Electronics Production | July 22, 2009
Elcoteq signs a Letter of Intent with Chinese industrial investor, Kaifa
Elcoteq has signed a conditional Letter of Intent with Chinese technology company Shenzhen Kaifa Technology, a separately listed company of China Electronics Corporation Group, concerning an equity investment of 50 MEUR. CEC has been Elcoteq's successful joint venture partner in China since 2002.
The intended transaction together with the required debt restructuring would significantly strengthen Elcoteq's financial situation, increase company's financial capability to manage existing and new customer projects, and hence ensure Elcoteq's turnaround back to growth and profits. Elcoteq and Shenzhen Kaifa Technology Company Limited ("Kaifa") have signed a Letter of Intent concerning a major equity investment. Kaifa belongs to the CEC Group of technology companies. The CEC Group consists of more than 200 different technology companies; from semiconductor, computer and mechanics companies to software development. As an equity investment Kaifa would subscribe new shares to be issued by Elcoteq with the amount of 50 MEUR. Elcoteq and Kaifa are also negotiating about further financing, which is subject to certain financial performance criteria. Kaifa's investment is depending on Elcoteq's creditors agreeing on restructuring of current debt, which will include partial debt-to-equity swap and it needs shareholders' approvals. The actual number of shares to be issued to Kaifa will be determined after the negotiations with the creditors have been completed, aiming at Kaifa becoming the biggest single shareholder of Elcoteq with a minimum ownership of 30%. The definitive agreement is planned to be signed during the third quarter of 2009. Pohjola Corporate Finance has been engaged to advice the company in these debt negotiations. "This transaction gives us the strengthened financial basis for future growth. It also makes perfect business sense by providing us with a very influential partner in China - Kaifa being part of the CEC Group. Hence this co-operation creates a very solid platform for developing our service offering into various new areas", says Mr. Jouni Hartikainen, President and CEO of Elcoteq. "Elcoteq brings us a global manufacturing network which helps us to serve our Asian and other customers wishing to expand their operations worldwide, so it is a logical step in our strategy", says Mr. Tam Man Chi, Chairman of the Board and President of Kaifa.
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