(Yicai Global) Aug. 19 – Zhuhai-based Gree Electric Appliances Inc. [SZ:000651], China's biggest air-conditioner maker, announced that it would acquire a 100 percent stake in Zhuhai Yinlong New Energy Co., Ltd, a lithium battery manufacturer, for CNY13 billion (USD1.95 billion), through private placement.
Once the deal is complete, Zhuhai Yinlong New Energy will become a subsidiary wholly owned by Gree, and lithium batteries and new-energy vehicles will become one of the core businesses of the listed company.
According to the announcement, Gree plans to issue around 835 million shares to corporate shareholders of 21 target companies including Guangdong Yintong Investment Holdings Group.
It was also announced that up to 642.3 million shares will be offered privately to eight pre-determined investors including its controlling shareholder Zhuhai Gree Group, in support of the private placement. Proceeds from the non-public offering are capped at CNY10 billion and will be used exclusively for project development at the target companies.
Specifically, Zhuhai Gree Group will subscribe to 269 million shares, and up to 152.9 million shares will be subscribed through Employee Stock Ownership Plans at Gree Electric Appliances.
The private placement will be priced at 90 percent of the company's share price over the previous 20 trading days prior to the pricing benchmark day, i.e. CNY17.07 per share. The final pricing is set to be CNY15.57 per share, taking into account profit distribution for 2015 carried out before the benchmark day.
According to the announcement, proceeds from the private share offering will be invested primarily in the lithium battery production line with a yearly capacity of 1.462 billion mA·h/g, construction of an energy storage module production base with a yearly capacity of 200MWh, together with an electric vehicle modification base with a yearly capacity of 32,000 vehicles.
Counterparties to the deal pledged that the net profit at Zhuhai Yinlong in the fiscal years 2016, 2017 and 2018 will be no less than CNY720 million, CNY1 billion and CNY1.4 billion, respectively.
It was also announced that the target company, Zhuhai Yinlong, specializes in R&D, production and sales of lithium titanate batteries, new energy vehicles, energy storage systems and supporting charging facilities, integrating upstream and downstream businesses throughout the new energy vehicle industry chain.
Furthermore, Gree Electric Appliances announced its earnings for the first half of 2016. It posted an operating income of CNY4.9 billion, down 1.85 percent YoY; net profit of CNY6.4 billion, up 11.92 percent year-on-year; the gross margin of its core businesses at 38.71 percent, up 8.12 percentage points year-on-year.
Prior to the merger, Zhuhai Yinlong purchased 53.6 percent of the shares of an American battery maker, BTR Nano Technology Co., then the only company in possession of key lithium titanate materials technology. It is estimated that China's demand for lithium titanate batteries will approximate 15,000 tonnes by the end of this year.