Vinda acquires SCA brands for China expansion

Swedish hygiene firm's mainland, HK and Macau operations acquired for HK$1.14b

PUBLISHED : Saturday, 19 July, 2014, 1:58am
UPDATED : Saturday, 19 July, 2014, 2:08am

Top Chinese tissue maker Vinda International rose by as much as 6 per cent in yesterday's trading following the integration with its biggest shareholder, Swedish hygiene products firm SCA.

Vinda will acquire SCA's commercial operations on the mainland, Hong Kong and Macau for HK$1.14 billion, according to an agreement.

Vinda will also obtain the right to use SCA brand Tempo in China on a royalty-free basis and acquire the trademarks of Dr. P and Sealer from SCA for use in China.

Shares of the company rose 6 per cent before closing up 3.45 per cent at HK$11.98.

A research report by Nomura said that in the short term the integration will support Vinda's stock but in the medium term, the benefits will be limited as the brands acquired from SCA are not widely known on the mainland. Nomura set a target price of HK$9 for Vinda.

Vinda said it expects to gain a larger market share by managing brands "with different positioning and market segmentation strategies".

"Leveraging the strengths of both Vinda and SCA, we are confident that the new business integration would enable Vinda Group to gain a larger market share for the hygiene product segments," said Vinda chief executive Donna Zhang.

Yesterday the company reported that revenue in the first six months increased 11.1 per cent from a year earlier to HK$3.68 billion, but net profit dropped 21.8 per cent to HK$222.2 million.

"Added production capacity in the industry exceeded the increment in consumption, temporarily disturbing the balance between production and demand in the industry cycle," the company said in a filing to the Hong Kong stock exchange.

"It was inevitable that the group had to face such a market situation, and a way to cope with it is to reinforce market share by stepping up sales and marketing efforts."

The tissue paper market on the mainland is highly fragmented, with many local brands jostling for space with international companies including Kimberly-Clark, Johnson & Johnson and Kao, which have also established their own production facilities in China. Vinda says it expects competition to remain intense in the next year.