Billionaire Kumar Mangalam Birla plans to merge all his carbon black units and may sell shares in the combined company, said two people familiar with the matter.
Aditya Birla Group is in the process of combining the businesses under the closely held SKI Carbon Black (India) Pvt., the people said, asking not to be identified as the plan isn’t public. Aditya Birla Nuvo Ltd. (ABNL), which runs companies that make fertilizers to textiles, will sell its unit to make carbon black to SKI for 14.51 billion rupees ($266 million), according to exchange filings yesterday.
Columbian Chemicals Co., which was acquired by the group for $875 million in 2011, will also be merged with SKI, one person said. A combined carbon black unit will be the world’s largest maker of the ingredient used in tire manufacturing and help Birla cut costs and negotiate better rates with clients. The new entity may sell shares in an initial public offering as early as next year, the person said.
“Multinational tire manufacturers prefer to engage with carbon black players that have global delivery capabilities, scale and global positioning,” Aditya Birla Nuvo said in the statement. Aditya Birla Nuvo accounts for 2 percent of global manufacturing capacity, according to the statement.
Group spokeswoman Pragnya Ram declined to comment on the company’s plan to combine the carbon black units.
Aditya Birla has a total annual capacity to produce 2 million tons of carbon black in five companies including Alexandria Carbon Black in Egypt, Thai Carbon Black Pcl (TCB), Liaoning Birla Carbon Black in China and Columbian Chemicals in the U.S.
Aditya Birla Nuvo (ABNL) rose 1.1 percent to 951.75 rupees at 10:07 a.m. in Mumbai, recovering from the lowest level in five months. Thai Carbon Black, which has gained 11 percent in the past year was unchanged at 26.5 baht in Bangkok.
Aditya Birla Nuvo will use the proceeds to cut debt and expand other businesses. The company will apply for a bank license by July 1. It is also also considering investing $1 billion to double its urea capacity, said managing director Rakesh Jain said in a November interview.
“From an investors’ point of view, it makes sense to have a focused company with specialized businesses than a little bit of everything,” said Santosh Singh, a Mumbai-based analyst with Espirito Santo Securities Ltd. said over phone. He recommends clients buy Aditya Birla Nuvo’s shares.
The carbon black business accounted for about 9 percent of Aditya Birla Nuvo’s business in the year ended March 31, 2012, according to data compiled by Bloomberg.
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