Unifi, Inc. has ceased joint venture discussions with the Guangdong Kaiping Polyester Enterprises Group and Guangdong Kaiping Chunhui Co. Ltd. in Kaiping, Guangdong, P.R. China. The Company announced in December 2003 that it had extended discussions related to the proposed joint venture, in which it had expected to own a seventy-five percent (75%) interest, as well as an indirect interest in Chunhui through the fifty-six percent (56%) ownership held by Kaiping.
The Company's determination that Kaiping will not be in a position to execute a definitive agreement in the near-term was a primary factor in its decision to end the discussions. Required regulatory approvals, which would not officially begin until after a definitive agreement between the parties was signed, could extend the closing well into the next calendar year.
Against this background, the Company additionally stated today that it will pursue a “greenfield” option, creating a wholly-owned subsidiary to produce its value-added yarns in China. Site selection is underway, and a location will be announced shortly.
The Company plans to utilize idle equipment from the United States, Ireland, and the United Kingdom to set up textured polyester and nylon production, twisting, nylon covering, and dyeing operations in China.
“Although we were unable to reach an agreement with Kaiping, we remain focused on our China strategy. Over the last two years, Unifi has introduced its value-added products and brands to the Asian market through Unifi Asia and our agreement with Tuntex in Thailand. In addition, we have had teams in China visiting various locations during the past eighteen months gathering information about the market and incentives for wholly-owned enterprises. We have determined that the quickest and most efficient way for Unifi to enter the Chinese market is to begin a “greenfield” operation that will be entirely owned and controlled by the Company,” said Brian Parke, Unifi's President and Chief Executive Officer.
“With what we have learned over recent months, we believe that the decision to pursue a start-up activity with a wholly-owed subsidiary is the best strategy for getting on the ground in China during the calendar year 2004,” continued Parke. “Various cities in China are competing for the location of the Unifi business, which should minimize our costs over normal start-ups we have experienced in the past. In addition, we expect that the approval process for our business license will be much shorter using a wholly- owned subsidiary. This strategy allows us to produce product sooner while using less of our cash reserves. We plan to apply the same business model that grew Unifi into one of the world's leading producers and processors of textured yarns to our subsidiary in China.”