Bloomberg News

Indian Billionaires Said to Mull Bids for Evonik Unit

December 01, 2010

Kumar Mangalam Birla, chairman of Hindalco Industries

Kumar Mangalam Birla, chairman of Hindalco Industries. Photographer: Scott Eells/Bloomberg

Companies controlled by Indian billionaires Kumar Mangalam Birla and Rama Prasad Goenka are considering making offers for a unit of Germany’s Evonik Industries AG, said three people with knowledge of the matter.

Phillips Carbon Black Ltd., part of Goenka’s RPG Group, and Aditya Birla Group are among potential bidders for the carbon black business, which makes material used in tires and synthetic rubber, said the people, who declined to be identified because the matter is private. The deal is likely to be valued at more than $700 million, said two of the people.

A sale would add to the record $26.9 billion of overseas acquisitions by Indian companies this year, according to data compiled by Bloomberg. Evonik, part-owned by private equity firm CVC Capital Partners Ltd., is selling the unit and its real estate and energy businesses to concentrate on chemicals.

“The margins in carbon black tend to be relatively low, so a buyer who specializes in that business or uses it for their own products may be able to boost returns,” said Matthias Schell, a credit analyst at Landesbank Baden-Wuerttemberg in Stuttgart, Germany. “Demand from Asia, especially for tires, is also rising.”

Birla Group spokeswoman Pragnya Ram in Mumbai and Barbara Mueller, a spokeswoman for Essen, Germany-based Evonik, declined to comment.

‘Exploring Opportunities’

Phillips Carbon (PHCB) “is always exploring opportunities for growth both organic and inorganic,” the Kolkata-based company said in a statement to the Bombay Stock Exchange today. “The company is also aware of the divestment process of Evonik’s Carbon Black operations. The company have not taken any decision in this regard.”

Shares of Phillips Carbon rose 1.6 percent to 177.3 rupees as of 3:21 p.m. local time in Mumbai trading, after earlier climbing as much as 11.5 percent.

Evonik, Germany’s largest specialty chemicals maker, said on Sept. 20 it plans to sell the carbon black unit, which has annual sales of about 1 billion euros ($1.3 billion) and 1,700 employees. Barclays Capital is advising Evonik on the proposed sale, one of the people said.

The Birla Group is the world’s fourth-largest producer of carbon black with operations spread across four units including Alexandria Carbon Black Co. in Egypt; Hi Tech Carbon, a division of Aditya Birla Nuvo Ltd. (ABNL) in India; Thai Carbon Black Public Co. in Thailand and Liaoning Birla Carbon Co. in China, according to its website.

Production Capacity

Phillips Carbon, the biggest producer of the material in India, has an installed capacity of 360,000 metric tons with plans to increase that to 410,000 tons within the next one year, the company said in an Oct. 27 statement. Goenka is chairman emeritus of RPG Group, and his sons run businesses including power, infrastructure, retail and entertainment.

Evonik said on Nov. 15 that group sales will rise more than 20 percent this year, driving chemicals profit to a record. Net income in the third quarter rose 55 percent to 260 million euros as sales grew 24 percent to 4.09 billion euros. Chemicals account for 81 percent of sales, the quarterly report shows.

Inks, Toners

The company said its carbon black unit is the second largest in the world, with operations in 12 countries. In addition to rubber and tires, carbon black is used for coatings, plastics, inks and toners. Evonik said in September it sees “better perspectives” for the business outside of the group, citing increased consolidation and the significance of Asian markets.

Cabot Corp. of the U.S. is the world’s largest maker of carbon black.

Evonik is also holding talks on the sale of its 3.8 Billion euro power unit, called Steag, and may reach a preliminary agreement as early as this week, said three people with knowledge of the matter on Nov. 24.

A group of German local energy suppliers led by the city of Duisburg’s utility as well as Energeticky a Prumyslovy Holding AS of the Czech Republic are looking to acquire 51 percent of the unit, and possibly the remaining stake, the people said.

To contact the reporters on this story: George Smith Alexander in Mumbai galexander11@bloomberg.net; Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net.

To contact the editor responsible for this story: Jeff St.Onge jstonge@bloomberg.net


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