VANCOUVER, March 17 /CNW/ - Hanwei Energy Services Corp. ("Hanwei" or the
"Company") today announced that it has satisfied the RMB100 million
(approximately $19 million) initial payment for the acquisition of Daqing Deta
Electric Co., Ltd. ("Deta"), by way of a working capital adjustment, as
prescribed in the Acquisition Agreement signed August 11, 2008, as amended,
and completed on November 25, 2008.
Hanwei acquired a 99 percent equity interest in Deta for RMB591 million
(approximately $112 million at current exchange rates). Before giving effect
to a working capital adjustment described below, the Acquisition Agreement
contemplated initial cash payments totaling RMB160 million (approximately
$30.3 million) and cash and share issuances to a maximum value of RMB431
million (approximately $81.7 million), subject to earn out provisions. The
initial cash payments of RMB160 million are comprised of RMB100 million
(approximately $18.9 million) due no later than March 31, 2009 and RMB60
million (approximately $11.4 million) due 30 days after the title of certain
land use rights and buildings is transferred to Hanwei. The earn-out
provisions are comprised of cash payments of RMB131 million (approximately
$24.8 million) and the issuance of up to 8,051,746 Hanwei shares (the "Hanwei
Shares") with a deemed value of $5.30 per share, to be paid over a five year
period from 2008 to 2012 conditional on Deta achieving certain annual
performance targets. The Hanwei Shares were issued on December 2, 2008 and
placed in escrow. Should any of the annual performance targets not be
achieved, the corresponding earn-out payment can be cancelled or extended by
mutual agreement.
The Acquisition Agreement, as amended on February 25, 2009, provided for
the pre-closing distribution of certain Deta assets and liabilities to the
Deta shareholders, as well as a post-closing repurchase of certain assets and
liabilities by Deta to be reflected as a working capital adjustment and
off-set against the initial cash payments. The actual value of the assumed
liabilities as of November 25, 2009 exceeded the value of the repurchased
assets by RMB129 million (approximately $24.4 million). This amount
effectively reduced the acquisition price by RMB 129 million (approximately
$24.4 million). After deducting this amount from the first cash payment of
RMB100 million, a credit of RMB29 million remains and will be deducted from
the second cash payment of RMB60 million when it is due. A Material Change
Report was filed by Hanwei on the SEDAR website (www.sedar.com) on March 17,
2009 with the reference to the Business Acquisition Report filed by Hanwei on
February 9, 2009.
To date, the earn-out performance conditions have not been met and no
earn-out provision payments in cash or Hanwei shares has been paid.
About Hanwei Energy Services Corp.
Hanwei Energy Services Corp. provides high value products and services
for the energy sector in China and the Asia region. Hanwei serves its major
energy customers through manufacturing facilities in China, producing products
for the oil, coal power and wind power industries. Hanwei is focusing on
providing products and services that address the growing need for improved
energy efficiency and environmental protection in China and the Asia region.
www.hanweienergy.com
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/For further information: Kim Oishi, Senior Vice President, Finance and
Business Development, Telephone: (416) 804-9228, koishi@hanweienergy.com;
Kevin O'Connor, Investor Relations, Telephone: (416) 962-3300,
ko@spinnakercmi.com/
