NYSE-listed International Paper on Tuesday announced signing an agreement to acquire 53.5 per cent stake in Andhra Pradesh Paper Mills Ltd from Mr L. N. Bangur, his family members and affiliates. It will pay approximately $257 million in cash with additional $62 million non-compete payment to the sellers (totalling Rs 1,435.5 crore).

The US company will also launch a mandatory public offer to acquire up to an additional 21.5 per cent of the outstanding shares of APPM for approximately $104 million (Rs 468 crore) in cash, thereby taking its total stakeholding in the company to 75 per cent of the outstanding shares through these transactions, subject to mandatory norms.

According to filings with the stock exchanges, as of December 2010, APPM promoters (Bangurs and others) hold 53.46 per cent stake with foreign institutional investors (0.91 per cent), domestic institutions (20.45 per cent) and others (25.12 per cent). On Tuesday, APPM shares ended 6.75 per cent higher at Rs 196.80 on the BSE, notching up huge volumes.

According to International Paper, the share purchase and public tenders are likely to be completed by the third quarter of 2011, subject to regulatory approvals, including from SEBI, the RBI and, if applicable, the Competition Commission of India.

APPM has two mills with a combined capacity of 250,000 tonnes of uncoated freesheet paper annually, employing about 2,500 people and a turnover of Rs 650 crore. The mother plant is located at Rajahmundry and unit two is based at Kadiam, about 17 km away, both in coastal Andhra Pradesh and known for nurseries. The company recently had completed a Rs 635-crore modernisation and upgradation recently.

International Paper believes that this investment would be positive for employees and their communities, customers, shareholders and the state of Andhra Pradesh.

Growth promise

Mr John Faraci, Chairman of International Paper, said: “APPM is an excellent platform to grow with the Indian paper and packaging markets. Both APPM and the paper and packaging industry are growing at substantial rates. We believe the technical expertise can accelerate that growth and create value for customers and APPM shareholders.”

Mr L. N.Bangur, Executive Chairman, Bangur Group, in a statement, said: “We have built a strong business in India and the next phase of growth requires a different set of resources and capabilities. International Paper is the right company to take the business forward and deepen maturity of the sector in India.”

Mr Paul Brown, President, IP Asia, said, “The Indian market is one of the fastest growing for paper and packaging in the world, growing at 8 per cent annually. India has 15 per cent of the world's population, but consumes less than 2 per cent of the world's paper. The rapid economic growth, combined with advantages in education infrastructure and the burgeoning middle-class will bolster the growth of paper consumption in India over the next several years. APPM presents an opportunity to enter growing market via an established company with good assets, access to fibre and brands, where our global operating experience can be advantageous.”

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