Industry News： HK$26.1 billion acquisition! Why did Indonesian paper tycoon 'fall in love' with Vinda?

On December 15, Golden Eagle Group, owned by Indonesian tycoon Chen Jianghe, proposed to acquire tissue paper manufacturer Vinda International for up to HK$26.13 billion.

Vinda International announced on December 15 that the offeror, Isola Castle Ltd, proposed to acquire all shares of Vinda International at a price of HK$23.50 per share. The offer price represented a 13.53% premium to the closing price of HK$20.7 on the 14th. Assuming the offer is fully accepted, the maximum total amount payable by the offeror will be HK$26.13 billion (approximately RMB 23.8 billion).

According to the announcement, Vinda International’s shares involved in the tender offer are mainly 621 million shares held by major shareholder Essity and 253 million shares held by founder Li Chaowang. The shareholding ratios of the above two parties are 51.59% and 21.04% respectively. , accounting for 72.62% of the total share capital of Vinda International.

This time Isola Castle Ltd, which took over Vinda International, was backed by Indonesian Chinese tycoon Chen Jianghe. Data show that Asia Pacific Resources Group is one of the world's largest pulp and paper products manufacturers and currently directly employs approximately 9,000 employees. The company is held by the family trust of Indonesian businessman Chen Jianghe and is also a core subsidiary of Golden Eagle Group, one of Indonesia's important consortiums.

01

Why sell?

Vinda and Essity are drifting apart, and the ownership of the 'Depot' brand has caused controversy

According to information on the official website, Vinda Group was founded in 1985. It started with the household paper business and gradually expanded to multiple businesses such as household paper, feminine care, baby care and household cleaning and hygiene solutions. Vinda International was listed on the Main Board of the Hong Kong Stock Exchange in 2007.

Vinda's predecessor was Xinhui Daily Necessities Factory, which was formed in 1985 by the merger of three small local factories. Its initial business did not include household paper. As a result, Li Chaowang, who was the factory director at the time, began to reposition the new factory and put the factory on the development track of high-end 'tissue paper'. After a series of efforts, in 2007, what was once a small factory in Xinhui, Guangdong, finally landed on the Hong Kong Stock Exchange and transformed into a listed company on the Hong Kong stock market.

The relationship between Essity and Vinda International can be traced back to 2007, before Vinda International was listed. At that time, Essity’s parent company SCA had taken a stake in Vinda International. Through two shareholding increases in 2008 and 2012, SCA became the second largest shareholder of Vinda International.

After Essity became the majority shareholder of Vinda International, Vinda International acquired the equity and related Chinese assets of three companies owned by Essity, and also acquired brands such as 'Tempo Debao', 'Bao Daren', 'Duokang', and 'Tian Ning' Non-exclusive patent rights to use products and exclusive rights to use technology. Among them, the term of the 'Tempo Debao' brand license is permanent use.

Source: Vinda Weibo

However, affected by the overall industry environment, the operating profits of many leading domestic tissue paper companies have continued to decline in recent years, and Vinda International is no exception. This has also become an important factor in Essity's pursuit of selling Vinda International. As an investment target, Vinda International's performance may no longer satisfy Essity.

From the perspective of Vinda International itself, the performance decline in the past two years has been very obvious. In the first half of this year, the company's revenue increased by 10.1% to HK$10.07 billion, but its net profit fell by 81.1% to HK$121 million, and its gross profit also fell by 18.5% to HK$2.527 billion. Prior to this, Vinda International’s net profit had declined for two consecutive years. The financial report shows that in 2022, Vinda International's net profit fell by 56.91%; in 2021, its net profit fell by 12.59%.

With Essity's stock clearance and withdrawal, whether Vinda International can continue to enjoy the permanent exclusive rights to use Essity's tissue brand 'Tempo' has become the focus of market attention.

In this announcement, Vinda International mentioned that according to the terms of the franchise agreement, if the total shareholding ratio of Vinda International held by all Essity member companies drops below 50%, Essity has the right to issue Vinda International three years in advance. Notice to terminate certain concessions granted under the concession agreement.

The announcement also mentioned that according to the new franchise agreement, starting from the third anniversary of the termination notice date, Vinda International must pay relevant royalties for the franchise rights to use global brands and Depot brands respectively. This also means that Vinda International still faces certain uncertainties in its future operations.

02

Why acquisition?

The new owner has already held shares and is optimistic about the development of the household paper business

In fact, Golden Eagle Group has already set its sights on Vinda International.According to the announcement, a company named Beaumont acquired 59.81 million shares of Vinda International through over-the-counter transactions as early as September 25 at a price of HK$16.14 per share. The company then purchased Vinda International shares in multiple time intervals from September 26 to September 29, October 3 to October 31, and November 1 to November 8.

Currently, the company holds a total of 92.5381 million Vinda International shares, accounting for 7.69%. The sole shareholder of this company is Belinda Tanoto, who is Chen Jianghe’s daughter.

Regarding Golden Eagle Group’s acquisition, some practitioners believe that there are already clues. Although Golden Eagle Group’s business focus in the past was mainly in the fields of pulp and office paper, in recent years, its intention of cross-border development has been quite obvious, and it has made frequent moves in the household paper sector. Prior to the announcement of the acquisition of Vinda International, relevant production capacity layout had been carried out. Chen Jianghe, chairman of the board of directors of Golden Eagle Group, has also stated on many occasions that he is optimistic about the development potential of household paper in the Chinese market.

It is worth mentioning that Vinda International’s announcement also mentioned that if Asia Pacific Resources Group acquires no less than 90% of the offered shares within the next four months, Asia Pacific Resources Group will compulsorily acquire the remaining shares. After the completion of the compulsory acquisition, Vinda International will become its wholly-owned subsidiary and will apply to revoke its listing status on the Stock Exchange.

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