Poh Lian gets Indonesian forests

Poh Lian gets Indonesian forests

Mantik Kusjanto, Reuters, Singapore

Singapore construction company Poh Lian Holdings took control of a large forestry asset in Indonesia on Monday and said it hopes to return to profit with the new venture.

Poh Lian shareholders almost unanimously approved handing 78 percent of the company to a group of Finnish, Swedish and Indonesian investors in return for the investors injecting into the company a 268,000 hectare forest concession and a pulp mill license in South Kalimantan, Indonesia, worth US$330 million.

The complexity of the deal meant it took two years to complete from its proposal in December 2000. Poh Lian suffered a net loss of S$7.27 million ($4 million) last year, hit by a downturn in the construction industry.

"It has been a long process," Anders Lindman, the new chairman and chief executive officer of Poh Lian, told Reuters.

"Now we have to pull up our socks and try to organize the financing very quickly and try to build the pulp mill as quick a possible," said Lindman, who is from Finland.

Asked about the possibility of Poh Lian returning to the black this year, he said: "I don't see any reason why it wouldn't."

Poh Lian, with a market value of S$110 million, would issue 1.41 billion new shares at S$0.32 each and pay US$20.3 million in cash over two years to the investors, led by Textronix Industries, valuing the transaction at around $272 million.

The majority shareholders of Textronix also owned 25 percent of Sweden's unlisted CellMark Holding AB, one of the world's largest marketers of forest products.

Following the approval, Poh Lian shares dipped 1.5 cents to S$0.265 by 0925 GMT (4.25 Jakarta time) in moderate trade of 8.7 million shares.

The stock has run up ahead of the voting and outperformed the broader market by 28 percent since the start of the year.

Textronix had agreed to sell 180 million Poh Lian shares, or 10.5 percent of the enlarged share capital, after the takeover to comply with the Singapore Exchange regulation that a minimum of 25 percent of the share capital is with public shareholders.

Poh Lian shareholders agreed to waive their rights to receive a general takeover offer by the investors group and for the firm to be called United Fiber System Ltd to reflect its business.

Lindman said the firm was working on a placement, but declined to give further details.

"We are in negotiation about the placement. We have to sell it to institutional investors," he said.

Poh Lian had said tough competition and a slowdown in the construction industry made it necessary to search for new ways to raise shareholder value.

The Tektronix group had given a S$20 million profit warranty for the first year of operation as a forestry firm, while a US$600 million pulp plant was being set up.

Poh Lian's revenues -- aside from its ongoing construction business -- would come from selling pulp woods or trees to pulp mills from its vast forestry assets in Kalimantan.

"Poh Lian can achieve positive cashflows by selling woods while the mill is being built," Lindman said.

"For the first time Singapore is getting a natural resources company...It's a win-win situation. Singapore gains a forest area which is four times the size of Singapore and Indonesia gains a billion (Singapore) dollar investment," he said.