Wait and watch

Mumbai, April 1: The Thapars have put on hold their plans for a $330-million flotation of BILT Paper Plc on the London Stock Exchange.

The decision was triggered by US-based International Paper’s surprise $257-million buyout on March 29 of a majority stake in Bangur-owned Andhra Pradesh Paper Mills.

International Paper has also offered to acquire up to 21.5 per cent from minority shareholders of Andhra Paper, raising the potential cost of the buyout to $423 million.

The Andhra Paper deal has convinced Ballarpur Industries — which holds a 79.5 per cent stake in BILT Paper through its wholly owned subsidiary Ballarpur International Holdings BV (BIH) — to press for a higher valuation for its paper venture.

Ballarpur Industries is India’s largest paper maker, while Andhra Paper is ranked third in the pecking order.

“It is important to study the impact of this acquisition valuation over the next few months, and the potential re-rating possibilities, against the IPO valuation in London at this time which is dependent on the current UK IPO market sentiments,” Ballarpur Industries, India’s largest paper maker, said in a statement on Friday. Ballarpur will reconsider plans to list its BILT Paper unit in the next two to three months.

The International Paper deal came at a significant premium to the prevailing market price of Andhra Paper. This led to a re-rating of the paper industry with most of the peer stocks attracting huge investor interest on the day after the buyout. On March 22, BILT Paper Plc had announced its intention to trade on the main market of the London Stock Exchange.

“There was an acquisition announcement this week by International Paper in the Indian market which the company believes will set a benchmark for the valuation of paper companies in India and may possibly re-rate the Indian paper industry,” Ballarpur Industries said today in a filing with the stock exchanges.

BILT Paper Plc had planned to use the proceeds from the stock flotation to finance around $170 million of capital expansion and pare its debt.

BILT, which is involved in all stages of paper making from tree plantations to distribution, has increased its annual paper production capacity by nearly 90 per cent over the last two years and plans to grow it another 50 per cent by the end of 2014.

Meanwhile, the open offer by International Paper to acquire 21.5 per cent of Andhra Paper will commence on May 26 and close on June 14.

The offer for additional 85.67 lakh shares will come at a price of Rs 544.20 per share.

After the announcement, Andhra Paper shares surged nearly 10 per cent to Rs 311.65 on the bourses.