NEW YORK, Nov. 3, 2011 /PRNewswire/ -- Gushan Environmental
Energy Limited ("Gushan" or the "Company"; NYSE: GU), a leading
producer of biodiesel and manufacturer of recycled copper products
in China, today announced that it
has entered into definitive agreements (the "Agreements") to
acquire a controlling interest in Guangzhou Taiyue Communications
Cable Co. Ltd. ("Taiyue"), a PRC-based company that is currently
engaged in the manufacture and sale of copper cable for
applications that include communication and personal
computing. The acquisition will be effected through several
transactions (the "Transactions") whereby Engen Investments Limited
("Engen"), a 75%-owned subsidiary of Gushan which indirectly holds
Gushan's recycled copper products businesses, will acquire 100% of
the equity interest in Taiyue in exchange for (i) up to
20,000,000 newly issued ordinary shares of Gushan, and (ii) up
to a 10.63% interest in Engen, to be issued over a period of three
years. The timing and total aggregate amount of shares to be
issued is subject to adjustment pursuant to an earn-out
arrangement. The closing of each of the Transactions is subject to
the satisfaction of, among others, customary closing conditions,
including obtaining approvals from relevant PRC governmental
authorities.
The Company also today announced that the board of directors of
Engen has granted Mr. Jianqiu Yu, a
director of Engen and the Chairman and Principal Executive Officer
of Gushan, an option to purchase up to 1,013 ordinary shares of
Engen at an exercise price of RMB63,179 per share.
Agreements to Acquire Taiyue
On November 3, 2011, the Company
caused True Excel Holdings Limited ("True Excel"), its indirectly
75%-owned Hong Kong subsidiary, to
enter into a share purchase agreement ("PRC SPA") with Taiyue and
its two shareholders, Mr. Fan Dun Xian and Ms. Wen Chun Xiu (the "Selling Shareholders"), under
which True Excel will acquire 100% of the equity interest in
Taiyue, for a cash consideration of RMB10,000,000 (approximately US$1,573,000). In addition, under the PRC
SPA, True Excel will enlarge the registered capital of Taiyue by
making a capital contribution of RMB10,000,000 (approximately US$1,573,000) to Taiyue, which will be used to
repay a loan to Taiyue from Mr. Zhang Tiansheng, an affiliate of
the Selling Shareholders, upon the closing of the Transactions.
Consummation of the transactions contemplated under the PRC SPA is
subject to and conditional upon, among others, approval from the
Department of Commerce of Guangdong
Province for the acquisition of Taiyue.
Concurrently with the entry into the PRC SPA, Gushan and Engen
(the sole shareholder of True Excel) entered into a share purchase
agreement (the "BVI SPA") with Cosy South Limited ("Cosy South," a
BVI company wholly owned by Mr. Zhang Tiansheng), Mr. Zhang
Tiansheng, Gold Wide Enterprises Limited ("Gold Wide"), Silvery
Boom Limited ("Silvery Boom"), Gold Hero Holdings Limited ("Gold
Hero," an existing shareholder of Engen), and Silver Harvest
Holdings Limited ("Silver Harvest," an existing shareholder of
Engen). Gold Wide and Silvery Boom may become shareholders of Engen
under the earn out arrangements entered into with them in
connection with the previously disclosed acquisition of Hunan Yin
Lian Xiangbei Copper Co. Ltd. (the "Xiangbei Earn-Out").
Under the BVI SPA, subject to a three-year earn-out that is tied to
the financial performance of Taiyue, as determined by its net
income under U.S. generally accepted accounting principles,
(i) Engen will issue ordinary shares, representing up to
10.63% (the "Engen Shares") of Engen's enlarged share capital after
the issuance, to Cosy South for consideration of US$3,246,000 (approximately RMB20,600,000), and (ii) Gushan will issue
up to 20,000,000 ordinary shares of Gushan (the "Gushan Shares") to
Cosy South for consideration of HK$200 (at par value of HK0.00001 per share).
Under the earn-out arrangement in the BVI SPA, Engen and Gushan,
respectively, will be obligated to issue Cosy South, (i) a
number of Engen Shares representing up to 3.54% of Engen's enlarged
share capital and a number of Gushan Shares up to 6,600,000 Gushan
Shares, determined based on the ratio of Taiyue's net income for
the year ending December 31, 2011 to
a net income target of RMB12,000,000,
(ii) a number of Engen Shares representing up to 3.54% of Engen's
enlarged share capital and a number of Gushan Shares up to
6,600,000 Gushan Shares, determined based on the ratio of Taiyue's
net income for the two years ending December
31, 2012 to a net income target of RMB55,000,000, and (iii) a number of Engen Shares
representing up to 3.55% of Engen's enlarged share capital and a
number of Gushan Shares up to 6,800,000 Gushan Shares, determined
based on the ratio of Taiyue's net income for the three years
ending December 31, 2013 to a net
income target of RMB120,000,000.
Under the BVI SPA, Gushan and Engen may have the right to redeem
at par all or part of the Gushan Shares and Engen Shares previously
issued to Cosy South pursuant to the earn-out, depending on the
ratios of Taiyue's aggregate net income for (a) the first two years
of the three year earn-out to the applicable net income target and
(b) for all three years of the three year earn-out, to the
applicable net income target.
Under the BVI SPA, as consideration for Gushan's issuance of
Gushan Shares, upon each issuance of Gushan Shares under the
earn-out, each of Gold Hero, Silver Harvest, Gold Wide and Silvery
Boom will transfer a number of ordinary shares of Engen to Gushan
determined based on the number of Gushan Shares so issued.
The net consideration to be paid in the Transactions by Gushan
under the terms of the PRC SPA and the BVI SPA consists solely of
the Engen Shares and the Gushan Shares. Upon consummation of the
Transactions and assuming Taiyue achieves the net income targets
under the earn-out arrangement (and assuming Engen issues the
maximum number of its ordinary shares issuable to Gold Wide and
Silvery Boom pursuant to the Xiangbei Earn-Out), Gushan, Gold Hero,
Silver Harvest, Gold Wide, Silvery Boom and Cosy South will own
approximately 62.625%, 8.311%, 6.921%, 6.908%, 4.605% and 10.630%
of Engen, respectively. Engen will indirectly own 100% of Taiyue
upon consummation of the Transactions.
The Engen Shares and the Gushan Shares will be issued and sold
in reliance upon the exemption from registration provided for in
Regulation S under the Securities Act of 1933, as amended.
Grant of Options to Purchase Ordinary Shares of Engen
On October 31, 2011, the board of
directors of Engen granted Mr. Jianqiu
Yu, a director of Engen and the Chairman and Principal
Executive Officer of Gushan, an option to purchase up to 1,013
ordinary shares of Engen (the "Option Shares") at an exercise price
of RMB63,179 per share (the "Exercise
Price"). Assuming Engen issues the maximum number of its ordinary
shares issuable pursuant to the earn out arrangements with Gold
Hero, Silvery Boom and Cosy South, the share option, if fully
exercised, will represent approximately 7.21% of the enlarged share
capital of Engen.
The purpose of the grant is to compensate Mr. Yu for his
contribution to Engen's business and development and to encourage
his future efforts in the expansion of Engen's recycled copper
products business. The option is exercisable immediately and will
expire ten years from the date of grant. Once issued, the Option
Shares are subject to a right of first refusal in favor of Engen
before they can be validly transferred. The Company believes that
when the Option is exercised, Engen will also benefit from an
increase in working capital.
About Gushan Environmental Energy Limited
Gushan is a leader in the China
biodiesel industry, in terms of annual production capacity, and one
of the leading biodiesel producers in Asia, in terms of nominal capacity. Gushan
produces biodiesel, a renewable, clean-burning and biodegradable
fuel and a raw material used to produce chemical products,
primarily from used cooking oil, and by-products from biodiesel
production, including glycerine and plant asphalt. Gushan sells
biodiesel directly to users, such as marine vessel operators and
chemical factories, as well as to petroleum wholesalers and
individual retail gas stations. The Company has seven production
facilities, located in the Sichuan, Hebei, Fujian
and Hunan provinces and in
Beijing, Shanghai and Chongqing, with a combined annual production
capacity of 490,000 tons. Gushan's Sichuan production facility is currently in
operation. Gushan also operates a recycled copper business through
Engen Investments Limited ("Engen"), a 75%-owned subsidiary, that
manufactures copper rods, copper wires and copper granules from
recycled copper. Currently, Engen has two plants, with a daily
production capacity of approximately 210 tons of recycled copper
products.
Safe Harbor Statement
This press release contains forward-looking statements within
the meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements can
be identified by words such as "will," "may," "expect,"
"anticipate," "aim," "target," "intend," "plan," "believe,"
"estimate," "potential," "continue," and other similar statements.
Statements other than statements of historical facts in this press
release are forward-looking statements, including but not limited
to, the Company's expectations regarding the expansion of its
production capacities, its future business development, and its
beliefs regarding its production output. These forward-looking
statements involve known and unknown risks and uncertainties and
are based on current expectations, assumptions, estimates and
projections about the Company and the industry. Important risks and
uncertainties that could cause the Company's actual results to be
materially different from expectations include but are not limited
to the effect of any applicable government policy, law or
regulation, of natural disasters, and of intensifying competition
in the biodiesel and alternative energy industries, the
availability of suitable raw materials to the Company, and the
risks set forth in the Company's filings with the U.S. Securities
and Exchange Commission, including on Form 20-F. The Company
undertakes no obligation to update forward-looking statements,
except as may be required by law. Although the Company believes
that the expectations expressed in these forward-looking statements
are reasonable, it cannot assure you that its expectations will
turn out to be correct, and investors are cautioned that actual
results may differ materially from the anticipated results.
For further information, please contact:
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US
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Asia
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Elizabeth Cheek
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Rico Ngai
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Hill & Knowlton (New York)
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Hill & Knowlton (Hong Kong)
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Tel: (1) 212 885 0682
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Tel: (852) 2894 6204
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Email: elizabeth.cheek@hillandknowlton.com
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Email: rico.ngai@hillandknowlton.com.hk
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SOURCE Gushan Environmental Energy Limited