International Paper will buy 53.5% of APPM from parent LN Bangur group for $257 million in cash and make a public offer for an additional 21.5% of APPM’s shares for $104 million. It has also agreed to a $62 million non-compete payment to the sellers, taking the deal’s potential value to $423 million
New York: US-based International Paper (IP) will buy a key stake in India's Andhra Pradesh Paper Mills (APPM) for up to $423 million as it seeks a foothold in the booming Indian economy, reports PTI.
IP said that it would buy 53.5% of APPM from parent LN Bangur group for $257 million in cash and make a public offer for an additional 21.5% of APPM's shares for $104 million.
In addition, it has agreed to a $62 million non-compete payment to the sellers, taking the deal's potential value to $423 million.
"Once completed, the transaction will position International Paper as the first global paper and packaging company with a significant position in India's fast-growing economy," the Memphis, Tennessee-based company said in a statement.
John Faraci, chairman and chief executive of International Paper, said that APPM is "an excellent platform" for IP to expand in the Indian market.
"Both APPM and the India paper and packaging industry are growing at substantial rates, and we believe that IP's global operations and technical expertise can accelerate that growth and create value for customers as well as IP and APPM shareholders," Mr Faraci said in the statement.
APPM is a leading integrated paper manufacturer in India. Its existing management team and 2,500 employees will continue to operate the business, the statement said.
LN Bangur, executive chairman of the Bangur Group, said that IP brings a different set of resources and capabilities needed for the unit's next phase of growth.
"International Paper is the right company to take the business forward and deepen maturity of the sector in India," he said.
Shares of APPM surged by 19.99% to hit the upper limit on the Bombay Stock Exchange at Rs236.15 today after the company announced that the US-based International Paper would buy a majority stake in the Indian firm.
A similar movement was witnessed on the National Stock Exchange, with the counter hitting the upper circuit at Rs 236.95, up 20.01% from its previous close.
Brent crude futures for May delivery rose 36 cents to settle at $115.16 a barrel, bouncing off its early $113.52 low. US May crude futures rose 81 cents to end at $104.79 a barrel, snapping a string of three lower sessions. Prices reached $105 after slumping to $102.70, where crude found support just below the 20-day moving average of $102.87.