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Unifi, Inc. (UFI: NYSE) today announced that it has signed a non-binding letter of intent to form a joint venture in Guatemala with the owners of Complast S.A. (Complast) and Technologia Textil Avanzada (TTA), existing recycling, spinning and texturing companies in Guatemala. The joint venture would continue the recycling, spinning and texturing activities of Complast and TTA. Under the proposed structure, Unifi would own 51% of the joint venture and the existing owners of Complast and TTA would own 49%.

Unifi’s desire to form the joint venture is based on the importance of the Central American textile market and Unifi’s commitment to this market for the foreseeable future. Unifi believes the venture will further expand its geographic footprint of REPREVE® recycled fiber through local, quick turn production of REPREVE® filament yarn within Central America, a key apparel-producing market that requires compliant yarn.

“Central America has been a region of focus for brands and retailers over the past few years, as apparel programs are sourced closer to the U.S.,” said Tom Caudle, President of Unifi, Inc. “The growth in the region is key to our strategy of building our REPREVE® and other value-added brands”.

Complast and TTA have been in business since 2008 and 2014, respectively. Complast owns and operates a bottle processing facility and produces flake and chip under the brand name EuroPET for the consumer packaging market in Central America and for further processing in their spinning plant. TTA produces polyester POY and textured yarn under the brand name EuroFIL, and supplies the Central American market. Under the letter of intent, these operations would be contributed to the joint venture and, upon consummation of the joint venture, the parties intend to expand the existing operations.

The transaction proposed in the letter of intent is subject to the parties reaching a definitive agreement, with a transaction closing expected to occur by the end of calendar 2017. There is no assurance, however, that a definitive agreement will be reached or that the closing of the transaction contemplated by the letter of intent will occur.