India's Birla Group buys Columbian Chem for $875 million

MUMBAI Mon Jan 31, 2011 7:43am EST

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MUMBAI (Reuters) - India's Aditya Birla Group on Monday said it has agreed to buy U.S.-based Columbian Chemicals for $875 million, doubling its capacity and boosting its position to the largest carbon black manufacturer in the world.

The acquisition, through three units, will give the diversified Indian group access to markets in North America, Canada, Brazil, Germany, Italy and China, Chairman Kumar Managalam Birla said at a press conference.

The deal, to be completed in six months, will yield synergies of about $50 million, he said.

The Indian conglomerate has interests ranging from telecom to retail and is led by Kumar Mangalam Birla, listed by Forbes as India's tenth richest man with a net worth of $8.5 billion.

"Aditya Birla group's carbon black business and that of Columbian Chemicals complements each other and the acquisition will create a business that has advantage of advanced technologies, low costs and global footprint," Birla said.

It also controls India's largest cement maker UltraTech Cement (ULTC.BO) and aluminum maker Hindalco (HALC.BO), which acquired Canada's Novelis for $6 billion in 2007.

Carbon black is used as a pigment in dyes and paints and for reinforcement in tires.

Columbian, the world's third-largest manufacturer of carbon black, manufactures specialty carbon black and has 16 percent of the global market share in the segment. The Indian group's carbon black business had capacity of 0.94 million tons per year.

The global carbon black industry is expected to touch capacity of 14.3 million tons in 2011, with growth seen at 3.5 percent a year.

Birla's acquisition will place it ahead of Cabot Corp (CBT.N) and Germany's unlisted chemical maker Evonik Industries EVON.UL, the two leading producers of the chemical.

Two of three acquiring Birla companies will raise $450 million in debt to fund the deal. Birla group officials did not specify how the remaining funds would be raised.

Shares in Aditya Birla Nuvo (ABRL.BO), which houses the Indian group's chemicals business, closed 0.2 percent higher at 750.70 rupees in a weak Mumbai market..BSESN.

(Writing by Prashant Mehra; Editing by Jui Chakravorty)

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