June 22, 2010 / 2:22 PM / 9 years ago

UPDATE 1-Sino-Forest to buy majority stake in HK's Omnicorp

* Sino-Forest ups stake to 53.7 pct from 19.9 pct

* To pay about $53.7 mln for 230 mln shares

* Says deal to help meet growing wood demand in China

* Sino-Forest V-C to become CEO of Omnicorp on completion

June 22 (Reuters) - Canada’s Sino-Forest Corp TRE.TO said it would take a majority stake in Hong Kong-based Omnicorp Ltd (0094.HK) by purchasing more shares worth HK$418.6 million ($53.8 million), to help meet the rising wood demand in China.

The commercial forest plantation operator will buy 230 million shares of the investment holding company at HK$1.82 each, raising its voting interest to about 53.7 percent from 19.9 percent.

Omnicorp and Sino-Forest are joint venture partners in South American forest concession operator Greenheart Resources Holdings Ltd. Omnicorp has a 60.4 percent stake in Suriname-based Greenheart while Sino-Forest holds the rest through its Sino-Capital Global Inc unit.

Greenheart owns a 178,000-hectare hardwood concession with a harvestable standing stock volume of about 4.4 million cubic meters, Sino-Forest said.

With the deal, Sino-Forest plans to perk up exports from Suriname to China, it said.

“This collaboration will strengthen our supply of sustainable hardwood fibre at competitive prices to serve the increasing wood deficit in China,” Sino-Forest Chief Executive Allen Chan said in a statement.

Sino-Forest also said upon conversion of Omnicorp notes, its stake will go up to 60.1 percent.

Once the deal is completed, Sino-Forest Vice Chairman W. Judson Martin will become chief executive and president of Omnicorp. Also, Sino-Forest CEO Allen Chan will become non-executive chairman of Omnicorp, the company said.

Separately, Omnicorp said it will raise $25 million by issuing new convertible notes to Greater Sino Holdings Ltd.

Sino-Forest shares were up 12 Canadian cents at C$17.92 in morning trade Tuesday on the Toronto Stock Exchange. ($1=7.769 Hong Kong Dollar) (Reporting by Gowri Jayakumar in Bangalore; Editing by Gopakumar Warrier)

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