Metso Paper to acquire Shanghai firm

Posted April 24, 2006

Apr 24, 2006. /Lesprom Network/. The paper unit of Metso Corporation, Finland, a global supplier of process industry machinery and systems, has signed an agreement to buy out Shanghai Chenming Paper Machinery Co., Ltd. to tap into China's booming paper sector, SinoCast reported. The deal is subject to final approval of Chinese authorities and is expected to be completed in the second half of this year. With registered capital of CNY 70 million ($8.7 million), Shanghai Chenming was established in 2002 by Shandong Chenming Paper Holdings Ltd. and Shanghai Heavy Machinery Plant Co., Ltd. holding 61% and 39% equity, respectively. The company principally designs and manufactures pulp and paper machinery. According to the agreement, Shanghai Heavy Machinery will first transfer its stake to Shandong Chenming for up to CNY 28.22 million ($3.5 million). Then the latter will sell total assets of Shanghai Chenming to Metso Paper. Shanghai Chenming held total assets of CNY 331.6 million ($41.4 million) as at August 31, 2005. The fixed assets and liquid assets were worth CNY 220.84 million (27.55 million) and CNY 89.50 million ($11.2 million), respectively. Its liabilities cumulated at CNY 259.2 million (32.3 million) and shareholders' equity was CNY 72.33 million ($9 million). In the year from August 31, 2004 to August 30, 2005, the revenue and net profit each reached up to CNY 16.85 million ($2.1 million) and a minus CNY 16.36 million ($2 million). The transaction will enable Metso Paper to better serve Chinese customers as well as the pulp and paper industry in Asia, said Risto Hautamaki, President of Metso Paper. Metso Paper is a leading supplier of paper machinery in China market, where the paper industry is growing fast. Approximately half of the orders for new and big paper making lines come from the country. From 1998, the company has delivered four paper making machines to Shandong Chenming's mills in Shouguang, Jiangxi and Wuhan. The most recent order was for the world's biggest deinking and paper making lines, which will start operation at the end of 2006. Shandong Chenming, whose shares are publicly traded, is a China 500 company and has 13 subsidiaries in the country equipped with seven world-class paper making lines and 15 domestically advanced lines. The group holds total assets of CNY 17.7 billion ($2.2 billion) currently and has a yearly capacity of 3 million tons of paper. Under its strategy for 2006-2010, the company plans to boost top-grade paper production by installing new machinery and to increase it capacity to over 5 million tons. Meanwhile, it will develop forestry land of in excess of 1 billion square meters for supply of raw materials. Shandong Chenming will pay more attention to environmental protection for sustainable growth. Metso Corporation, based in Finland, is a leading engineering and technology corporation, and comprises four business groups, Metso Paper, Metso Minerals, Metso Automation and Metso Ventures. The group and its subsidiaries earned net sales of about EUR 4.2 billion in 2005.

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