Pan Paper’s Sale Sets Stage for Miller’s Revival
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The sale and purchase agreement signed between the Joint Receivers of Pan Paper Mills (in receivership) and a strategic investor has paved way forthe revival of the paper miller who will invest $60m.
The purchaser of the miller’s assets, Tarlochan Limited, a subsidiary of Rai Group of companies, will take over the running of the once vibrant icon of Kenya’s manufacturing sector. The purchaser indicated that it will invest an estimated Kshs 6Billion in the next five to ten years. The Rai group has interests in agro-forestry, farming, saw milling, paper milling, wheat milling, edible oils and fats, and sugar in the wider Eastern Africa region. They also have requisite experiencing in reviving Mufundi paper miller in Tanzania.
Pan Paper Mills, which was incorporated in 1969 with Orient Paper industries Limited, Government of Kenya and the International Finance Corporation, as the principal shareholders, was placed under receivership on 20th March 2009, after failing to service its
debt obligations. The decision to sell the paper miller was made by the secured lenders who are owed in excess of Kshs 6 Billion.
Speaking during a media briefing, the joint receiver, Mr. Kuria Muchiru said: “We are delighted that the agreement reached with Tarlochan Limited to purchase the assets of Pan Paper Mills is progressive and will lead to the re-birth of an asset on the brink of significant deterioration. This is a groundbreaking receivership process that started with a global search for an investor with
requisite capability to restore and grow the local paper milling capacity as well as free the business from mounting debts. Whereas, the lenders may not have actualized the full recovery of their debt, a greater gain with potential positive long term prospects for the region has been realized.”
A key objective of the Receivers was to safeguard the interests of the various other stakeholders of the Company as they attempt
to realize the assets for the secured lenders. Despite an extensive marketing process having been undertaken by the Receivers both locally and internationally, the assets did not generate substantial interest, with the only offer obtained being the one of Kshs 0.9 billion from Rai Group.
Speaking during the ceremony,Cabinet Secretary, Ministry of Industry, Investment and Trade, Mr. Adan Mohamed, said: “We are pleased with the efforts of the Receiver Managers to have found a solution to a bag of outstanding issues and lay foundation for the revival and long term viability of a manufacturing sector icon in Kenya. The revival and modernization of the plant by private sector coupled with related economic activities is poised to have a tremendous positive multiplier effect on the
local economy in Western region and Kenya.”
On his part, the Chairman, Rai Group, Mr. Jaswant Rai said: “Our long term plan is to rehabilitate the main plant to ensure restoration of its full capacity. We plan to invest USD 60 million in the next 5 – 10 years. We have the requisite capacity to undertake
investments as demonstrated by a similar operation in neighbouring Tanzania and turned it round successfully.
He added: “We envision that at its peak the plant will directly employ over 1,500 employees and create employment opportunities along the value chain. We have also developed a business plan that takes into consideration the environmental impact of paper production, conservation of forests and safe treatment of waste material. Importantly, as part of our social agenda, we will channel our
investments towards improving and enhancing the education facilities within the Pan Paper complex.”
Tarlochan has indicated that its investments will hinge on a much-needed technological upgrade of the factory, application paper manufacturing efficiencies to bring down manufacturing costs and bolster competitiveness.