LOLLIMAN Holdings has reached provisional agreement with the state-owned Hangzhou Chemical Fibre Group Co (HCFGC) to set up a US$27.2 million joint-venture company. Under the terms of the provisional agreement, the China party has agreed to inject the total assets and liabilities of Hangzhou Chemical Fibre Factory and Hangzhou Synthetic Fibre Factory into the joint-venture vehicle. Both factories are wholly owned subsidiaries of HCFGC. In exchange, Grandace Investments, a wholly owned subsidiary of Lolliman, will inject $15 million and 87 million yuan (about HK$116 million at the official rate) for a 55 per cent stake in the joint-venture company. This acquisition represents about a 28 per cent discount to the revalued net assets of the factories as at December 31 last year. Hangzhou Chemical Fibre Factory and Hangzhou Synthetic Fibre Factory were established in 1958 and 1987, respectively. The factories, which have 5,000 employees, produce mainly viscose rayon, nylon filament, polyester staple, polyester tops and related products for domestic sale and export. The same management teams will operate the factories, but will be supervised by representatives from Grandace. Net profit before tax for the two factories for the eight months to August 31 this year was about 27.5 million yuan, according to accounts reviewed by Hangzhou Certified Public Accountants. A statement issued last night said the investment by Grandace would be financed from internal resources of Lolliman.