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Last Updated : Jan 31, 2011 08:26 PM IST | Source: CNBC-TV18

AV Birla grp to buy Columbian Chem for $875m

The Aditya Birla group is boosting its carbon black capabilities by acquiring US-based carbon black manufacturer Columbian Chemicals in a USD 875 million deal. Carbon black is used to make tires, paints and plastics. And the buy will take the AV Birla group's carbon black capacity to two million tonne per year.


The Aditya Birla group is boosting its carbon black capabilities by acquiring US-based carbon black manufacturer Columbian Chemicals in a USD 875 million deal. The buy will take the AV Birla group's carbon black capacity to two million tonne per year.


While addressing the press, Aditya Birla Group chairman Kumar Mangalam Birla said the group hoped to complete the deal by mid-2011.


To know what Aditya Birla Group chairman Kumar Mangalam Birla had to say to the press, watch video. 


Carbon black is used to make tyres, paints and plastics. CNBC-TV18's Sajeet Manghat gives a complete lowdown.


This transaction has been done by privately held companies of the Aditya Birla group. Birla pointed out that the transaction will be done through three of the companies. One is Alexandria which is an Egypt-based company for the AV Birla Group there which has some operation in the Egyptian market as far as Carbon Black is concerned. Then you have the Thai Carbon and then SKI Investment, a holding company in the Aditya Birla Group.


The total transaction value, as he said, is USD 875 million and will be on a zero debt basis.


This company is one of the top three companies in the world with a capacity of nearly 1 million tonne of carbon black. The company has a revenue of nearly USD 1 billion with an EBITDA of USD 140 million which takes the entire value of the transaction to nearly 6.25 times EBITDA.


This entire industry has been going through rough times especially in 2008-09. It is not a profit making company, but from a strategic sense it makes sense for the AV Birla Group to go ahead and acquire this company at a time when demand is much lower than global supply which is coming through Carbon Black. The entire industry is growing at a 3-3.5% on a CAGR basis. That is the expectation for 2011-15 for them.


This acquisition which was done after negotiations for nearly after 15 months gives access to nearly 11 plants in nine countries. It gives the Aditya Birla Group access to the North American continent, the South American continent, to the East European and China and Korea. AV Birla Group has some operations in China, but this operation of Carbon Group Columbian Chemical will be complementing the Chinese market.


Speaking on why the transaction wasn

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First Published on Jan 31, 2011 05:36 pm