Bilt’s $500 mn deal to sell Malaysian unit comes unstuck

By TEAM VCC

  • 06 Jul 2016

Ballarpur Industries Ltd (Bilt), India’s largest paper company, said on Wednesday it has scrapped its proposed deal to sell loss-making Malaysian unit Sabah Forest Industries Sdn (SFI) to Pandawa Sakti (Sabah) Sdn Bhd, Malaysia, for an enterprise value of $500 million.

The deal came unstuck as the buyer could not meet the deadline to sew the transaction despite multiple extensions.

Bilt said it will invoke the $50 million guarantee, given as an advance by the buyer.

The firm had signed an agreement to sell its entire stake in SFI last September. The deal, which was subject to necessary approvals, was originally expected to close within three months. The deadline was first extended to February, then April and May. The parties had later put a final deadline of 30 June.

Earlier, in July 2015, Bilt had received board approval to sell its 98.08% stake in the subsidiary.

Bilt had acquired SFI, the largest Malaysian paper firm, in 2007 for $261 million. This marked the first significant overseas acquisition by an Indian paper company and remains the biggest to date in an otherwise conservative and slow-moving industry.

SFI makes paper and paper-related products. It also offers solid wood-related products such as rough and chemically treated sawn timber and panel-based products including dried veneer and raw plywood. It exports its products to Iran, Syria, Yemen, South Africa, Jordan and Saudi Arabia.

Bilt, part of the Gautam Thapar-led Avantha Group, has around half a dozen paper production units including the one in Malaysia.

Interestingly, this comes at a time when Bilt has just received interest from local rival JK Paper to buy two of its five paper plants in the country. JK Paper would become the top domestic paper producer if the deal goes through.

Meanwhile, Bilt's parent Avantha Group has been facing a debt overhang and has divested several assets in the recent past, including its stake in consumer appliances business under Crompton Greaves and part of its power generation business.

Bilt had said the proceeds from the sale would be used to reduce debt of SFI and other units. SFI was to be sold on a debt-free, cash-free basis.

Shares of Bilt rose 1.2% to end at Rs 16.7 on the BSE in a weak Mumbai market on Tuesday, ahead of the twin announcements. Trading in the Mumbai market is closed on Wednesday.

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