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US-based International Paper is acquiring 53.5 percent stake in Hyderabad-based Andhra Pradesh Paper Mills Limited (APPM) from company’s promoter L.N. Bhangur Group for up to $257 million (Rs. 1,150 crore) in cash. This is the first significant domestic acquisition by a foreign paper company.
In addition, International Paper has also agreed to a $62 million (Rs.280 crore) non-compete payment to the selling shareholders. International Paper will also make an open offer to acquire up to an additional 21.5 percent of APPM for about $104 million (Rs.470 crore). With this, International Paper will hold 75 percent stake in the company.
APPM was advised by Khaitan & Co with corporate Partner Bharat Anand, tax Partner Daksha Baxi and relationship Partner Haigreve Khaitan taking lead.
Speaking with Bar & Bench Partner Bharat Anand said,
“The deal underscores the fact that it is out of interest in terms of foreign capital pursuing opportunities in India across wide spectrum of industry including paper and hopefully this trend will continue. The recent shortfall in FDI is a short term hiccup and not spectrum of a long term trend. I do think one of the interesting aspects of this deal is that although theFDI figures have shown that FDI is lower but transactions like this happening at the top end of the market will give a boost to FDI in India generally and to large corporates that India is an attractive place to invest”.
International Paper was advised by Trilegal with a team led by Managing Partner Anand Prasad.
The share purchase and public tender are expected to be completed in the third quarter of 2011.
APPM is the country’s fifth largest paper producer by revenues behind Ballarpur Induatries, JK Paper, Tamil Nadu Newsprint and the paper division of diversified firm ITC.