Lee & Man Paper (2314) said it disposed the entire interest in USLM Acquisition, Inc. and HKLM Acquisition, Inc, (”USLM & HKLM”) at a consideration of HK$200 million. USLM & HKLM were paper pulp manufacturers in the USA. The gain from the transaction was estimated at about HK$1 million and the consideration was decided based on the net book value of the assets of USLM & HKLM. The transaction was completed on 15 October.
Raymond Lee, CEO of Lee & Man Paper, said, “The profit margins of USLM & HKLM have been dwindling significantly because of the continuing increasingly production cost in USA. With what’s best for long-term development of the group in mind and the pulp line in Chongqing plant has started production, we decided it is the right time to dispose of the business. The move has freed resources for us to concentrate on growing our containerboard and pulp businesses in China with lower production costs.”
“Worthy Pick,” the concern that purchased the pulp mill (USLM & HKLM), is a shell holding company based in the Virgin Islands with links to Lee and Man. Because of the downturn in the pulp industry and because of the recent credit crisis, Lee and Man needed cash fast - hence the sale. Sources say that because Worthy Pick has inside links to Lee and Man, they will sell it back to L&M when the global pulp market improves, perhaps three to six months from now. Stay tuned.
"Worthy Pick" -- listed as incorporated in the British Virgin Islands on Jan. 10, 2008 -- is believed to be in the paper manufacturing business, according to the Hong Kong exchange filing.
Why would they invest in a Pulp Mill with the market so bleak?
SINGAPORE, Oct. 20, 2008 (RISI) - The Asian pulp market remains in freefall, with no sign of the bottom in sight. Market players are at sixes and sevens, unsure when the slide may end.
Contract prices for October orders are still under negotiation in the region. But suppliers have offered to slash them by $70/tonne for bleached softwood and hardwood kraft pulps.
They have not yet decided what prices to offer for unbleached softwood kraft pulp or bleached chemi-thermomechanical pulp grades this month. But these are expected to fall as well.
Regular buyers attributed the weak pulp conditions to stagnant paper and board demand in the region.