APP China subsidiary becomes second largest Shandong Bohui shareholder

Ningbo Asia Paper Tube & Carton Box, a wholly-owned subsidiary of APP China, acquired a 5% stake in Shandong Bohui Paper Industry as of June 20.

The corrugated packaging enterprise has revealed it plans to increase its holdings in the Shanghai-listed company to 6-15% in the next 12 months.

Ningbo Asia Paper Tube & Carton Box completed the purchase of 66,842,226 shares in Shandong Bohui, equal to 5% of its total outstanding shares, via block trades at a price of RMB 3.74 ($0.54) per share and via public bids at RMB 3.35-4.05 per share over the present quarter.

Following the transactions, which cost an estimated RMB 250 million in total, the APP China subsidiary is the second largest shareholder of Shandong Bohui after the Bohui Group, which holds a 28.84% stake.

In late April, presumably alerted by APP China’s moves on the stock market, Shandong Bohui’s board of directors proposed an amendment to the terms of board elections, banning the use of cumulative voting unless there is a shareholder controlling more than 30% of the total shares.

The amended terms, which were passed at a shareholders’ meeting in mid-May, will effectively bar APP China from appointing a director on Shandong Bohui’s decision-making body, at least in the short term.

According to Fastmarkets RISI’s Mill Asset Database, APP China and Shandong Bohui are the top two producers of virgin fiber-based cartonboard in China.

The former boasts a total virgin cartonboard capacity of 3.2 million tonnes/yr at its two plants in Ningbo city, Zhejiang province and at a plant in Qinzhou city, Guangxi province.

The latter runs a combined virgin cartonboard capacity of 1.7 million tonnes/yr at its Zibo mill in Shandong province and at its Dafeng mill in Jiangsu province.

It is also gearing up to start a new BM with a capacity of more than 1 million tonnes/yr at the Dafeng mill.

Together the two companies account for about 40% of the country’s entire virgin cartonboard capacity.

In early 2018, rumors emerged that APP China was interested in taking over the Dafeng mill from Shandong Bohui to strengthen its leading position in the virgin cartonboard section, though neither of the parties publicly commented on the matter.

At that time, almost 80% of Shandong Bohui’s paper and board (P&B) capacity was virgin cartonboard, mostly coated ivory board.

Prices for the grade sunk by around RMB 1,500/tonne in the second quarter of 2018 and remained soft for the rest of the year due to severe oversupply.

Hit hard by the price erosion, Shandong Bohui’s net profit for the year ended December 31 plunged 70.11% from 2017 to RMB 255.9 million.

The company has been aggressively expanding in other P&B sectors since the beginning of 2019.

It fired up two new recycled containerboard machines with a combined capacity of more than 1 million tonnes/yr at the Zibo mill in the first half of the year.

It is also building a new 600,000 tonne/yr uncoated fine paper machine at the same site, with startup expected next year.