Orient Packaging to Acquire Fine Paper Operations in China

Orient Packaging Holdings Ltd. has entered into a letter of intent to acquire 100% of the shares of Main China Ltd., a British Virgin Islands special purpose company whose sole asset is a 60% interest in the Shandong Weifang Paper Co. Shandong is a sino foreign joint venture that has acquired all of the fine (art) paper production facilities of Weifang Hengcredit Paper Ind (Group) Co. of Weifang, Shandong Province in China.

With a current annual production of 22,000 m.t. of art paper, Weifang is one of the leading suppliers of high-quality art paper for magazines, journals, and other `glossy' publications in China. The company also produces 8,000 m.t. of tissue paper for use in disposable napkins and Kleenex-type tissues. Proforma unaudited sales for 1997 for Weifang were approximately $20 million, with a net profit of approximately $2 million.

Under the terms of the transaction, Orient has agreed to contribute an additional $2 million to Shandong during the next 12 months to expand its art paper production capacity. This expansion is expected to increase net profits of the joint venture by 75%, to $3.5 million.

In announcing the acquisition, Nils Ollquist, president of Orient said that "Shandong is one of the best managed paper manufacturing businesses in China, and the acquisition of high quality fine paper production for the publishing industry complements our existing brand name paper packaging business. Shandong has just commissioned a 40,000 m.t./yr, state-of-the-art bleached pulp mill, for which Orient will retain right of first refusal to include in the joint venture, at some future date, on an operating lease basis. I am confident of the tremendous potential that Shandong will provide to our business."

Ollquist added that "in addition to this joint venture, the Shandong authorities are working with Orient management to identify additional acquisitions of high quality paper businesses in the province and have committed to support further privatizations in conjunction with Orient as part of the ongoing process of restructuring of the industrial base in China."

Orient Packaging Holdings Ltd., with headquarters in Hong Kong, is a manufacturer and supplier of paper-based packaging materials predominantly for the food, beverage, and cosmetics industries in the People's Republic of China.