By Li Qiaoyi

Huatai Group, the country's largest newsprint producer, plans to buy a mill run by Norske Skog, one of the world's leading paper firms, according to Huatai's filing with the Shanghai Stock Exchange Saturday.

Huatai will pay 925 million yuan ($135.47 million) to acquire 100 percent shares of Hebei Norske Skog Long-Teng Paper (HNLC), the majority of which is owned and operationally controlled by Norske Skog, said the filing.

Oslo-based Norske Skog, which dominates 10 percent of the world's newsprint market and five percent of the world's magazine paper, has run two newsprint mills including HNLC and Shanghai Norske Skog Potential Paper (SNP) since 2005.

But Huatai is buying a fixer-upper. In the first six months of the year, HNLC posted a net loss of 11.25 million yuan ($1.65 million), said the filing.

Huatai, which has nearly a 30 percent market share in the domestic newsprint industry, was confident about the deal, however.

The sale would help further enhance Huatai's newsprint production capacity, the company stated in the filing.

HNLC has a newsprint production capacity of 330,000 tons, which would beef up Huatai's current level of 1.2 million tons.

The company's market share in the newsprint industry will also increase, and it will have more influence on production prices and raw materials sourcing, Huatai claims.

The sale of HNLC, following Norske Skog's selling of all of its 56 percent stake in SNP, is expected to relieve the company's net debt by around 800 million nok ($137.9 million), according to a statement released on Norske Skog's website September 24.

The world-leading newsprint producer failed to turn a profit in China, the company's CEO Christian Rynning-Tønnesen was quoted in the statement saying, "With the sale of HNLC, Norske Skog is no longer producing paper in China."

Norske Skog' fiscal report released in August revealed that in the second quarter, the company's finances have only slightly improved over the first quarter.

While pointing out that second quarter performance was unsatisfactory due to low demand, Rynning-Tønnesen stated that "reduced sales were offset by lower costs."