The Aditya Birla Group signs a framework agreement to acquire St Anne Nackawic Pulp Mill, Canada

The Aditya Birla Group and Tembec (Canada) have signed a framework agreement with the province of New Brunswick for the acquisition of the St. Anne Nackawic Pulp Mill. The acquisition will be made through a joint venture between the Aditya Birla Group and Tembec in which Aditya Birla Group will be the majority equity holder. Operations would be managed jointly by the Aditya Birla Group and Tembec.

Mr Kumar Mangalam Birla, the Aditya Birla Group's chairman stated that "this move is consistent with our group's strategy of reinforcing our competitive edge in the cellulosic man-made fibre sector, through setting up fully integrated operations, virtually from the `forest to the fabric' stage.

"The group's vision in the Viscose Staple Fibre (VSF) business is to maintain its global leadership in this segment. To do so entailed securing access to good quality pulp - vital for its fibre business. This agreement is a step up in this direction", added Mr Birla.

"We are excited by the potential of not only expanding our position in dissolving pulps, but also increasing our presence in the province of New Brunswick," added Mr Shailendra K Jain, Director, Fibre and Pulp Business. "Our positive experience in Atholville has been based on a solid partnership with Tembec, a well trained and dedicated team in the mill and a positive and supportive business climate here in New Brunswick. We see the same potential for the Nackawic mill and look forward to working with the province, the community and the workforce to c;reate a stable and competitive site."

Work would begin soon after closing of the transaction of the conversion of the mill to allow it a product mix of paper, dissolving and specialty pulps. The mill's current capacity is 2.8 lakh tpa of paper grade pulp. After conversion it would be able to produce 1.5 lakh tpa of dissolving grade pulp.

"This accelerated ability to be able move the mill away from the vagaeries of the hardwood pulp business and into these other grades made it possible for Tembec to take another look at this opportunity, " said Mr Frank Dottori, President and CEO of Tembec.

Tembec's initial decision as the sole acquirer was not to pursue the St. Anne acquisition and this was announced on the 8 March 2005. The presence and support of the Aditya Birla Group as a partner in this facility was the key in this change of position on how Tembec views the restart of the mill, said Mr Dottori.

The framework agreement signed provides the guidelines for the development of the final agreements and working relationships. It is expected that these details will be worked out in the next several weeks and that site preparation, plant rehabilitation and training can be completed by early September to allow a restart of the mill by October or November.