Yuen Foong Yu acquires P&G's Chingshui plant

Dec 19, 2003 Ι Industry In-Focus Ι General Items Ι By Ben, CENS
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Taipei, Dec. 19, 2003 (CENS)--Yuen Foong Yu Paper Mfg. Co., Ltd., Taiwan's second largest manufacturer of paper products for household use, recently announced it has acquired Procter & Gamble Taiwan's Chingshui plant in Taichung County, central Taiwan.

Yuen Foong Yu acquired the P&G's plant in the name of its marketing affiliate--Homartin Co., Ltd. With the plant acquisition, Homartin will become a marketing professional with production facility.

With the acquisition of the P&G plant, Yuen Foong Yu will see annual output reach 35 million metric tons of household paper, compared to existing 28 million metric tons. In addition, the company will see market share reach 35% to compete with Kimberly-Clark Taiwan as the island's largest supplier of household paper.

Yuen Foong Yu is said to have bought land, factory, production equipment, inventories and brand of P&G's Chingshui plant. But the company wouldn't release the detail of the acquisition deal, only saying it acquired P&G's plant for lower than NT$2.2 billion (US$64.7 million at US$1:NT$34), the amount it paid to acquire Long Chen Paper Co.'s Chingshui plant four years ago.

Recently Yuen Foong Yu has applied to the Securities & Futures Commission under the Ministry of Finance for increasing paid-in capital by issuing NT$720 million (US$21.17 million) worth of new shares to support the new acquisition deal.

Chang Hsueh-chien, president of Yuen Foong Yu, said the acquisition deal will help his company strengthen domestic distribution network. The firm's 'Mayflower'-series toilet paper currently commands a 20% share of the domestic market. But the company lags behind P&G by five percentage points in the household paper market in central and southern Taiwan.

With the acquisition of the P&G Chingshui plant, Yuen Foong Yu will soon launch a two-stage consolidation engineering project by using multi-brand strategy to expand market share. After the project is completed, the company will consider merging Homartin.

Considering the global operating strategy, P&G will concentrate household paper operations in North America and Western Europe. This is why the company resolved to sell out Taiwan's household paper unit. However, P&G has promised to continually invest in other household products in Taiwan to meet the demand of domestic consumers.

At present, Yuen Foong Yu has a plant in Kunshan, Jiangsu Province of mainland China with a monthly production capacity of 2,000 metric tons of household paper. The company's mainland operations will see monthly output increase to 4,000 metric tons after its Beijing plant is inaugurated in the third quarter of next year.

In addition to acquiring P&G's plant to expand market share, the company also vows to introduce five high-value-added products per year in the next few years. The company targets to meet the goal of NT$50 billion (US$1.47 billion) in total sales within the next three years.
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