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Topics Sustainability, Materials, Recycling, Materials Suppliers, Oceania, China
Plans by Chinese polypropylene recycler Novarise Renewable Resources International Ltd. to take itself private have hit a snag, with a management-led buyout group missing an important July 31 funding deadline and independent shareholders now saying they may cancel the deal.
Novarise Chairman Qingyue Su and a buyout group have been trying for more than a year to orchestrate an A$24.4 million (US$22.7 million) buyout that would delist the company, which claims it is China’s largest maker of recycled PP filament yarn, from the Australian Stock Exchange.
But Su and his group have missed several deadlines since proposing the deal in July 2013, prompting the company’s independent directors to issue a statement Aug. 1 saying that they would try to “determine whether the privatization of Novarise may proceed by way of alternative means or methods.”
“If this consultation process does not result in agreement on an alternative proposal before Aug. 18, 2014, it is the current intention of Novarise’s independent directors to terminate the implementation agreement and the capital reduction,” they said.
The privatization proposal has had the backing of both Su and the independent directors, who have argued that Novarise has not been successful as it had hoped in raising money in the public capital markets, and that the costs of complying with the listing requirements were a burden for the relatively small firm.
Su and entities he controls already own about 75 percent of Novarise’s 415 million shares, and want to buy the remaining 25 percent for A$24.4 million.
The company is based in Quanzhou, Fujian province, and has all of its production there for recycling PP into fiber-grade pellets. It has been traded on the Australian exchange since 2010.
Novarise saw its sales rise 10 percent to A$90.8 million (US$84.4 million) last year but profit was cut in half, to A$9.06 million (US$8.44 million).
The company blamed the falling profit on supply restrictions from China’s “Green Fence” crackdown on imports in the first half of 2013, and on higher costs associated with delays in opening a new, much larger factory. That facility will have production capacity of 80,000 tons when it is fully operational, which the company said it expects to happen later this year.