Thai Rayon part of Birla's pulp mill buy-out

Economy July 18, 2012 00:00

By The Nation

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India's Aditya Birla Group has signed an agreement to purchase the Terrace Bay Pulp mill in northwestern Ontario for US$110 million (Bt3.5 billion).


“The acquisition of the Terrace Bay mill and its subsequent conversion into a dissolving-grade pulp mill is a major strategic move,” chairman Kumar Mangalam Birla said yesterday.
“In the VSF business, we enjoy global leadership. To sustain ongoing growth, we have an integrated business model, spanning the entire value chain from plantation to pulp to fibre. The Terrace Bay Mill, upon conversion, will be geared to provide superior quality pulp for our VSF plants worldwide.”
VSF stands for viscose staple fibre, which can be used in textiles; rayon is such a cellulose fibre.
In January, Terrace Bay Pulp was placed under the Companies’ Creditors Arrangement Act, a statute that allows insolvent corporations owing their creditors more than 5 million Canadian dollars (Bt155 million) to restructure their affairs.
Aditya Birla will make this acquisition through a special-purpose vehicle, AV Terrace Bay Inc (Canada). Thai Rayon, an Aditya Birla joint venture, proposes to hold a 60-per-cent stake in AV Terrace Bay and the remaining 40 per cent would be held by Grasim Industries, a flagship of the Aditya Birla Group. Over a period of three years, Thai Rayon would contribute US$66 million of the total equity contribution of $110 million.
The group will invest more than $250 million in phases to convert the mill to produce dissolving-grade pulp with a capacity of 280,000 tonnes per year. Until the conversion, which is likely to happen in 2016, the mill will produce and sell paper-grade pulp. The paper-grade pulp mill should restart by October. 
Terrace Bay is considered an anchor mill because of its location and its significant consumption of residual chips produced by regional sawmills.
The transaction is subject to court approvals in Canada and other regulatory approvals in Canada, Thailand and India. It is expected to close by the end of this month.
Aditya Birla Group has a significant presence in Canada. Its major companies – AV Nackawic, AV Cell in the pulp and fibre business, Aditya Birla Novelis in the metals business, Aditya Birla Minacs in the ITES (information technology enabled services) business, and Columbian Chemicals in the carbon-black business have highly successful operations in that country. 
Aditya Birla has a 6,000-strong workforce operating in Canada, where it says it enjoys a strong relationship with the government and the community at large.