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Hansol Paper and Moorim Paper, both listed South Korean paper makers, are considering the acquisition of Dong Hae Pulp, sources close to the situation said.
Hansol Paper plans to submit a letter of intent [LOI] to buy Dong Hae Pulp, a South Korean pulp manufacturer, said a Hansol source. Meanwhile, Moorim Paper would actively consider buying Dong Hae Pulp if it managed to form a consortium with a financial investor, said Yin-Kyu Park, Moorim’s vice president.
Dong Hae Pulp announced on 9 July that it would hold a public auction to be sold. The South Korea-based pulp producer expects to receive letters of intent from potential bidders by 30 July.
Moorim wishes to receive contact from a financial investor interested in bidding for Dong Hae Pulp. It has not yet been approached by either potential partners such as financial investors or investment bankers, the VP said.
Park said the company had not determined as yet if it would submit a LOI by next Monday. He added he would tell this news wire if it did decide to submit a LOI.
The Hansol source meanwhile said the company Hansol was approached by two financial investors, both large domestic banks, who suggested the consortium for the deal. However, Hansol has not finalised a financial investor as yet as details of the strategy were still pending, including the contribution Hansol would make. “We still have a month before submitting the final bid with the strategy,” he said.
Hansol is willing to review proposals from other financial investors before finalizing its partner. Hansol has not appointed an advisor in the transaction as yet, and presumed the potential financial investor would act in an advisor role throughout the transaction, the source added.
The Hansol source said the acquisition of Dong Hae Pulp could help reduce the impact of pulp’s price fluctuation, and could eventually generate a more stable supply of material. Additionally, Dong Hae Pulp currently owns land, which could be utilized to increase its facilities.
Park said the Korean paper manufacturing industry was sluggish at the moment. Dong Hae Pulp could be unattractive to domestic paper manufacturers in some ways as it still had to import raw materials from overseas. Although the price of raw material was not high at present, it was expected to rise from next year. However, Park said Dong Hae Pulp’s real estate asset could an the attractive factor to companies within the shipbuilding industry due to its location in Ulsan, the center of South Korea’s shipbuilding community.
Park said he was told that several companies within the shipbuilding industry, as well as real estate developers, were also considering the acquisition of Dong Hae Pulp.
Dong Hae Pulp said in its announcement that potential bidders were allowed to conduct the due diligence from 7 August to 20 August, and final bids would be accepted until 3 September.
Samjung KPMG was appointed as the advisor of the target, while one of its creditors, Korea Development Bank [KDB], was acting as a co-advisor in this transaction. KDB, a government-owned bank, owns a 62.37 % stake in Dong Hae Pulp, said a KDB source.
Moorim Paper is traded at KRW 13,350 (USD 14.60) per share, giving it a total market cap of KRW 257.7bn (USD 281.9m).
Hansol Paper has a total market cap of KRW 791.8bn. Dong Hae Pulp has assets worth KRW 336.3bn and recorded sales of KRW 244.54bn in 2006. Established in 1974, Dong Hae has been in court receivership since 1998.
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