UNITED Fiber System (UFS) has taken a major step forward in its planned acquisition of Indonesian pulp mill, PT Kiani Kertas.

　　UFS said yesterday it has taken on the exclusive sale and purchase agreements between Kingsclere Finance Ltd and the vendors of Kiani Kertas for the acquisition of a 100 per cent interest in the mill, including a share purchase agreement and a debt instruments sale agreement.

　　Kingsclere had entered into the agreements with the owners of Kiani Kertas on Dec 5, 2005. At the time, the company had indicated that it would sell the asset to UFS.

　　'To take on the agreements is a significant step forward for UFS in acquiring Kiani Kertas,' said UFS CEO Kishore Dass. 'As in any transaction of this size, what remains for us to seal the acquisition is to fulfil a number of agreed-upon conditions precedent, SGX regulatory requirements and obtain shareholders' approval.'

　　Upon completion of the acquisition, UFS will pay US$220 million to the vendors of Kiani Kertas in the form of a combination of cash, zero coupon mandatory convertible bonds maturing 12 months after completion and promissory notes that are to be redeemed over 33 months.

　　'We have arrived at this investment decision after careful consideration. All the right business elements are in place. There is a ready market for this commodity in East Asia, especially China, and Kiani Kertas enjoys natural freight advantage to these countries from its strategic location in East Kalimantan,' Mr Dass said.

　　'The mill is also situated close to plantations and we have secured a ready supply of pulp wood as raw material for the mill. In terms of marketing the product, we intend to enter into a long-term offtake agreement with one of the world's leading pulp marketing companies.'

　　The Kiani Kertas mill is a large modern plant with an annual capacity of 525,000 tonnes. UFS said an operation management arrangement with the Kiani Kertas owners last year has enabled it to gain an insight into the mill's operation ahead of the acquisition.

　　'When the acquisition is completed and sufficient working capital is put in place, this facility will be able to operate at its rated capacity and efficiency,' said Mr Dass.

　　UFS said it is currently constructing a wood chip mill in South Kalimantan where it is also developing a new pulp mill.

　　ANZ Investment Bank is its financial adviser on the proposed acquisition.

《The Business Times》