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Orient Paper Signs Letter of Intent to Merge with Lingxian Taihua Pulp & Paper

Thursday, June 19, 2008

Press release from the issuing company

NEW YORK & HEBEI, China June 18, 2008--Orient Paper Inc., a large paper milling manufacturer based in the Hebei province of China (the "Company"), announced today that the Company has signed a Letter of Intent to merge with Lingxian Taihua Pulp & Paper Ltd, Co., the backbone paper milling enterprise in Shandong Province and the economic pillar enterprise in Dezhou City. The main products are: flat paperboard, roll paper and newspaper. The company possesses 18 paper production lines which are advanced in the nation, and also owns some facilities that are under construction now: the most advanced wheat straw wet preparation 150 t / d with a steam and bleach pulp making centre in the nation, DCS control system, and improved environmental protection facilities for alkali recycling.

The management of Orient Paper stated, "According to the paper milling development planning in Shandong Province, Lingxian Taihua Pulp & Paper Ltd, Co. is the pulp production center in the northwest of Shandong Province. The profit margin of pulp is larger than the finished raw paper. If the proposed merger can be consummated successfully, it could provide our wholly-owned subsidiary, Hebei Baoding Orient Paper Milling Co, Ltd., with raw material directly, thereby optimizing the industrial organizational structure of the listed company and realizing economies of scale and cost efficiency."

Lingxian Taihua Pulp & Paper Ltd, Co. has received the "Honor of outstanding contributions to the economic development" in 2002-2006. Presently, the pulp production capacity has reached 100,000 tons per year and paper milling capacity reached 150,000 tons per year, which ranks number six in the province as the pulp production capacity. The books printing paper was assessed as "international level." by the Technical Supervision Office in Shandong Province. The products sell well throughout 21 provinces and were exported to totally more than ten countries and areas, such as Taiwan, North Korea, Southeast Asia and Mid-east, etc. Machine made paper comprises 80% of the annual sales and 65% of the raw paper sales is in the domestic market while the remaining 35% of the sales is export. At the end of 2007, the total assets of the Company were $98 million with net assets of $67 million. The annual sales were $89 million and annual net income was $8.7 million. The gross profit margin was 15% and net profit margin was 10%. The profitability of the company remains stable.




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