LONDON: Essentra plc has signed an agreement for the establishment of a new joint venture (JV) company in China, China Tobacco Essentra (Xiamen) Filters Co., Ltd. to produce specialist and next generation filters, which the JV plans to manufacture locally in a new facility in Xiamen, and will incorporate a state-of-the-art development and testing centre.

Shareholders in the JV will be Essentra Pte Ltd (which will own a 49% shareholding), China Tobacco Fujian Industrial Co., Ltd (which will own a 21% shareholding), Shanghai Haiyan Investment Management Co., Ltd (which will own a 10% shareholding), China Tobacco Hunan Investment Management Co., Ltd (which will own a 10% shareholding) and China Tobacco Guangxi Tiancheng Management Co., Ltd (which will own a 10% shareholding).

The associated equity investment for this opportunity in aggregate is c.£16m (Essentra’s share of which will be in line with our respective shareholding in the JV). Establishment of the JV is subject to formal approval from the relevant regulatory authorities in accordance with the Tobacco Monopoly Law of the People’s Republic of China and completion of various ancillary documents.

Essentra and China Tobacco Fujian will cooperate closely to obtain the necessary regulatory approvals as soon as possible. It is anticipated that the JV will commence construction and fit out of the new plant and machinery in Q1 2020. We expect the JV to ship first production volumes to local customers in November 2020, at the earliest.

This transaction delivers another key strategic ‘game changer’ for the Filters division, and closely follows the recent announcement of a significant outsourcing deal. This alliance will open up Essentra’s access so that it can further tap into the market in China.

Commenting on today’s announcement, Paul Forman, Chief Executive said:  “I am very pleased to secure this particular strategic ‘game changer’ for Filters. The JV’s onshore development and testing facility, together with local production, will enable us to work ever more closely with our partners in China to provide innovative special filter solutions”.