WUHAN, China – China Automotive Systems (CAAS) has entered into a stock exchange agreement to acquire the remaining 20 percent minority interest in Jingzhou Henglong Automotive Parts Co. Ltd., and the remaining 19 percent minority interest in Shashi Jiulong Power Steering Gear Co. Ltd. from Jiulong Machinery Electricity Manufacturing Co. Ltd.
The company will issue a total of 4,078,000 new common shares of CAAS stock to Jiulong Machinery Electricity as consideration for the acquisition of the minority interests. The company will issue 3,260,000 new shares in exchange for the 20 percent equity interest in Jingzhou Henglong, and 818,000 new shares for the 19 percent equity interest in Shashi Jiulong. The shares will be issued in a private placement transaction that is exempt from registration with the U.S. Securities and Exchange Commission.
The aggregate purchase price of the acquisition will be equivalent to approximately $35.2 million, based on the closing price of CAAS stock of $8.62 on the NASDAQ stock market as of Aug. 8, 2014. The net income of the two subsidiaries totaled $27.8 million in 2013.
Hubei Henglong Automotive System Group Co., a wholly owned subsidiary of CAAS, currently owns the other 80 percent and 81 percent equity interests in Jingzhou Henglong and Shashi Jiulong, respectively. The company expects to complete these acquisitions in the third quarter of 2014. Upon completion of these acquisitions, Jingzhou Henglong and Shashi Jiulong will become wholly owned subsidiaries of the Henglong Group.
Jingzhou Henglong was founded in 1997, and it is mainly engaged in the production of rack and pinion power steering gear for cars and light-duty vehicles. Founded in 1993, Shashi Jiulong is mainly engaged in the production of integral power steering gear for heavy-duty vehicles.
