as binding agents for medical products, particularly pharmaceutical tablets and in casing for the food industry. In addition, their bio-refinery enables the company to extract the full value from its operations by production of ethanol and lignosulphate as by-products. While ethanol is used in bio-fuel, paint and printing, Lignosulphate is used as an additive in concrete, ceramics and dye pigments.