A.V. Birla Group leads race for US' Columbian Chemicals

The Aditya Birla Group has emerged the frontrunner for acquiring US-based Columbian Chemicals, ahead of rivals such as Phillips Carbon Black of the RPG Group.

The $800 million (Rs 3,680 crore) deal may be executed through Aditya Nuvo or Birla Carbon, an umbrella organisation for Alexandria Carbon Black in Egypt, Thai Carbon Black in Thailand and Liaoning Birla Carbon in China. Carbon black is one of the key inputs for the blackness in tyres, toners, paints, printing inks and conveyor belts.

A Birla Group spokesperson neither confirmed nor denied the development. “The Group is always on the lookout for potential acquisition and it is not our policy to comment on market speculation,” she said.

The acquisition will help the Group, which produces 780,000 tonnes per annum of carbon black, to consolidate its position as a leading producer. For the year ended March 2010, the carbon black division posted revenues of Rs 1,161 crore and profit before interest and tax of Rs 227 crore.

In India, Hi Tech Carbon, part of Aditya Nuvo, is one of the lowest-cost producers of carbon black and has a 37 per cent market share with a facility each at Renukoot in Uttar Pradesh and Gummidipoondi in Tamil Nadu. It has a combined capacity of 300,000 tonnes.

Last year, One Equity Partners, the private equity arm of JP Morgan Chase, put its majority stake in Columbian Chemicals on the block. Earlier in 2006, it joined hands with South Korea-based petrochemical company DC Chemical to acquire Columbian for about $600 million from Phelps Dodge. In 2009, DC Chemicals divested its entire holding to One Equity for about $150 million.

Georgia-based Columbian Chemicals, founded by a host of small carbon black makers in 1922, was acquired by Phelps Dodge Corporation in 1986. The world's third-largest carbon black manufacturer operates 16 plants in nine countries, including the US, Canada, Brazil, Germany, Spain, South Korea and China.