HE acquisition of Deta electric on schedule
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Mar 18, 2009 02:16AM
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Attention Business Editors Hanwei satisfies first payment for Deta acquisition 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 -30- /For further information: Kim Oishi, Senior Vice President, Finance and Business Development, Telephone: (416) 804-9228, [email protected]; Kevin O'Connor, Investor Relations, Telephone: (416) 962-3300,