SANTA ROSA, Calif.--Electric-vehicle-maker Zap today announced it will acquire 51 percent of Jonway Automobile Co. Ltd. as part of a strategy to tap into the growing automotive and EV market in China.
In the agreement, Zap will acquire controlling interest in Jonway for $29.03 million in cash with an addition to acquire exclusive international distribution rights to Jonway's vehicles for about 31.5 million shares of Zap common stock (valued at $1 per share, according to Zap). Zap has to right to acquire the remaining 49 percent of Jonway by March 30, 2011 at the same valuation.
According to the announcement, Jonway reported revenues of about $40 million in 2009 and about $20 million for the first quarter of 2010. Jonway will be debt-free upon the closing of the transaction. Jonway employs 800 workers and can manufacture about 30,000 vehicles per year. The Jonway plant is a 3.6 million sq. ft. facility on about 141 acres of land.
Zap, a veteran in electric-vehicle production, looked at several companies the world over but decided on Jonway as a partner because of the company's strong reputation and attention to quality.
"This particular family has focused on quality. It will really make things easy for us on a global scale," said Steven Schneider, chief executive officer and director for Zap, in a conference call on Wednesday. Schneider added that Zap's focus, in its 15-year history, has been to capture the fleet vehicle, or the route-fixed, market.
Schneider said most American drivers have "range anxiety" when it comes to investing an all-electric car. That's why Zap's focus has been unique: most of Zap's vehicles go to companies, universities, and municipalities. Zap recently converted a U.S. Postal Service truck to an all-electric vehicle. The electric postal truck is currently on its way to Washington D.C. where it will be put to the test on a route.
Schneider said, Zap plans a two-phase acquisition with Jonway; both U.S. and China production facilities will have the same goal--a worldwide distribution network. Currently, Jonway distributes through a nationwide network of auto dealerships in China along with partners in Europe and Egypt. Jonway's three-door SUV has been CE approved in Italy by its European partner for the European market, Schneider said.
Zap's board of directors approved the agreement on July 2, 2010. Director and Board Chair Priscilla Lu, Ph.D., said in a conference call that when she originally joined Zap in connection with the Cathaya Funds' investment in the company, the Jonway transaction was formulated to give Zap the complementary facilities and automotive manufacturing expertise to position itself as a worldwide EV and automobile manufacturing. "Jonway's management continues to lead and expand its product line of traditional vehicles and will begin to build the production line for Zap's EVs in the coming quarters. Zap will enhance its operations management team to focus on delivering the opportunities at hand," Lu said.
At the close of the market on Wednesday, Zap (OTCBB: ZAAP) was trading at $0.45, up $0.05.