Just a couple of follow-up thoughts on the Times-Standard‘s major scoopage this morning on the sale of Evergreen Pulp …
Here’s the disclosure form (.pdf) on the sale from the Hong Kong stock exchange. Note the payment schedule. Someone’s getting what seems like a pretty handsome deal. They’re putting about $2.5 million US down, then paying ~$4 million in six quarterly installments beginning at the end of the year, for a total of about $28.7 million.
And what is that buying, exactly? The purchaser isn’t buying the mill itself. It’s buying two Lee & Man subsidiaries — USLM Acquisition, Inc. and HKLM Acquisition, Inc. (One would guess they stand for “U.S. Lee & Man” and “Hong Kong Lee & Man.”) What other assets do those subsidiaries own? We don’t know at this point, but they are headquartered in Colorado, not here.
More to come, for sure. But don’t miss the T-S‘s excellent write-up this morning on the mill’s general economic problems, which have spun out to its suppliers over recent months.
Oct. 17, 2008 at 12:35 pm
40M in investment upgrades, not a bad pick up for someone. Unless that 40M was in part tax payers cash for the Samoa economic development zone. Whos getting what, and what about the monies owed to local companies?
Oct. 17, 2008 at 10:35 pm
QuamNews: L&M Paper Sells US Paper Pulp Making Biz at HK$200 Mln
17 Oct 2008
QuamNews
Lee & Man Paper (2314) said it disposed the entire interest in USLM Acquisition, Inc. and HKLM Acquisition, Inc, (”USLM & HKLM”) at a consideration of HK$200 million.
USLM & HKLM were paper pulp manufacturers in the USA. The gain from the transaction was estimated at about HK$1 million and the consideration was decided based on the net book value of the assets of USLM & HKLM. The transaction was completed on 15 October.
Raymond Lee, CEO of Lee & Man Paper, said, “The profit margins of USLM & HKLM have been dwindling significantly because of the continuing increasingly production cost in USA. With what’s best for long-term development of the group in mind and the pulp line in Chongqing plant has started production, we decided it is the right time to dispose of the business. The move has freed resources for us to concentrate on growing our containerboard and pulp businesses in China with lower production costs.”
Oct. 19, 2008 at 5:11 pm
an anonymous tip from someone with good infomation:
“Worthy Pick,” the concern that purchased the pulp mill (USLM & HKLM), is a shell holding company based in the Virgin Islands with links to Lee and Man. Because of the downturn in the pulp industry and because of the recent credit crisis, Lee and Man needed cash fast – hence the sale. Sources say that because Worthy Pick has inside links to Lee and Man, they will sell it back to L&M when the global pulp market improves, perhaps three to six months from now. Stay tuned.
Without a doubt, the Chinese have had the mill cared for, upgraded and brought into environmental compliance. Nobody’s about to abandon a future cash machine.
Oct. 19, 2008 at 6:07 pm
as soon as our economy is back on track the Chinese will need lots of boxes again to ship stuff to us in.
Oct. 19, 2008 at 6:10 pm
Anon, what you heard just doesn’t make any sense. Raising cash is one thing, closing an operating facility is quite another.
Last month Lee and Man raised $58M in a stock offering.
According to the Lee and Man disclosure, Evergreen lost $5.4M in 2007 and $400,000 last year so it was marginal but improving. Obviously, the financial crisis has changed the outlook.
All Lee and Man got at closing was $2M. That’s not much and I doubt they can borrow against the future payments. So it seems to me the deal wasn’t about raising cash, it was about stopping negative cash flow by quickly closing and selling a nonperforming property.
The buyer, “Worthy Pick” was incorporated in January 2008, probably as a speculative venture to buy and sell distressed properties. The name “Worthy Pick” sounds like an expression market analysts use to describe a stock recommendation. It might be wishful thinking on the part of its principals, who are likely market speculators. Their names are not public.
I doubt “Worthy Pick” is in the papermaking business. I do agree that Evergreen will be resold if the pulp market improves. I doubt it will reopen under the current ownership.
Oct. 21, 2008 at 8:12 am
its about extracting wealth from a company and splitting the company off to protect you from having to pay its bills from your other investments. ….And if things go sour you can divest it quicker as a single entity. Look at palco/scopac, Green diamond/simpson (mills now called ca redwood company).
Oct. 22, 2008 at 4:25 pm
is it possible to make that thing haveno smell. I was sitting on my balcony in Fortuna and I noticed a reddish-dusty layer in the atmosphere like pollution you see in South.Cal. Does it smell like money to you? Smells like shit to me.
Oct. 23, 2008 at 6:07 pm
firewood smoke. its that time of year.