UNITED FIBER SYSTEM may soon morph from a pulp producer into a thermal coal miner through a second RTO (reverse takeover offer), giving shareholders another chance to unlock value in the stock which has been languishing since its first backdoor listing.

 

On Jan 27 before the market opened, Unifiber announced that it will be issuing 44.3 billion new shares at 3.5 cents each to buy over 67% stake in PT Golden Energy Mines (GEMS), in an RTO deal worth $1.55 billion. The new shares will represent 92.8% of the enlarged share capital.

 

The seller is PT Dian Swastatika Sentosa Tbk, the Jakarta-listed mining and infrastructure unit controlled by the Sinar Mas Group, one of Indonesia’s largest conglomerates in various resources businesses that include palm oil as well as pulp and paper. The conglomerate, founded by China-born Indonesian billionaire Eka Tjipta Widjaja, father of high profile corporate figure Oei Hong Leong, also has businesses in financial services, real estate and telecommunications.

 

First listed back in May 1997 as construction company Poh Lian Holdings, Unifiber shifted its focus to forestry and pulp production in April 2002 through its first RTO deal. Although the stock has plodded along after its first transformation, the new coal-mining business, if executed successfully, could provide Unifiber the lift it needs. Investors may remember it was through an RTO that Ezyhealth morphed into palm oil giant Wilmar International.

 

The announcement already pushed the stock to as high as 4.8 cents, its biggest increase since May 2003, from 2.8 cents, before closing the day at 3.9 cents with 112 million shares changing hands.

 

In its announcement via the Singapore Exchange, Unifiber notes that the GEMS group controls nearly 2 billion tonnes of thermal coal -- including reserves. “The development of extensive power plant industries including in China and India, which rely on medium and low calorie coal, has significantly increased demand for the commodity and the GEMS Group is well positioned to address the surge in demand for the commodity due to its competitive advantages over its competitors,” the company states.

 

These include lower stripping ratio, proximity of its mines to shipping facilities, and Indonesia itself is closer to the two main markets of India and China compared to Australia, the other leading coal exporter. “The Board is of the view that the Proposed Acquisition and resultant focusing of the Company on coal mining is appropriate given the growth opportunities they offer,” says Unifiber in its statement.

DMG & Partners Securities and Stamford Law Corporation are advising Unifiber on this deal, which the parties involved aim to complete by March 7.