(Yicai Global) Sept. 28 -- Shanghai Hugong Electric Group Co. [SHA:603131] plans to acquire a 100-percent stake in a Beijing-based military industry firm for USD87.1 million to enrich Shanghai Hugong's business structure and upgrade its industrial manufacturing.

Shanghai Hugong said yesterday that it will acquire Beijing Aerospace Huayu Technology Co. from its shareholders via share issuance and cash payment. The transaction price will be USD87.1 million. The company will pay USD72.08 million of that by share issuance.

The group will resort to private placement to raise proceeds from investors at a price of USD3.44 per share. It will raise at most USD22.53 million.

Aerospace Huayu is one of the key manufacturers of parts and components for China's aerospace and defense armament while Shanghai Hugong is a leading manufacturer of welding and cutting equipment in the country. Upon completion of the acquisition, the two parties will cooperate to promote the extensive application of intelligent and automatic equipment in the aerospace component manufacturing industry.

The main downstream industry for welding and cutting equipment is the infrastructure construction industry, and it is relatively reliant on the national economic situation and is of great periodicity, said Shanghai Hugong. By acquiring Aerospace Huayu, Shanghai Hugong will expand into the technologically sophisticated military industry thereby reducing the susceptibility of its business performance to economic fluctuations.