Manganese Bronze Holdings has signed legally binding agreements with Chinese car manufacturer Geely Automobile Holdings and Shanghai Maple, an associate of Geely, to hold equity in a joint venture company, Shanghai LTI Automobile Ltd. (Shanghai LTI).
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This venture will be based in Shanghai and will produce four different vehicles: the London Taxi, a limousine variant of the London Taxi and two additional large saloon cars.
Total investment in the joint venture is forecast at GBP53m which will be invested in press tools, body-in-white facilities and assembly operations. Geely will invest a further GBP33m purchasing land and constructing buildings including paint facilities which will be leased to the joint venture.
The total investment in the joint venture will be funded from shareholders equity of £29m and bank loans of £24m.
Manganese Bronze will satisfy its 48% share of the joint venture by issuing 5.7m new ordinary shares to Geely (representing just over 23% of Manganese Bronze’s enlarged issued ordinary share capital) based on a valuation of £2.50 a share (with £14m being invested by Geely in the joint venture).
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By GlobalDataGeely and Maple will respectively own 51% and 1% of the joint venture and will fund the balance of the shareholders equity of £15m.
Manganese Bronze will license its intellectual property to the joint venture which is subject to regulatory approval in China, and this transaction will also require approval by Manganese Bronze shareholders at an extraordinary general meeting scheduled for December.
Final assembly and sales of the London Taxi, the limousine and the two saloon cars will be undertaken by Shanghai Maple which will have the right to sell the taxi within Asia while Manganese Bronze will have the right to sell it in the rest of the world. In addition, Shanghai Maple will have the right to sell the limousine and two saloon cars globally with the exception of the United Kingdom, to which Manganese Bronze will have exclusive rights.
LTI (a wholly owned subsidiary of Manganese Bronze), will utilise the skills of its Coventry business to support the establishment of manufacturing in Shanghai, support quality initiatives in Shanghai LTI and assist Maple and Geely in selling vehicles globally.
The planned capacity of the Shanghai LTI facility will be 40,000 vehicles with a single shift, with production planned to commence in mid 2008 subject to regulatory approval in China and shareholder approvals.
The cost of producing the London taxi is expected to be significantly lower due to higher volumes and purchase of components from Geely’s current suppliers. Shanghai LTI will provide Manganese Bronze with a low cost manufacturing base which should increase appeal to new markets outside China and allow rapid access to the large and fast growing Chinese vehicle market.
