Malaysian timber firm Samling Global acquires China's Elegant Living to expand flooring business in China, grow premium wood products portfolio

Liling Tan

HONG KONG , April 18, 2008 (press release) – Samling Global Limited (“Samling Global” or “the Group”; HKSE: 3938) aims to open up to 1,000 Elegant Living flooring distributor outlets throughout China by 2010.

Elegant Living is a well-established brand for engineered wood flooring in China, with a network of approximately 340 distributor outlets in China and an annual flooring production capacity of approximately 4.5 million square metres (“m²”), equivalent to more than 60,000 residential units with a typical build-up of 800 square feet per unit. Its product range includes engineered wood flooring, solid wood flooring and laminate flooring. “We are very pleased to have Elegant Living to make in-roads into China. Through this investment, Samling Global ventures into the production and distribution of wood flooring.

The investment will expand Elegant Living’s distribution network in China to reach our end user customers. We will also expand our portfolio of premium wood products," commented Mr. Yaw Chee Ming, CEO of Samling Global. "We are excited about the potential of this investment to accelerate the growth of our downstream value-added wood products business.”

China is a strategic investment destination for the Group as the Chinese government encourages foreign direct investments. Samling Global is positive on the outlook of China’s flooring market as domestic consumption is sustainable with improving standards of living and the rising pool of middle to higher income groups in China. The Group is confident of this market’s appetite for leading edge, high quality and innovative products.

The flooring industry in China is expected to be robust. According to China Wood Flooring Industry Report, the domestic demand for flooring products in China will elevate to 520 million m² in 2010, an increase of three fold from 2001 (2001: 130 million m²). Among which, the demand for engineered wood flooring is expected to reach 119 million m², an increase of 14.8 times from 2001 (2001: 8 million m²).

Elegant Living is one of China’s market leaders in the engineered wood flooring segment, witnessed by its strong revenue growth, brand advantage and market potential. The Group will build upon the strengths of Elegant Living – its brand, products, market share, distribution networks and product innovation.

This investment aims to provide Elegant Living immediate scale and accelerate the growth of its distribution network in China to reach out to more end user customers. By year 2010 it aims to have a network of 1,000 distributors across China.

This partnership will also deliver significant value creation opportunities and synergy to Samling Global. The Group’s strength is in forest resource management and plywood manufacturing, which is the main raw material for engineered wood flooring. Samling Global will increase its plywood supply to Elegant Living. Therefore, it is also anticipating an expanded product offering of premium wood flooring products for Elegant Living’s customers.

With a major market in China, Elegant Living also exports its products to North America and Europe, including the large specialist flooring manufacturers and retailers. Samling Global also plans to tap into the newly acquired distribution network in Australia to expand the flooring business to the region.

Elegant Living’s operations are also within the Group’s geographic footprint and there is scope for its product and service offer to be extended to Samling Global’s other businesses around the world.

“Ultimately, our vision is to be a one-stop source for housing products with its range of flooring, doors and home furniture solutions. We believe that being closer to our end- user customers have a number of advantages including improved distribution margins and opportunities to build a stronger brand identity.” commented Mr. Yaw Chee Ming. Earlier this year, Samling Global has agreed to acquire the assets of Elegant Living at a maximum aggregate purchase consideration of approximately US$63.7 million (approximately HK$500 million). The purchase consideration includes an upfront investment amount of US$38.34 million, out of which US$23.34mil will be used to fund the expansion the business. The remaining balance of the purchase consideration is subject to the achievement of the business’s performance targets.

About Samling Global Limited

Samling Global Limited is a well established, integrated forest resource and wood products company. Based in Malaysia, the Group has established an international presence with strategically located operations in Malaysia, Guyana, New Zealand and China. The Group was listed on the Hong Kong Stock Exchange in March 2007 (Stock code: 3938).

The Group’s business is divided into upstream and downstream timber operations. The upstream operations comprise timber harvesting and management of natural forest concessions in Malaysia and Guyana as well as tree plantations in New Zealand and Malaysia. The downstream operations comprise manufacturing, marketing and distribution of wood products including plywood, veneer, sawn timber and other value- added products.

About Elegant Living

Headquartered in Zhongshan, Guangdong Province, China, Elegant Living is engaged in the research and development, manufacture and sales and marketing of engineered wood flooring, solid wood flooring and laminate flooring products. Engineered wood flooring is the key business segment of Elegant Living.

Elegant Living emphasises creativity, artistic and high quality range of products, and targets at the medium to high end markets. With China as its major market, it also exports products to North America and Europe.

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