KUALA LUMPUR: Dialog Group Bhd is planning to produce food grade recycled plastic packaging products together with a local partner, the company's first venture into downstream petrochemical business.

       Dialog, in a filing today, said it has entered into a memorandum of understanding with Diyou Fibre (M) Sdn Bhd to set up a special purpose vehicle (SPV) for the venture with a total investment outlay of approximately US$25mil (RM106mil).

       Dialog will own a majority 51% equity interest in the SPV while its partner will take up the remaining 49%.

       The proposed SPV will build, own and operate a food grade recycled polyethylene terephthalate (recycled PET) pellets production facility using recycled PET flakes as raw material.

       "The SPV will sell food grade recycled PET to food & beverages customers," Dialog said.

       This proposed venture into the post-consumer plastics recycling industry would be Dialog’s first investment into the downstream petrochemicals business.

       Diyou Fibre, Dialog said, is an established recycling and manufacturing company in Malaysia, based in Nilai, Negeri Sembilan.

       "The founders have more than 30 years of experience in the post-consumer plastics recycling industry," it said.

       "Diyou Fibre is one of the largest mechanical recycling manufacturer, where post-consumer plastics are recycled and made into materials used for polyester staple fibre, food and beverage packaging, industrial packing, construction, automotive and other raw materials in various industries," it added.

       Dialog said the proposed venture will serve to meet the increasing demand for food grade recycled PET materials.