(Yicai Global) Jan. 29 -- Guanfu Holdings' wholly-owned unit Nenter & Co. and Dutch DSM Nutritional Products China Enterprise penned a framework agreement in Shanghai yesterday to set up a joint venture to produce vitamin E and its intermediate products.

Fujian province-based Guanfu Holdings said this in an announcement today.

Nenter will site the JV in Jingzhou in China's central Hubei province and invest its vitamin E-related assets and its 33 percent stake in the unit, Nenter Shishou.

DSM plans to acquire a 75 percent stake in the new firm for CNY1.1 billion (USD157 million). Nenter Shishou and the JV will be responsible for the production and sales of vitamin E intermediates, per the announcement.

Nenter will hold a 67 percent stake in the Shishou subsidiary and 25 percent of the JV, which in turn will take a 33 percent share in the JV unit, while DSM will control with 75 percent of the JV, the announcement added.

DSM will lend Nenter CNY159.9 billion, which will be repaid after the transaction concludes. Nenter will register the new company. DSM will pay 90 percent of the transaction amount after the registration and equity transfer, while the remaining 10 percent of funds is payable within one year of the equity transfer.

Retooling and Refitting

The transaction is scheduled to finish in the second or third quarter. The two sides will renovate and upgrade existing equipment post-transfer. The JV will improve Nenter's production management and equipment use, while DSM's comprehensive global sales network will further boost its vitamin E products' sales and enhance its brand name, the announcement stated.

This agreement is a cooperative framework one to whose terms, arrangements, and progress of the cooperation both parties have agreed. A final formal contract must be signed, however, to fill in further details, and administrative approval is still needed, per the announcement, that added areas of uncertainty still remain as to the arrangement's precise implementation.

Guanfu Holdings [SHE:002102] is listed on the Shenzhen Stock Exchange's small and medium-sized enterprise board.

Headquartered in Dehua county, Fujian province, it has two core subsidiaries, Nenter and Sumi Information Technology.

The former researches and develops pharmaceutical raw materials, animal nutrition and new materials. The latter is an e-commerce company that sells low-density polyethylene and other plastic raw materials.

DSM Nutritional Products China Enterprise is a unit of Heerlen, Netherlands-based Koninklijke DSM, a renowned multinational leader in health and nutritional products with 21,000 staff in 50 countries and production bases in all major regions as of the end of 2017, public information shows.

Editor: Ben Armour