China Automotive Systems (CAS), one of the country’s leading power steering components and systems suppliers has entered into a final definitive agreement with Hubei Wanlong Investment (Hubei) to acquire an additional 35.5% of Henglong Automotive Parts (Henglong) to increase its total ownership to 80%.
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This 35.5% ownership of Henglong alone represented more than US$5m of CAS net earnings in 2007.
In 2007, Henglong posted net income of $14m. Henglong, formerly 44.5% owned by China Automotive Systems prior to this acquisition, makes power steering systems and components for China’s rapidly growing passenger vehicle market. Its main customers include Chery Auto, Brilliance Auto, BYD Auto, Geely Auto and FAW Volkswagen.
The purchase price of the acquisition will be approximately $32.1m – $10m in cash with the remaining value to be paid in 3,023,542 shares of CAS stock valued at 7.3060 per share.
At the closing, 1,170,000 shares of CAS stock will be issued and the remaining 1,853,542 will be issued in accordance with applicable NASDAQ requirements.
The agreement, as usual, is subject to local government authorities’ final examination and approvals.
CAS chairman Hanlin Chen said: ” With this acquisition, we continue to strengthen China Automotive Systems’ earnings, net margin and shareholders’ value.”
CFO Jie Li added: “This transaction will be immediately accretive to net earnings. The value of Henglong’s 35.5% earnings we acquired would have resulted in increasing our 2007 diluted earnings per share to $0.51f rom US$0.37, even after adjusting for the additional 3,023,542 shares to be issued.”
