After two and a half years of litigation, the case is over and Roshan Packages appears to have come out completely victorious in the law suit its joint venture partner had filed against the company. The China-based Shandong Yongtai Paper Mills had filed the suit against Roshan Packages, calling for their joint venture – the Roshan Sun Tao Paper Mill – to be dissolved after a dispute between the two companies.
The joint venture had been announced as far back as January 2017, as part of Roshan Packages’ initial public offering (IPO) on the Pakistan Stock Exchange. The company’s management had then talked about raising as much as Rs4 billion in capital for the joint venture with Shandong Yongtai Paper Mills to set up a manufacturing facility that produces liner and fluting, two essential inputs for its corrugated paper manufacturing division.
The Roshan Sun Tao Paper Mill was supposed to be financed with Rs2.4 billion in debt raised from Dubai Islamic Bank, Meezan Bank, and Askari Bank, with the remaining Rs1.6 billion coming from the two joint venture partners: Roshan Packages and Shandong Yongtai Paper Mills. Roshan raised its part of the capital through its IPO on the PSX.
The plan was for both companies to roughly equally split the equity component of the investment into the Roshan Sun Tao Paper Mill. The company was scheduled to begin production by the middle of 2019.
However, by May 2018, it became clear to the public that the project had hit some road blocks. On May 11, 2018, Roshan Packages announced that it had been sued by Shandong Yongtai Paper Mills in the Lahore High Court, and that the Chinese company wanted the whole joint venture to be dissolved, presumably with the intent of getting back the amount of money it had invested into Roshan Sun Tao Paper Mill.
Roshan Packages also announced that it had every intention of fighting that case and not giving in, and that it had the resources to be able to finance the project entirely on its own, with or without the cooperation of its Chinese joint venture partner.
And so, began the litigation process, during which time Roshan Packages kept on sending out announcements to its shareholders through notices to the PSX that it was on track to complete the production facilities at the new paper mill. It did not, however, indicate when that mill would begin production of the materials that it had stated it needed for its corrugated packaging material business.
Finally, on October 22, 2020, Roshan Packages announced that it had emerged victorious in the lawsuit. Not only did the Lahore High Court dismiss the case, it ruled that Shandong Yongtai Paper Mills had to pay the legal expenses incurred by Roshan Packages, the kind of ruling that typically is handed down when the court believes that the lawsuit filed was frivolous.
While the details of the ruling were not immediately available, the announcement seems to indicate that the court agreed with Roshan Packages’ position that it was Shandong Yongtai Paper Mills that was in breach of its contractual commitments to the joint venture, and that it was therefore not entitled to a dissolution of the enterprise.
Roshan Packages’ position during the trial was that if Shandong Yongtai Paper Mills wants to exit the joint venture, it can sell its shares back to Roshan Packages, a position that the Chinese company presumably disagreed with. It is unclear why the Chinese company decided to sue in the first place. Liquidating a company would be unlikely to yield more of its money back than simply selling its shares to either Roshan Packages or even a third party.
Regardless, with the end of this dispute, investors will no doubt be looking to see if Roshan Packages can – belatedly – fulfill its promise of beginning production on that new paper mill. The company’s recent announcements give no indication of when that is expected to happen, and it is unclear if it was this litigation that was holding up progress on the paper mill to begin with.
Roshan Packages was created in 2002, originally as a means of providing packaging materials for the founding family’s fruit export business, but quickly became a large business in its own right, serving other consumer goods companies in Pakistan. Its largest customers are now the who’s who of the local and global food and consumer goods business: PepsiCo, Unilever, Lotte Kolson, Continental Biscuits (Kraft Foods’ local affiliate), Tapal, and Coronet Foods, among others.
The company began over six decades ago, when the founder of the Roshan Group, Aijaz Hassan Qureshi, graduated with a PhD in History in 1959 from a German university, and returned to Pakistan to launch an Urdu imitation of Readers’ Digest that same year. While Readers’ Digest seeks to remain ideologically unaffiliated, Urdu Digest reflects the political and religious views of its founder, which in turn were informed by his affinity with the Jamaat-e-Islami, a right-wing religious political party.
What makes their story relatively unusual is that unlike most family businesses where each successive generation manages the business worse than the last, Qureshi’s children had the good sense in 1989 to invest the wealth created from Urdu Digest and the family’s other publications into other businesses. Specifically, they decided to enter the fruit export business, focusing on selling Pakistani mandarins around the world. That business was named Roshan Enterprises, and came to become the dominant commercial interest owned by the family by the early 2000s.
Roshan Packages started off as a backward integration project for Roshan Enterprises. And the Roshan Sun Tao Paper Mill, in turn, was a backward integration project for Roshan Packages. The Qureshi family, it seems, like to have control over their supply chains.
By eadline I think its an internet company but now after reading its a stock company.