Malaysian Group to Get Out of Paper Business
Malaysia's Union Paper Holdings Bhd (Kuala Lampur) is changing its name and getting out of the paper manufacturing and trading business. After suffering losses for five consecutive years, the company has launched a restructuring program that will include the sell of its tissue and paper mill subsidiary, Union Paper Industries (UPI), and its related trading operation, Union Paper Trading (UPT).
Through acquisitions, Union Paper Holdings will change its core business to plantations and civil engineering, and operate under the new name of TH Group. As a result, company officials say they expect to become profitable in the very near future.
In a circular to shareholders recommending support for the restructuring, the company said it expected a consolidated profit after tax and minority interests of RM 22.89 million ($6.02 million) for the year ending March 1999, compared with an expected RM 8.32 million ($2.2 million) consolidated loss if the proposed restructuring was not undertaken.
Since its financial year ended Aug. 31, 1994, the company has been incurring losses. For 1998, its unaudited pretax loss had grown to RM 10 million. The group is pessimistic about its current core activities, and management expects the group would continue to take losses if it stayed in the paper business area, due to "difficult trading conditions" now and in the foreseeable future.
The company's proposed acquisition involves the entire stake in Tung Hup Enterprise Sdn Bhd, Tracpower Sdn Bhd, and Syarikat Tung Hup Plantation Sdn Bhd (STHP), and a 25% equity interest in Marceda Corp Sdn Bhd. These acquisitions and the disposal of UPI and UPT are expected to be completed next month.
After the restructuring, the company's core activities will be the cultivation of oil palm and cocoa, operation of a crude palm oil mill, and the provision of contracting services in timber extraction, plantation development, and civil infrastructure works.
The price of the acquisitions in about RM 333.64 million ($87.8 million), which will be raised by the issuance of new company shares at a revised price of RM 1 each. The company will issue 226.23 million shares for Tung Hup and 16.65 million shares for Tracpower, while 4.38 million shares will be allotted to STHP.
The company proposes to sell its entire interest in UPI to Queeline Sdn Bhd for RM 1. The price for UPI takes into account its net current liabilities and a deficiency in shareholders' funds of about RM 55.52 million ($14.6 million) and RM 7.99 million ($2.1 million), respectively, as of Aug. 31, 1997.
The company also has proposed an employees share option scheme (ESOS), and plans to increase its authorized capital to RM 500 million from RM 20 million. About 35.10 million shares will be issued pursuant to the proposed ESOS, and together with the 333.64 million shares issued for the group's acquisitions, the company's paid-up capital will rise to about RM 386 million from RM 17.36 million currently.