Bottled water maker China Water & Drinks Inc. has acquired a sizable stake in the parent company of Hong Kong plastic bottle molder Guozhu Holdings Ltd., a move it said will help shore up its supply chain and cut costs.
China Water said Sept. 6 it paid US$9 million in cash and additional stock compensation to acquire 48 percent of Guozhu's parent, Hutton Holdings Corp. of Salt Lake City, from two shareholders.
The acquisition would add Guozhu's operations in mold making, PET packaging and bottle making to China Water's network of five water purification and plastic bottle production facilities in China, the companies said in filings with the U.S. Securities and Exchange Commission.
``The acquisition of Hutton is our first step in our plan to vertically integrate our operations, and secures a stable and reliable supply source,'' said Xing Hua Chen, chief executive officer of China Water. ``This strategic ownership will enhance our bottled water production technology, which should reduce our costs over the long run.''
However, China Water said it will not manage directly or take control of the operations of Hutton. China Water is based in Shenzhen.
The purchase is part of what the company said will be an ``aggressive'' acquisition plan. It said in recent SEC filings that it raised US$30 million from investors in July, and that it plans to purchase other bottled water firms and expand its factories in Changchun and Guangzhou.
The company said in SEC filings that China's bottled water market grew 16.5 percent a year from 2000-05, in the face of widespread concerns about water quality, and said China has ``no short-term plan for improving the availability of water resources and the quality of [the] municipal water supply system.''
About 300 million people in China are without access to potable water, the company said.
Guozhu's customers in China include Coca Cola Co., Groupe Danone SA and Chinese beverage giant Hangzhou Wahaha Group Co. Ltd., China Water said.
Guozhu had sales of US$30.7 million and profit of US$7.5 million for the year ended Dec. 31, while China Water reported first-half 2007 sales of US$24.4 million and profit of US$7.2 million.
China Water said it sells bottled water in 11 Chinese provinces and supplies purified water to Coca Cola and other companies.