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Ballarpur Industries Limited to sell Malaysian subsidiary for $500 million

Sabah Forest is 98.08% is owned by Ballarpur Paper Holdings BV, a Netherlands-based investment firm in which BILT owns a 69% equity stake.

ET Bureau|
Updated: Sep 25, 2015, 04.11 AM IST
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Sabah Forest is 98.08% is owned by Ballarpur Paper Holdings BV, a Netherlands-based investment firm in which BILT owns a 69% equity stake.
Sabah Forest is 98.08% is owned by Ballarpur Paper Holdings BV, a Netherlands-based investment firm in which BILT owns a 69% equity stake.
NEW DELHI: Ballarpur Industries Limited (BILT), the flagship company of the Avantha Group, announced the sale of its indirectly owned subsidiary in Malaysia— Sabah Forest Industries Sdn. Bhd — for an enterprise value of $500 million to Pandawta Sakti.

Sabah Forest is 98.08% is owned by Ballarpur Paper Holdings BV, a Netherlands-based investment firm in which BILT owns a 69% equity stake. BILT will use the proceeds from the proposed transaction to reduce its overall debt of about Rs 7,000 crore.

The company will continue to focus on its core business of paper and paper products. "Under the transaction the sale proceeds will come into Ballarpur Paper Holdings BV. A substantial part of it will be used to repay debt of its wholly owned Indian subsidiary— BILT Graphics Paper Products Ltd, and some portion will be used for paying shareholders," said B Hariharan, group CFO of the Avantha Group. Besides BILT, the two other shareholders in Ballarpur Paper Holdings BV are GIC Singapore and the Washingtonbased International Finance Corporation, which own stakes of 18% and 11%, respectively.

BILT Graphic Paper Products has total debt of Rs 7,000 crore that includesRs 1,200 crore of long-term bonds. The company will make repayments of about Rs 2,300 crore to bring down the overall debt to less than Rs 5,000 crore. “The enterprise valuation of $500 million for Sabah Forest Industries that was earning an operating profit of about $25 million is quite attractive for us,” said Hariharan. The transaction is likely to be completed in three months. The equity consideration to be paid to Ballarpur Paper Holdings will be subject to adjustments relating to debt, working capital and other liabilities at the time of completion of the transaction. "The transaction is subject to satisfaction of certain conditions precedent as set out in the definitive agreement, including approvals from the government of Sabah (Malaysia) and Pandawa Sakti's financing agencies," BILT said in a statement.

Malaysian company Pandawa Sakti and its strategic partner in China propose to establish a pulp mill with an annual capacity of more than 1 million tonnes for the manufacture and sale of wood pulp to other countries. The project is based on financing by leading Chinese Banks. Gautam Thapar, chairman of the Avantha Group, said: “Given the prevailing market conditions, and the company’s strategy of divesting assets at the right prices to maintain a healthy balance sheet, the divestment of SFI is aligned with BILT’s objectives."

The deal is expected to improve the leverage and strengthen the capital structure of the company significantly, he added. CIMB Securities (India) Pvt. acted as sole financial advisor to BILT for the transaction. The sale of Sabah Paper is the third major divestment by the Avantha Group in the recent past.

The group sold Crompton Greaves’ consumer products division to private equity firm Advent International and Temasek for Rs 2,000 crore earlier this year. Prior to this, it sold its 600 MW Korba West unit under Avantha Power for more than Rs 4,200 crore to Adani Power in November 2014.

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