Timber products company China Grand Forestry Resources Group announced that it would acquire Yunnan Shenyu New Energy, a biofuels research group, for $822 million.

China Grand Forestry said Yunnan Shenyu New Energy is principally engaged in the research and development of Jatrohpa Curcas L based biological energy sources, such as biodiesel.

Under the agreement, China Grand Forestry will pay HK$400 million in cash and issue HK$6 billion in notes convertible into shares at HK$2.50 each. It's buying Yunnan Shenyu from Forcemade Investments.

The acquisition is expected to be complete by the end of January 2008.

Yunnan Shenyu deployed its first-phase project in 2006, which included the construction of a production base and seedling-breeding base for Jatrohpa based biological energy sources.

China Grand Forestry said Yunnan Shenyu is currently constructing a complete industrial chain, which includes plantation of Jatropha and refinery. Yunnan Shenyu is also building a processing factory with planned annual biodiesel production capacity of 100,000 tons.