omniture

China Automotive Systems Signs Letter of Intent to Acquire 36.5% of Jingzhou Henglong Automotive Parts Co., Ltd.

2008-01-22 19:05 1527


-- Intends to Acquire at Approximately 7 Times 36.5% of Henglong's 2007 Earnings --

-- Intends to Increase the Ownership in Henglong to 81% --

WUHAN, Hubei, China, Jan. 22 /Xinhua-PRNewswire-FirstCall/ -- China Automotive Systems, Inc. (Nasdaq: CAAS), a leading power steering components and systems supplier in China, today announced it has entered into a Letter Of Intent (LOI) with Hubei Wanlong Investment Co. ("Hubei") to acquire an additional 36.5% of Jingzhou Henglong Automotive Parts Co., Ltd. ("Henglong").

The purchase price of the acquisition will be approximately US$ 33 million. The payment will consist of US$ 10 million in cash with the remaining value to be paid in the common stock of China Automotive Systems at approximately US$ 7.20 per share, which is the Volume Weighted Average Price (VWAP) based on the prior 20 trading days before the signing of this LOI. Upon closing, the acquisition will be valued at approximately 7 times 36.5% of Henglong's 2007 net earnings. An independent asset appraiser will conduct an evaluation to assist the closing of the acquisition. The final transaction price will be based upon the appraiser's findings and the closing is subject to the special committee's final approval.

Henglong, currently 44.5% owned by China Automotive Systems, is engaged in manufacturing power steering systems and components for China's rapidly growing passenger vehicle market. Henglong's main customers include Chery Auto, Brilliance Auto, BYD Auto, Geely Auto and FAW Volkswagen. In the first nine months of 2007, Henglong posted sales of US$ 54.3 million, representing 56.6% of China Automotive Systems' total net sales and net profit of US$ 11.1 million, while CAAS' net profit was US$ 6.7 million. Management expects that the acquisition will be immediately accretive to net earnings.

Mr. Hanlin Chen, the Chairman of China Automotive Systems, is also the controlling shareholder of Hubei, which is a 36.5% minority shareholder of Henglong. Upon completion of the proposed acquisition, China Automotive Systems will increase its total ownership in Henglong to 81%. Once the acquisition is completed, Mr. Chen, the Chairman of China Automotive Systems, and other management also will have increased their ownership of the Company's stock.

Mr. Hanlin Chen, Chairman of China Automotive Systems, stated, "We are very excited about the growth opportunities of our power steering products domestically and internationally. The growth prospects before China Automotive Systems makes the consolidation of the minority stake in Henglong very attractive. Within 5 years, we plan to build China Automotive Systems into a global power steering powerhouse."

Mr. Jie Li, Chief Financial Officer of China Automotive Systems, stated, "We welcome the minority shareholders' interest in joining forces with our fast-growing public company. We share the same vision and are planning to combine our internal resources to create economies-of-scale that will strengthen China Automotive Systems' earnings and shareholders' value. We are aiming to close the acquisition within the first quarter of 2008."

About CAAS

Based in Hubei Province, People's Republic of China, China Automotive Systems, Inc. is a leading supplier of power steering components and systems to the Chinese automotive industry, operating through seven Sino-foreign joint ventures. The Company offers a full range of steering system parts for passenger automobiles and commercial vehicles. The Company currently offers 4 separate series of power steering and 307 models of power steering with an annual production capacity of 1.1 million sets, steering columns, steering oil pumps and steering hoses. Its customer base is comprised of leading Chinese auto manufacturers such as China FAW Group, Corp., Donfeng Auto Group Co., Ltd., Brilliance China Automotive Holdings Ltd., Beiqi Foton Motor Co., Ltd. and Chery Automobile Co., Ltd. etc. For more information, please visit: http://www.caasauto.com .

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the Company's operations, financial performance and condition, and the impact of this acquisition on its financial performance. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others, the risk that the acquisition of Henglong's 36.5% minority share will not be completed. or that if completed it won't be successful, the impact of competitive products, pricing and new technology; changes in demand for the Company's products; changes in consumer preferences and tastes; and effectiveness of marketing; changes in laws and regulations; fluctuations in costs of production, delays and cost overruns related to developing and opening new production facilities; and other factors as those discussed in the Company's reports filed with the Securities and Exchange Commission from time to time.

For further information, please contact:

Jie Li

Chief Financial Officer

China Automotive Systems

Email: jieli@chl.com.cn

Kevin Theiss

Investor Relations

The Global Consulting Group

Tel: +1-646-284-9409

Email: ktheiss@hfgcg.com

Stacy Dimakakos

Financial Media Relations

The Global Consulting Group

Tel: +1-646-284-9417

Email: sdimakakos@hfgcg.com

Source: China Automotive Systems, Inc.
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Keywords: Auto
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