(Yicai) Nov. 11 -- Shares of Jiuri New Materials tumbled after the Chinese chemicals producer announced plans to acquire Ignition New Midco, the insolvent European market leader in photoinitiators.

After falling by as much as 18 percent in Shanghai this morning, Jiuri New Materials [SHA: 688199] ended the day 10.5 percent down at CNY24.64 (USD3.69) per shares.

Jiuri New Materials will join a group of outside investment funds to acquire all of Ignition New Midco for a symbolic EUR1 (USD1.11), the Tianjin-based company said late yesterday. Its subsidiary Guangyao Technology signed the deal with the target’s parent company Ignition Topco on the same day.

The firm will team up with six equity investment funds to jointly inject capital into Guangyao Technology, raising its registered capital to CNY800 million (USD119.93 million) before processing the deal. Once the acquisition is complete, Jiuri New Materials will become an indirect major shareholder with a near 44 percent stake in Ignition New Midco, according to the announcement.

Photoinitiators are initiators for photochemical hardening reactions. Under ultraviolet/light-emitting-diode irradiation, they quickly turn liquid resins into solid polymers. The resulting polymers can be made into inks, coatings, adhesives, 3D-printing resins, and electronic photoresists.

Ignition New Midco has the world’s most valuable photoinitiator portfolio, production technology, and intellectual property, Jiuri New Materials said. It has plants in Mortara, Italy and in Anqing, China, along with a global research center in Milan and a international sales-and-operations headquarters in the Netherlands. The firm’s sales network spans Europe, Asia, North America, and South America.

Ignition New Midco is insolvent. An Ernst & Young audit report cited in the announcement said its total liabilities stood at EUR531 million (USD591 million) at the end of last year, with negative net assets of EUR212 million.

Jiuri New Materials stressed that the bulk of Ignition New Midco’s debt dates back to a leveraged buyout of the company by private-equity shareholders in 2018, and that the high debt load is not the result of operating cash losses or any deterioration in its underlying operating assets.

The acquisition will enable Jiuri New Materials to move quickly into the high-end photoinitiator applications market, it said, rapidly achieving a presence in high-end products and full coverage across the industry chain. It will also fill a gap in the firm’s own semiconductor chemical materials business and help break the overseas monopoly on the technology.

Jiuri New Materials will also deploy its proprietary production processes and supply low-cost intermediates to the target’s factories after the deal closes, to help them cut production costs and quickly resume and expand output at the Mortara plant, it added.

Editor: Tom Litting