Paper major Ballarpur Industries has signed a conditional agreement to acquire 97.8 per cent stake in Sabah Forest Industries (SFI), an integrated paper and pulp manufacturing company based in Malaysia for $261 million. The acquisition would be subject to legal, technical, regulatory and financial due diligence.
SFI is the largest integrated paper manufacturer in South-East Asia. With this acquisition, BILT will emerge as one of the largest paper manufacturers in Asia.
SFI was set up in 1982 as a joint venture between the provincial government of Sabah region and the Lion group. An integrated paper and pulp mill was set up at Sipitang in the Borneo island and nearly 2.9 lakh hectares (over 7 lakh acres) of forest was allocated to the company by the government. The forest concession is valid till 2094.
SFI has the capacity to manufacture 144,000 metric tonnes per annum of printing and writing paper, including around 40,000 tonnes of coated paper. SFI has a pulp capacity of 120,000 tonnes per annum. The company exports to 26 countries and nearly 60 per cent of its revenues come from exports.
The large forest concession that comes with the acquisition would ensure raw material supplies for BILT for a long time. The assets being acquired also include a jetty, power plant and steam generation facility.
Detailed financials of SFI have not been disclosed, but the company has reportedly been making losses for last few years. A statement from the Lion group said the opportunities and competitive advantage of SFI has diminished.
The acquisition is being made jointly by BILT and investment bank JP Morgan, which will take 20 per cent on finalisation of the agreement. BILT and its affiliates would hold the balance of close to 78 per cent.