TMX group

Jan. 12, 2011 (Canada NewsWire Group) --

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES
OR FOR DISSEMINATION IN THE UNITED STATES

TORONTO, Jan. 12 /CNW/ - Asia Bio-Chem Group Corp. (TSX: ABC) ("Asia Bio-Chem" or the "Company") announced today that it has entered into an agreement to sell to a syndicate of underwriters led by Canaccord Genuity Corp. (the "Underwriters"), on a bought deal basis, 7,200,000 common shares ("Common Shares") at a price of $1.40 per Common Share for gross proceeds to the Company of approximately $10 million (the "Financing").

The Company has also granted the Underwriters an over-allotment option to purchase up to an additional 1,080,000 Common Shares on the same terms and conditions, exercisable at any time, in whole or in part, up to 30 days after the closing of the Financing. The Financing is expected to close on or about February 1, 2011 and is subject to regulatory approval.

The net proceeds of the offering will be used to fund the construction of a downstream production facility at the Company's existing Daqing plant. Asia Bio-Chem will use approximately 250,000 tonnes of cornstarch produced annually at its Daqing plant for further processing into downstream products including crystallized glucose and may include other products such as maltodextrin and/or sorbitol.  The Company expects these new downstream products to represent approximately $140 million in revenues at higher gross margin than that achieved on current third party starch sales. 

Crystallized glucose is a water-soluble product widely used in the food processing industry in products such as beverages, baking, dairy, and pharmaceuticals.  It prevents the crystallization of water and other sugars and has a long shelf life.  The Chinese domestic market for crystallized glucose was approximately 1.5 million tonnes in 2010 and has been growing at a compound annual growth rate of over 25% for the past four years.  The growth in this market has been fueled by increased demand in the beverage and baked products industries in China brought about by shifting dietary patterns. 

"With our existing capability to produce stable quality starch, Asia Bio-Chem is very well positioned to enter the starch-based sweetener market and immediately become a sizeable player in China," said Zhiping Wang, Chairman and Chief Executive Officer of Asia Bio-Chem. "Furthermore, our access to low-cost corn and our proven transportation and logistics capabilities will allow us to satisfy customer demand anywhere in Eastern China.   Once operational, we believe that the addition of these higher-value products will enhance Asia Bio-Chem's blended operating margins and provide significant accretion to earnings."

The capital cost of this project is expected to be approximately $30 million and the Company anticipates that it will require an additional $10 million of working capital.  This project is expected to be funded with a combination of existing credit facilities, new credit facilities, cash flow from operations and the proceeds from the Financing.  The Company expects this project to be completed in the fourth quarter of 2011.

The Common Shares will be issued under a short form prospectus and as such will be freely tradable.  The Common Shares have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, or any state securities laws, and may not be offered or sold in the United States, or for the account or benefit of any person in the United States, absent registration or an applicable exemption from the registration requirements.  This press release shall not constitute an offer to sell, or the solicitation of an offer to buy, any Common Shares in the United States, or in any other jurisdiction in which such offer, solicitation or sale would be lawful.

About Asia Bio-Chem Group Corp.

Asia Bio-Chem Group, through its wholly-owned subsidiaries in the People's Republic of China ("PRC"), is in the business of processing corn. From its plants in Liaoning and Heilongjiang Province, the Company has a total processing capacity of 900,000 tonnes of corn per year, which are processed into cornstarch, corn germ, gluten, and fiber for sale into the domestic Chinese market.

This news release contains certain statements that may be deemed "forward looking statements". Forward looking statements are  statements that are not historical facts and are generally, but not  always, identified by the words "expects,", "plans", "anticipates",  "believes", "intends", "estimates", "projects", "potential" and similar  expressions, or that events or conditions "will", "would", "may",  "could" or "should" occur. Forward looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements including, among others, the ability of the Company to meet the conditions of the Financing and to otherwise close the Financing, anticipated capital costs, expected production estimates, inherent operating risks, use of proceeds of the Financing, ability to obtain new credit facilities, and those risk factors identified in the Company's Annual Information Form prepared and filed with securities regulators in respect of its most recently completed financial year.  Although the Company believes the expectations expressed in such forward looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in forward looking statements. Forward looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made. The Company undertakes no obligation to update these forward looking statements, except as required by law, in the event that management's beliefs, estimates or opinions, or other factors, should change.

For Corporate Information: