29 October 2014 – Sateri announced that it has entered into a sale and purchase agreement to sell its viscose staple fiber (“VSF”) business in China. Upon completion of the transaction, Sateri will be a leading global pure-play dissolving wood pulp producer. It will focus on further strengthening its dissolving wood pulp business, particularly in the specialty grade segment.

Explaining the rationale for the sale of Sateri’s VSF business, Sateri Chairman John J. Ying said: “The Board had evaluated and determined the transaction to be in the interests of Sateri and its Shareholders as a whole. It would not only offer the opportunity to crystallize and unlock the value of the VSF business, but also results in a focused business model with a clear value proposition and enables Sateri to concentrate its efforts on becoming a leading global player in the specialty cellulose market. We also believe that a streamlined business model will be easier for investors to understand, resulting in enhanced comparability with our listed industry peers.”

Its remaining business in Brazil, including Bahia Specialty Cellulose, is the world’s third largest dissolving wood pulp producer with an annual production capacity of 485,000 tons. In addition to its state-of-the-art production facilities, it also owns over 150,000 hectares of freehold timberland in Brazil, which is currently able to meet all the wood requirements of its dissolving wood pulp mill in Brazil.

As the world’s second largest specialty grade dissolving wood pulp producer in terms of potential production capacity, Sateri is expected to benefit in the long-term from the strategic shift from rayon grade dissolving wood pulp towards specialty grade dissolving wood pulp. Specialty grade dissolving wood pulp producers not only generally generate higher margins than rayon grade dissolving wood pulp companies due to the ultra-high purity and use in high-value end markets of their products, but also face fewer competitors in the world due to its specialized nature and high barriers to entry.

This sale and purchase transaction is subject to the approval of the independent shareholders in a general meeting in accordance with the Listing Rules of the Hong Kong Stock Exchange. Sateri plans to change its name after the transaction is completed, which is expected to be before 31 December 2014.

Download the announcement here.