China Water & Drinks announced last week that on 31 August it entered into agreement to purchase a 48 per cent stake in Hutton Holdings from two shareholders, in exchange for $9m (€6.5m) and two million shares of common stock.
Through a series of subsidiaries Hutton in turn owns all of Guozhu Holdings, a mold manufacturing, polyethylene terephthalate (PET) packaging and bottle making company that holds 50 per cent of China's domestic market for such products.
"The acquisition of Hutton is our first stepin our plan to vertically integrate our operations and secures a stable and reliable supply source," said compeny chief executive officer Xing Hua Chen.
Guozhu Holdings currently supplies packaging materials to Coca-Cola, Danone, Wahaha and Huiyuan Juice, and its net profit for the year ending 31 December 2006 was $7.5m (€5.4m), the company reported.
"This strategic ownership will enhance our bottled water production technology, which should reduce our costs over the long-run," Chen said.
"It is also an important milestone that will allow us to implement our aggressive acquisition plan," he added.
China Water & Drinks' acquisition is part of a company drive to expand operations in China, following this year's record profits for bottled water, Chen said.
For the second quarter of 2007, the company's total revenue increased to $12.5m (€9.1m), up 41.5 per cent from the second quarter of 2006, while for 2008 the company expects revenues to be about $105m (€76m), with a net income of approximately $30m (€21.7m), the company said.
"Demand for bottled water in China remains strong, driven by the middle class who are choosing a healthier lifestyle and the general need for quality drinkable water," Chen explained last month.
The company intends to continue expanding our capacity and market penetration by building new facilities and through acquisitions, he added .
"Our goal is to have capacity for 1.44 billion litres by the end of 2007 for a 120 per cent increase in capacity from the end of 2006," he stated.
Other expansion plans include the construction of a new bottled water plant in the Jilin province, China, which is expected to produce 150 million bottles of purified water each year.