APP China finalizes acquisition of Bohui Group; holds half of Chinese coated ivory board market

APP China, an affiliate of Asia Pulp & Paper, has completed the takeover of the Bohui Group, thus becoming the effective controlling shareholder of Shandong Bohui Paper Industry with a 48.84% stake.

The acquisition, which was finalized on Thursday, has restructured China’s virgin cartonboard sector.

APP China was already the largest producer of the grade in China, boasting a total virgin cartonboard capacity of 3.3 million tonnes/yr, mostly of coated ivory board, at its two plants in Ningbo city, Zhejiang province and at a plant in Qinzhou city, Guangxi province.

Shandong Bohui held second place, running a combined virgin cartonboard capacity of 2.9 million tonnes/yr at its Zibo mill in Shandong province and at its Dafeng mill in Jiangsu province. Most of that output is also coated ivory board.

Together the two account for about 50% of the country’s entire capacity.

That share of the market is set to increase as APP China is building a new 1.25 million tonne/yr virgin cartonboard unit at the Qinzhou mill in Guangxi, with startup expected in mid-2021.

The two companies are both engaged in uncoated woodfree (UWF) paper production as well.

Shandong Bohui fired up a 600,000 tonne/yr recycled containerboard machine at its Zibo mill in March 2019. However the unit has been rededicated to UWF production at a maximum rate of 40,000 tonnes per month for most of the past year.

APP China operates around 500,000 tonnes/yr of UWF capacity at its Suzhou mill in Jiangsu province.

This year it has also turned to UWF production at its coated woodfree paper mills in Zhenjiang, Jiangsu province and Yangpu, Hainan province, as demand for the coated grade has been hit harder by the pandemic.

APP China has committed to aiming at eliminating horizontal competition between its established properties and Shandong Bohui in the coated ivory board and UWF sectors within six years.

Regulatory success: In early January, APP China signed an agreement to buy a 100% equity interest in the Bohui Group from its founder Yang Yanliang and his wife Li Rongxiu.

The total value of the transaction was not revealed, but it included the target firm’s 385,494,958 shares (equal to 28.84% of the total outstanding shares) in the Shanghai-listed Shandong Bohui. The price was set at RMB 5.36 ($0.78) per share.

The purchase agreement was approved by Shandong Bohui’s board and shareholders, and greenlit by China’s State Administration for Market Regulation in late June after anti-trust reviews.

It got security clearance from China’s National Development and Reform Commission on Monday.

Prior to the deal, APP China already indirectly held a 20% stake in Shandong Bohui. The shares were bought by its wholly-owned subsidiary Ningbo Asia Paper Tube & Carton Box between June and November last year.

Now that APP China indirectly controls a 48.84% stake in Shandong Bohui, exceeding a 30% threshold set out by Chinese securities regulations, it is required to launch a tender for all the remaining shares.

APP emphasized that the tender, through which it is offering to buy the shares at RMB 5.36 each, is not intended to privatize Shandong Bohui.

The share price of Shandong Bohui increased from a low of approximately RMB 3.5 per share in early June last year to RMB 13.2 on Friday.

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