International Paper has also agreed to pay INR 280 crore for a non-compete payment to the sellers. APPM ranks as the fifth largest paper producing company in India. The top four are: Ballarpur Industries, JK Paper, Tamil Nadu Newsprint and the paper division of diversified firm ITC.
APPM went up by 19.99% after opening today (March 30, 2011), it is trading at INR 236. A rough calculation to get an approximate value of the promoter at INR 542 per share, and this does not include the non-compete fees paid by International Paper.
This is certainly high valuation, as one investment expert said "It (AAPM) is quoting at about 99,000 per tonne kind of a valuation vis-À-vis Ballarpur Paper valuation of around 55,000-56,000 per tonne." Higher valuation is not surprising in cases where entire stake is bought from promoters, as in the case of APPM. Also valuation of the wholly owned subsidiaries should be considered.
As per the regulations, International Paper will bring a public offer to acquire an additional 21.5% of the outstanding shares. These outstanding shares of APPM has been valued at approximately INR 470 crore. If this open offer is successful, International Paper will have control of 75% stake of APPM, the maximum allowed in a listed firm.
It is expected that the share transfer and public offer should be completed by in the next 2 or 3 quarters after receiving the regulatory approval.
With the completion of this deal, International Paper will be the first global company with a significant presence in the paper and packaging industry of India. Most of the international companies have limited presence, with sales offices with imported products.
John Faraci, chairman and chief executive officer of International Paper, said, "APPM is an established and highly respected company in India, and is an excellent platform for International Paper to grow with the Indian paper and packaging markets."
"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," said LN Bangur, executive chairman, Bangur Group.
APPM owns two paper mills and their combined capacity stands at approximately 250,000 metric tonnes annually. All its employees are expected to be retained. Current employees will be supported with leadership and technical support from International Paper.
Also with this deal, all stocks in the paper industry will find new level of investors among the investors especially the day traders and momentum investors.