Forestry, Omnicorp Limited, and the Sino-Forest Group

The global forestry industry as well as lumber and timber have become increasingly important in recent decades. Within this international trade sector, one of the largest market suppliers is the Asia Pacific tropical and subtropical region. Therefore, multinational companies headquartered in countries such as China and Canada have become very interested in forestry operations throughout the Pacific Rim. One such company is Omnicorp Limited, currently traded in the Hong Kong Stock Exchange and previously known as Omnitech Group Limited, until a formal name change in 2002. This company was originally incorporated in Bermuda in 1987, with its corporate headquarters in Hong Kong. As its name suggests, Omnicorp Limited is an investment holding company that is well diversified through a number of subsidiaries in the electronic components, smart card technology, home furnishings, and forestry sectors, amongst others. Simultaneously, Omnicorp Limited owns a 60% stake in Greenheart Resources Holdings Limited, which is a major forestry subsidiary with operations in Suriname, South America. Greenheart owns a 180.000-hectare tropical hardwood concession, along with cutting rights in Suriname. Furthermore, the harvestable standing hardwood stock volume is approximately 4.4 million cubic meters and Greenheart’s concession and cutting rights represent 13% of the largest concession type available in Suriname.

Forestry, Omnicorp Limited, and the Sino-Forest Group

Likewise, as an operator of commercial forest plantations, managed for the sale of lumber and wood products, the Greenheart Group has forest assets in China, New Zealand, and Suriname, amongst others. In recent years, Omnicorp Limited, and its subsidiary Greenheart, attracted the attention of the Sino-Forest Corporation, which is an operator of commercial forests and is mainly active in China, where it has the bulk of its holdings. Similarly, Sino-Forest is registered in Canada and has at times traded in the Toronto Stock Exchange. As a way to diversify and increase participation in international forestry operations, Sino-Forest became a majority stakeholder in Omnicorp Limited through the purchase of shares and convertible bonds, for a total price upwards of US$21 million. If the Sino-Forest Corporation were to exercise its convertible bonds, alongside its current Omnicorp Limited shares, Sino-Forest would be a majoritarian, or close to majoritarian, stakeholder in Omnicorp Limited. Nevertheless, in recent years, the Sino-Forest has also been investigated by Canadian authorities for fraud and has at times reported financial distress.

The growing importance of forestry and lumber operations worldwide will certainly lead to an increase in the number of multinational companies active in this sector as well as numerous M&A activities.

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