(Yicai) Sept. 30 -- Contemporary Amperex Technology will take control of Shenghua New Material in a CNY2.1 billion (USD295 million) deal to enhance its research, development, production, and market expansion capabilities of high-quality lithium iron phosphate cathode materials.

CATL's stake in Shenghua will increase to 51 percent from 18.7 percent after the deal, the target firm's current top shareholder Fulin Precision announced late yesterday, adding that it will also invest CNY1 billion in the company, but its stake will drop to 47 percent from 80 percent.

The move will bring strategic resources to Shenghua, speed up the development of its main business, and hike its profits, Fulin Precision said, without mentioning whether the deal will lead to adjustments in Shenghua's daily operations and decision-making processes.

Shares of Fulin Precision [SHE: 300432] surged by their daily trading limit of 20 percent to CNY22.22 (USD3.12) apiece as of lunch break in Shenzhen today. CATL's stock [SHE: 300750] rose 1.17 percent to CNY402 (USD56.46).

In March, CATL invested CNY339 million (USD47.6 million) to become Shenghua's second-largest shareholder. In addition, the Ningde-based battery giant plans to provide Shenghua with CNY500 million (USD70.2 million) in advance payment this month and CNY1 billion in November to help Shenghua to finance new production lines for LFP cathodes and other battery materials, which will later be supplied exclusively to CATL, Fulin Precision said on Sept. 18.

Shenghua is building up its production capacity and it plans to increase its annual production capacity of LFP cathode materials to 440,000 tons from 300,000 tons by the end of this year and to 500,000 tons next year to meet the long-term demand of key clients. Its relevant sales just topped 126,200 tons last year, bringing in revenue of CNY4.8 billion, accounting for 57 percent of its total income, it said in a financial report.

Compared with the ternary lithium batteries widely used by international electric carmakers, LFP batteries are cheaper, safer, more eco-friendly, and dominate China's new-energy vehicle market by both installed capacity and applications.

Editor: Martin Kadiev