ZAP and Jonway Group have announced they have signed definitive agreements under which ZAP will acquire 51% of Zhejiang Jonway Automobile Co. Ltd.
ZAP said that the move is part of its strategy to capitalise on the growing automotive and electric vehicle (EV) market in China.
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According to the terms of the definitive agreements, ZAP will acquire 51% of Jonway Auto for US$29.03 million in cash. In addition, ZAP will acquire exclusive international distribution rights to Jonway’s automobiles for approximately 31.5 million shares of ZAP’s common stock (valued for purposes of the transaction at US$1 per share). The boards of directors for ZAP and Jonway Auto approved and signed the merger agreement on July 2, 2010.
According to the terms of the definitive agreements, ZAP has the right to acquire the remaining 49% of Jonway Auto at the same valuation by March 30, 2011 or at a then current valuation after that date. ZAP and Jonway intend this transaction to be phase one of a two-phase acquisition, whereby the two companies will combine their complementary expertise, leveraging ZAP’s EV technology and Jonway Auto’s mass production capabilities.
ZAP intends to acquire the remaining 49% of Jonway Automobile following completion of the first phase and following final regulatory approval.
ZAP said the ZAP Jonway merger accelerates cost-effective manufacturing of ZAP’s electric vehicles and gives ZAP access to the Chinese market through Jonway’s distribution channels of more than 80 factory direct dealerships that ‘feed into hundreds of factory authorised dealers’.
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By GlobalData“By combining ZAP’s experienced team of EV engineers with Jonway’s manufacturing capabilities, the combined ZAP Jonway will be able to scale up with the fast-growing worldwide market for affordable electric and fuel-efficient vehicles,” said Steve Schneider, CEO of ZAP Jonway. “The new entity will leverage ZAP’s extensive intellectual property and international market access with Jonway’s current China distribution channels and revenue base, for enhanced shareholder value. The new company creates an integrated worldwide sales and manufacturing operation.”
According to Dr. Priscilla Lu, ZAP Board Chair: “As originally planned when I joined ZAP in connection with the Cathaya Funds’ investment in the company, the Jonway transaction was formulated to give ZAP the complementary facilities and automotive manufacturing expertise to position itself as a worldwide EV and automobile manufacturer. Jonway’s management continues to lead and expand its product line of traditional vehicles and will begin to build the production line for ZAP’s EVs in the coming quarters. ZAP will enhance its operations management team to focus on delivering the opportunities at hand.”
Jonway Automobile, with approximately 800 employees, is currently manufacturing approximately 1,000 vehicles per month and has a capacity to produce up to 30,000 vehicles per year at its 3.6 million square foot plant in Sanmen.
Jonway distributes through a nationwide network of auto dealerships in China and distribution partners in Europe and Egypt. Jonway’s 3-door SUV has been CE approved in Italy by its European partner for the European market, ZAP said.
“ZAP’s engineering enables us to expand into the EV market and position our company to be one of the leaders in China’s EV market,” said Alex Wang, CEO of Jonway Automobile. “The ZAP team also brings us international market access and automotive distribution channels for the new models that we are designing, and ZAP will help us meet the required international standards for these new markets.”
Earlier this year, ZAP integrated electric drive systems into several Jonway vehicles through its joint venture ZAP Hangzhou. These vehicles are now being showcased and used as electric taxis at the Shanghai Expo. Jonway has also agreed to produce the ZAP Alias electric car.
Dr Priscilla Lu added, “The new ZAP Jonway combined company enhances the complementary strengths of each, and uniquely positions the company in the EV market. Jonway Automobile has quality mass production manufacturing as well as access to the Chinese automobile market. ZAP can now apply its in-depth experience in EV technologies and engineering integration know-how to produce a new line of EV models for Jonway Automobile and provide access to worldwide international distribution channels. Jonway, with physical asset value assessed at around US$60 million in land, buildings and modern manufacturing facilities, is cash flow positive, debt-free, has growing revenues, and offers shareholder value for ZAP. ZAP Jonway has now become a significant automotive manufacturer/distributor worldwide”.
