(Yicai) Sept. 24 -- Valin Wire & Cable’s shares surged by their daily trading limit after the Chinese firm announced its intention to buy a controlling stake in a startup that specializes in robot connectors, thereby growing its supply chain to better meet clients’ needs.

Valin Wire [SHE: 001208] closed up 10 percent at CNY14.65 (USD2.06) a share in Shenzhen today. The stock has climbed 61 percent since the end of last year.

Valin Wire has signed a letter of intent with two individual shareholders of Sanzhu Intelligent Technology to buy the stake in a partly cash deal, the Hunan province-based company announced late yesterday. While the size of the stake will be determined later, the transaction is based on valuing the target firm at CNY270 million (USD38 million), it said.

Sanzhu Intelligent researches, develops, produces, and sells connectors and wire harnesses, with its products mainly used in servo drives, robots, and industrial manipulators. 

The startup has become a leading supplier of industrial connection products in its niche sector, counting Japan's Panasonic Holdings and domestic robot and automation gear makers Inovance Group, Xindao Intelligent Equipment, Midea Industrial Technology, and Estun Automation among its clients.

Its connectors are critical parts in high-end applications, including in the industrial automation, robotics, and new energy fields, Valin Wire said. The deal will extend Valin Wire’s industrial chain, enhance its ability to deliver integrated system solutions, and speed its expansion into the robotics and high-frequency transmission businesses, providing a second growth driver, it added.

Sanzhu Intelligent's net profit topped CNY25 million (USD3.5 million) last year on unaudited operating revenue of CNY209 million, with net assets of CNY94 million as of Dec. 31, Valin Wire said.

Its owners have pledged to achieve net profits between next year and 2028 of between CNY71 million and CNY75 million. Should that not be met, they have agreed to compensate the new shareholder financially, it added.

Editor: Martin Kadiev