China Securities Journal reported that Hunan Corun New Energy, a producer of nickel products and batteries, plans to fully acquire Yiyang Hongyuan Rare Earth through a combination of cash and share issuance.
Corun will purchase equity held by natural person Cao Youmin, shareholder of the rare earth company which has an appraised value of CNY 1.22 billion.
Corun will issue 48.13 million shares to Cao at CNY 20.28 per share to purchase the 80% stake and will issue shares to 10 designated investors to raise up to CNY 325 million to finalize the proposed acquisition.
The company will use CNY 244 million of the CNY 325 million to purchase the remaining 20% stake held by Cao, with the remaining proceeds to be used for operating needs.
Following the restructuring, Corun will fully own the rare earth company, while natural person Zhong Faping will remain as the largest shareholder. Cao will become the second largest shareholder of the company with a stake of 12.7%. Cao gave a commitment not to sell his stake within a 36 month period.
In September 2011, Corun said it planned to acquire the target company and announced in January 2012 acquisition plans were halted as it could not accurately predict the company's value due to large fluctuations in rare earth prices. Corun restarted the acquisition plan after five months.
Yiyang Hongyuan Rare Earth recorded 2011 net profit of CNY 276 million on revenue of CNY 716 million, while Corun posted net profit of CNY 16.45 million on revenue of CNY 2.38 billion.
The target company was the only company in Hunan to have rare earth metals export quota, accounting for 4.17% of the total national quota in 2011.
An insider in Corun said the success of the acquisition will further improve the company's competitiveness and could allow Corun to provide rare earth to its factory in Japan.
