Johannesburg - Sappi Limited, the world leader in coated fine paper, announced today that it has reached an agreement to acquire 34% of Jiangxi Chenming Paper Company Limited in a joint venture with Shandong Chenming Paper Holdings Limited, together with Jiangxi Paper Industry Company Limited, Shinmoorim Paper Manufacturing Company Limited of South Korea, and the International Finance Corporation. The transaction is subject to customary regulatory approvals.
Sappi's equity contribution will be approximately US$60 million.
Jiangxi Chenming is constructing a 350,000 ton per year light-weight coated paper machine, together with a bleached thermo mechanical pulp (BTMP) mill and deinking plant and ancillary power plant and transportation infrastructure in Nanchang, the capital of Jiangxi Province which is located in southeast China. The total cost of the project is an estimated US$487 million and construction is well advanced with the mill scheduled to start delivering paper in the first half of 2005. The mill is the sole asset of the company.
The IFC has been mandated to arrange the debt financing for the project, which is without recourse to Sappi. The IFC will hold 7.5% of the equity and has also approved US$60 million in long-term debt for its own account.
Sappi will nominate the Chief Financial Officer of Jiangxi Chenming.
Shandong Chenming is a leading Chinese paper producer and has an annual paper production capacity of approximately 1.4 million tons in China. Shinmoorim is a leading Korean fine paper manufacturer with an annual paper production capacity of approximately 500,000 tons.
Commenting on the transaction, Jonathan Leslie, Chief Executive Officer of Sappi, said, "This is our first manufacturing investment in Asia and we are delighted to be teaming up with high calibre partners."
"There is a good strategic fit with the rest of our coated paper business and this investment extends our manufacturing base from a geographic and product perspective."
"Sappi will now have coated paper manufacturing capacity on four continents, further reinforcing our position as a leading global coated paper producer."
"We look forward to a close and fruitful relationship with our new partners."
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