SHANTOU, CHINA (Jan. 10, 12:10 p.m. ET) — A Chinese manufacturer of model cars is acquiring the majority share of a local polystyrene plant owned by South Korea's SK Networks, a move that the company said will help achieve upstream vertical integration.
Xinghui Auto Model Co. Ltd. of Shantou, Guangdong province aims to obtain a 67.4 percent stake in SK Networks PS (Shantou) Co. Ltd. for 215.6 million yuan ($34.1 million) in cash, Xinghui said in a filing. SKN will hold the remaining share. The two parties signed an agreement on Dec 30.
SKN Shantou runs three production lines that total 150,000 metric tons of GPPS and HIPS in annual capacity, serving the toy, stationery and home appliances industries. It reported net profit of 16.5 million yuan ($2.6 million) and sales of 1.1 billion yuan ($174.2 million) during the first 11 months of 2011.
Xinghui hopes to reduce raw material cost and improve competitiveness with the acquisition. Plastic resins represent more than 30 percent of its raw material consumption.
Xinghui recorded profit of 55.84 million yuan ($8.84 millon) on sales of 324 million yuan ($51.3 million) in 2010. It sells toy cars under the Rastar brand in more than 40 countries. Its factory in Shantou employs more than 1,000.
SKN is a subsidiary of Seoul-based global conglomerate SK Group. SKN acquired the Shantou plant in May 2007.