Aditya Birla Nuvo eyes Evonik assets

The Aditya Birla Group is back in acquisition mode, as group firm Aditya Birla Nuvo may bid for the carbon black division of Germany's Evonik Industries. The division, with annual sales of $1.3 billion and 1,700 employees across 12 countries, is the second largest in the world.

According to two independent investment banking sources, AB Nuvo officials have been approached by bankers to buy out the carbon black division.

In September, Evonik had identified the division as non-core and finalised plans to divest it. Aditya Birla Group, on the other hand, is the fourth-largest producer of carbon black at 900,000 tonnes per annum with facilities in India, Egypt, Thailand and China. Barclays has been appointed to help Evonik with the exercise.

Carbon black is a key ingredient to the blackness in tyres and printing inks, toners and conveyor belts. Carbon blacks were originally derived from soot. Today they also make tyres more durable and have a host of other industrial applications.

Investment bankers in the know said talks with AB Nuvo and other potential buyers were still at a preliminary stage and any deal may take months to fructify. But initial estimates suggest that bids could cross $1.25 billion as other suitors, including global leaders Cabot Corporation of the US, are expected to join the race.    

When contacted, an Aditya Birla Group spokesperson refused to comment on "speculative news".

Evonik Industries group spokesperson Barbara Mueller responded to a Business Standard email query, saying: "The carbon black activities have already been carved out to a separate legal entity and we have retained Barclays Capital to support us in the divestment process." But she refused to furnish any comment on specific bids from potential suitors, including AB Nuvo.

Santrupt Mishra, CEO of the carbon black business of the Aditya Birla Group, said AB Nuvo has not put in any bid for the asset.

"Yes, we are aware of the divestment process of Evonik's carbon black operation. But I don't think any information memorandum will be ready before December end. So, to say we are bidding at this point is incorrect. Once all details are out, then we shall evaluate them and take a call."

Following the economic downturn of 2008, Evonik -- majority owned by a government-controlled trust that bears the long-term liabilities of Germany's wound-down coal mining industry -- may also sell its power plant business and has plans to hive off its real estate operations to focus on its main speciality chemicals portfolio.

Global private equity firm CVC Capital Partners has a 25 per cent stake in the company after its plans to sell shares and list on the Frankfurt stock exchange did not take off despite repeated attempts.

Hi Tech Carbon, the carbon black business of AB Nuvo, caters principally to the domestic market and has a 37 per cent share. Currently, it has two manufacturing facilities, in Renukoot in Uttar Pradesh and Gummidipoondi in Tamil Nadu. Their combined capacity stands at 300,000 tonnes per annum, including a recent greenfield capacity expansion at Patalganga.

The company is one of the lowest cost producers of carbon black in India. The group also has international operations in three key emerging markets. The group aims to produce 1 million tonnes per annum by 2012.

Evonik, with operations across the Netherlands, Korea, Brazil, China and South Africa would give AB Nuvo a much bigger global footprint, feel analysts, especially in high-growth markets in Asia, Africa and South America.