AV Birla group set to exit Malaysia

KOLKATA: After over quarter of a century, the Aditya Birla group has decided to sever its ties with Malaysia. The group has entered into a share sale agreement for its Malaysian ventures — Pan Century Edible Oils and Pan Century Oleochemicals — to IOI Corporation Berhad for a total consideration of $175 million (Rs 800 crore).

Information trickling in suggests that the Birlas on Thursday entered into a share sale agreement with IOI Corporation, a diversified company with interests in oleochemical, speciality oils and fats, plantation and property businesses. The turnover of the group's Pan Century companies was approximately $500 million as on January 2006.

The AV Birla group had sold off another Malaysian venture, Pan Century Rubber Products, a few years ago. With the sale of Pan Century Edible Oils and Pan Century Oleochemicals, the group is now completely out of Malaysia. Incidentally, the group's Philippines venture, under the umbrella of Pan Century Surfactants with interest in fatty alcohol business, has not been divested.

An integrated player in the palm oil industry, IOI Corp owns and operates more than 1,58,000 hectares of plantation land in Malaysia, and is also engaged in the manufacture of oleochemicals and speciality oils and fats. The company is also involved in property development and investment in Malaysia.

AV Birla group chairman Kumar Mangalam Birla told ET: "The Aditya Birla group's decision to move out of this business has been driven by its limited presence in the palm value chain, which constraints both growth and competitiveness."

"Additionally, the palm oil business offers no scope for horizontally leveraging our group's business synergies. The divestment is in the best interest of all of the company's stakeholders and for its sustainable growth," Mr Birla said.

AV Birla group executive president and business head Ravi Kastia said, "This divestment will allow us to focus on core areas, including cement, metal and fibres. The two ventures have been sold on a PE multiple of 10, compared to the industry PE of 5-8."