INTERVIEW-China Starch eyes buyouts to lift market share

* Aims to take over rivals to boost production capacity

* Expanding into higher-margin corn-based sweetener

HONG KONG, Nov 17 - Cash-rich China Starch Holdings Ltd <3838.HK>, a partner of world's largest dextrose and cornstarch producer Corn Products International Inc <CPO.N>, said it aims to lead the domestic market share by taking over rivals.

The company aimed to take a bigger slice of the market, tapping growing demand from customers as the Chinese economy recovered, said Will Leung, financial controller of China Starch.

China Starch is China's second-largest cornstarch producer by sales volume, accounting for 13 percent of the market. It sold 350,000 tonnes of cornstarch in 2008, behind a privately owned Shandong-based producer with a sales volume of 500,000-600,000 tonnes.

"We aim to be the market leader (in China)," Leung told Reuters in an interview, without giving a timeframe. "We're looking to expand capacity by acquiring producers with a capacity of more than 100,000 tonnes."

China Starch produces modified starch for use as a food additive and in paper and pharmaceuticals products through a 49 percent owned joint venture with Corn Products International. It has a production capacity of 850,000 tonnes per year.

Leung said the company had 200 million yuan ($29.30 million) cash in hand for acquisitions. He added that it preferred to buy rivals in the corn-producing provinces of Jilin and Shandong, but did not identify any acquisition targets.

Demand for cornstarch in China is estimated at about 6 million tonnes per year. Leung said he expected cornstarch prices to remain steady in 2010 after rising 20 percent this year to 2,100 yuan per tonne excluding tax. China Starch also plans to expand into higher-margin corn-based sweetener for use in beer and soft drinks.

Leung said the "Snow" beer brand of China Resources <0291.HK> was running a trial of the new product.

The company has an initial capacity for corn-based sweetener of 100,000 tonnes per year, expecting to generate an annual profit of 21 million yuan ($3.08 million).

Leung said the figure would rise to 140 million yuan as capacity was expanded to 700,000 tonnes, without giving a time frame.

Shares of China Starch have risen 45 percent so far this year. (US$1=HK$7.75=6.825 yuan)