Ballarpur acquires Malaysian Sabah Forest Industries for $261 million

Mar 19, 2007. /Lesprom Network/. Ballarpur Industries has formally signed a $261-million deal to acquire Sabah Forest Industries Ltd, Malaysia which operates an integrated pulp-and-paper mill. Ballarpur Industries and JP Morgan Securities (Asia Pacific) Ltd have acquired 98% stake in Sabah Forest from the Malaysia-based Lion Group, which has interests in steel, retail and property development. JP Morgan holds 20% and 78% is with Ballarpur Industries. Through this acquisition Ballarpur Industries brings under its fold a paper mill with annual capacity of 140 000 tonnes, a pulp mill with annual capacity of 120 000 tonnes and a 289 000 hectare forest land concession from the Sabah state government, which will continue to hold 2% stake in Sabah Forest. Ballarpur Industries can use the timber in the forest land for its raw material up to 2094. Mr. Gautam Thapar, chairman of Ballarpur Industries, said that the acquisition was a key component of the company's plans to double paper capacities to a million tonnes by 2010 and increase it by another two million tonnes by 2015. In the next two years, it would invest over $80 million in the paper and pulp mill to increase capacities to 200 000 tonnes of paper and 240 000 tonnes of pulp. In addition, it would restart a 40 000-tonne coated paper production facility, which had been mothballed. The chief minister of Sabah, Datuk Seri Musa Haji Aman, said that with Ballarpur's long-term investment, Sabah would emerge as a major player in the pulp and paper industry in the region. Sabah Forest would benefit from modern technology and high-quality planting material for its plantations, which would benefit the small farmers and the forest communities. Later, speaking to newspersons, Mr. Thapar said that Sabah Forest would be a subsidiary of Ballarpur Industries. Last year Sabah Forests clocked sales of $110 million. Apart from the immediate expansion plans, Ballarpur hopes to set up a 700 000 tonne pulp million Sabah Forest by 2012. Going by the industry thumb rule this would mean investments of about $700 million. Initially, the Malaysian operations would call for quality upgradation to match that of its products in India. Subsequently, it would look at exports from Malaysia and raw material supply to its mills in India. Mr. B. Hariharan, group finance director, Ballarpur Industries, said that acquisition would make profits from the first year. The acquisition was funded through $75 million equity; the remaining was debt, which would have to be paid over 7.5 years.