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CELM...China Electric Motor, Inc. Announces the Acquisition of Shenzhen Guofa Optoelectronics Co., Ltd.

China Electric Motor (MM) (NASDAQ:CELM)
Intraday Stock Chart
Today : Tuesday 25 January 2011
China Electric Motor, Inc. (Nasdaq: CELM, "China Electric" or the "Company"), a Delaware corporation and China-based company that engages in the design, production, marketing and sale of micro motor products, today announced that Luck Loyal International Investment Limited ("Luck Loyal"), an indirect wholly owned subsidiary of the Company, entered into an Equity Transfer Contract (the "Agreement") with New-Metal (H.K.) Technology Limited (the "Seller") on January 21, 2011. Under the terms of the Agreement, Luck Loyal will purchase 100% of the equity interests of Shenzhen Guofa Optoelectronics Co., Ltd. ("Guofa Optoelectronics" or "Guofa"), a wholly foreign owned enterprise incorporated in China, held by the Seller, for an aggregate purchase price of RMB42.7 million (or approximately US$6.5 million, based on the exchange rate as of January 21, 2011) (the "Transaction").

(Logo: http://photos.prnewswire.com/prnh/20100331/CNW006LOGO )

With this acquisition, the Company will acquire new production lines and expertise focused on high-end DC micro motors used in products like digital cameras, cell phones, electronic door locks, and other similar products. Guofa's products are sold to clients representing high-end OEM companies which include Ricoh, Toshiba, Philips, OMRON, Panasonic, OLYMPUS, and Taiwan Asia Optical. In 2010, Guofa Optoelectronics recognized RMB83.4 million (or approximately US$12.7 million) in revenue and RMB8.7 million (or approximately US$1.3 million) in net income.

The purchase price will be paid by the Company in three installments, subject to certain conditions precedent and adjustments, as described in the Agreement. For the first installment, the Company will pay RMB4 million (or approximately US$607,000) within ten days of the execution of the Agreement. For the second installment, the Company will pay RMB28.7 million (or approximately US$4.4 million) within thirty days of the Agreement after certain conditions precedent have been met. The last payment of RMB10 million (or approximately US$1.5 million) will be withheld as a deposit to secure the settlement of labor issues, if any, as described in the Agreement. The closing of the Transaction is expected to take place within 120 business days from the date of the Agreement, subject to government approvals.

In addition, Dr. Dehe Wang, the General Manager of Guofa Optoelectronics (no relation to the Company's CEO, Mr. Yue Wang, or Chairman, Mr. Fugui Wang), has been hired to replace Mr. Shengping Wang, who resigned due to medical reasons, to become the Company's new Chief Technology Officer, effective as of January 21, 2011. Mr. Dehe Wang has been the General Manager of Guofa Optoelectronics since November 2005 and has over 15 years of management and research experience in the micro motor industry.

Mr. Yue Wang, the Chief Executive Officer of China Electric, stated, "This acquisition further establishes our presence in the high-end DC micro motor category. Guofa has a blue chip customer base and serves markets in which we currently have no presence. Part of our strategy over the past two years has been to diversify our overall product offering beyond home and kitchen appliances. Guofa has an established customer base and a strong product portfolio in niche areas like camera printing machines and automobile door lock motors, which help with our diversification efforts.

"We plan to consolidate Guofa's operations and over 450 skilled employees to our newly acquired Sunna Industry Park after the closing of this transaction. We expect Guofa to be accretive immediately upon the closing of this acquisition and we believe that we can maximize Guofa's sales and profit growth in the coming years through our working capital commitments.

Wang continued, "We greatly appreciate Mr. Shengping Wang's tremendous contribution to China Electric's growth and we are excited to welcome Mr. Dehe Wang to the China Electric team. We believe that his appointment, combined with our acquisition of Guofa Optoelectronics, will significantly help us continue to expand China Electric's micro motors footprint."

About China Electric Motor, Inc.

China Electric Motor, Inc. (Nasdaq: CELM) is a China-based company that engages in the design, production, marketing and sale of micro motor products through its subsidiaries, Shenzhen YuePengCheng Motor Co., Ltd. and Ningbo Heng Bang Long Electrical Equipment Co., Ltd. The Company's products are incorporated into consumer electronics, automobiles, power tools, toys and household appliances, and are sold under its "Sunna" brand name. The Company provides micro motor products that meet the growing demand for efficient, quiet and compact motors from manufacturers of consumer electronics, automobiles, power tools, toys and household appliances. China Electric Motor, Inc. sells its products directly to original equipment manufacturers and to distributors and resellers both domestically in the People's Republic of China and internationally to customers in Korea and Hong Kong. The Company's manufacturing facilities are located in Shenzhen, Guangdong and Ningbo, Zhejiang.