The merger, should it proceed, is intended to create a leader in sustainable packaging: Cardia Bioplastics holds a strong patent portfolio and develops, manufactures and markets its patented renewable resource-based materials and finished products for the global packaging and plastic products industries. Fuelled by the global trend towards sustainable packaging, the company, which was established in 2002, is experiencing robust growth. Stellar Films, likewise headquartered in Melbourne, manufactures and markets high quality cast films to the personal care, hygiene and medical product industries. Over the last fifteen years, Stellar Films Group with average sales over the last three years of over $21 million has developed partnerships with customers in over twenty-seven countries throughout North America, Asia, Africa, the Middle East and Australia/New Zealand.

Under the terms of the proposed merger, Cardia Bioplastics will acquire all of the shares and units issued in Stellar Films and issue ordinary shares in Cardia Bioplastics to the owners of Stellar Films. Following completion of the proposed merger, it is currently anticipated that Cardia shareholders will own 42% of the merged group and the owners of Stellar Films will own 58% of the merged group.

Over the past three years, Cardia Bioplastics and Stellar Films have collaborated on the production of environmentally friendly, high quality and cost competitive Biohybrid films. The Biohybrid films produced using Stellar Films' proprietary cast film process exhibit a high performance property profile, and are tailored for the global personal care and hygiene products industry.

The longstanding cooperation between the two companies brought out the strategic fit of the two businesses, highlighting the major benefits of a merger, including scale and geographic footprint of combined operations, market access and reach, production and operational savings, complementary intellectual property positions, resources to deliver business strategy and high quality management teams.

As Cardia Bioplastics Chairman, Richard Tegoni, phrased it: "The combined business has the scale and resources to deliver the successful implementation of our profitable business growth strategy in our carrier bags, films & packaging, and waste management target market segments. We look forward to working with the Stellar Group Board and management to bring the merger transaction to a successful conclusion."

The proposed merger is subject to completion of satisfactory due diligence by both parties, execution of a sale agreement, shareholder and regulatory approval and other customary closing conditions. The terms sheet provides for an exclusivity period of four months from November 21, 2014.