Zongshen PEM to acquire Chinese motorcycle brand

VANCOUVER, B.C. – January 4, 2010 – (Motor Sports Newswire) – Zongshen PEM Power Systems Inc. (TSX: ZPP) says it will acquire a major Chinese motorcycle brand for about $95 million in a related-party transaction that will result in Zongshen Zuo owning at least 62.2 per cent of the company.

The gas-powered motorcycle business that’s being acquired by ZPP is carried out through Chongqing Zongshen Automobile Industry Co., Ltd. and Chongqing Zongshen Automobile Air Intake System Manufacturing Co., Ltd.

ZPP is a China-based, Canadian-listed manufacturing company focused on the development and commercialization of environmentally friendly two and three wheel vehicles

Its first products are small gas and electric bikes and motorcycles.

Following a reorganization by the vendor, ZPP will gain administrative control of Automobile Industry and obtain “substantially all of the economic benefits of the remaining 51 per cent of the equity of Automobile Industry not purchased directly under the equity purchase agreement.”

The agreement is with Hong Kong VAS International Development Ltd., an investment holding company that is related to ZPP’s largest shareholder, Zongshen Industrial Group Co., Ltd., which is controlled by Mr. Zuo.

ZPP said the acquisition of the Chongqing Zongshen Automobile companies will provide it with a leading motorcycle brand in China and a strong manufacturing, technology and distribution platform for its electric motorcycle business.

Zongshen Industrial Group estimates the acquired business will generate the equivalent of $283.8 million in revenue in the year ended Dec. 31, 009, and will have annual net income equal to about C$15.8 million.

Based on that estimate, the purchase price will be about 600 million yuan (C$94.6 million), including 400 million yuan in cash and about 31.5 million common shares of ZPP.

Also, based on that estimate, Zuo will own, control or direct about 59.4 million common shares of ZPP upon closing and up to 90.9 million common shares, or 71.6 per cent of the company, if all escrow shares are released to the vendor.

SOURCE: The Canadian Press