Zap merges with China's Jonway Automobile
One: Zap has had seven straight annual losses, last making a profit in 2002. Two: Zap is reportedly paying over $29 million in cash that was apparently privately financed through unknown European sources along with 31.5 million shares in Zap... which were newly issues specifically for this transaction. Three: The Chinese authorities have yet to approve of the deal.
With all that out of the way, assuming all goes according to plan, Zap says it wants to offer an electric version of Jonway's A380 SUV for use as a taxi in China. It will reportedly cost around $25,000 and have seating for five. No word on range.
Jonway apparently operates 500 dealerships in China and just completed a new plant with 3.6 million square feet of space. A few months back, Zap and Jonway announced plans to have the three-wheeled Alias built in China. So... those are the facts, at least as best we can figure. See the press release after the break.
ZAP Acquires Majority Stake in China's Jonway Auto
New Company Combines EV Expertise with Mass Auto Manufacturing in China
ZAP and Jonway Group today announced they have signed definitive agreements according to which ZAP will acquire 51 percent of Zhejiang Jonway Automobile Co. Ltd. as part of a strategy to capitalize on the growing automotive and electric vehicle (EV) market in China. ZAP is a 15-year-old California EV company and Jonway Auto is a wholly owned subsidiary of Jonway Group, a 20-year-old Chinese vehicle manufacturer. According to the terms of the definitive agreements, ZAP will acquire 51% of Jonway Auto for US$29.03 million in cash. The boards of directors for ZAP and Jonway Auto approved and signed the merger agreement on July 2, 2010.
Jonway Auto reported annual revenues of approximately US$40 million in 2009 and approximately US$20 million for the first quarter of 2010. According to the terms of the transaction, Jonway Auto will be debt-free upon the closing of the transaction.
According to the terms of the definitive agreements, ZAP has the right to acquire the remaining 49% of Jonway Auto at the same valuation by March 30, 2011 or at a then current valuation after that date. ZAP and Jonway intend this transaction to be phase one of a two-phase acquisition, whereby the two companies will combine their complementary expertise, leveraging ZAP's EV technology and Jonway Auto's quality ISO 9000 certified mass production capabilities to address the new alternative energy vehicle market. ZAP intends to acquire the remaining 49 percent of Jonway Automobile following completion of the first phase and following final regulatory approval.
The ZAP Jonway merger accelerates cost-effective manufacturing of ZAP's electric vehicles and gives ZAP access to the Chinese market through Jonway's distribution channels of more than 80 factory direct dealerships that feed into hundreds of factory authorized dealers. Jonway's volume manufacturing capacity gives ZAP a strong manufacturing base with the means of commercializing its innovative EV technologies.
"By combining ZAP's experienced team of EV engineers with Jonway's manufacturing capabilities, the combined ZAP Jonway will be able to scale up with the fast-growing worldwide market for affordable electric and fuel-efficient vehicles," said Steve Schneider, CEO of ZAP Jonway. "The new entity will leverage ZAP's extensive intellectual property and international market access with Jonway's current China distribution channels and revenue base, for enhanced shareholder value. The new company creates an integrated worldwide sales and manufacturing operation."
According to Dr. Priscilla Lu, ZAP Board Chair: "As originally planned when I 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 manufacturer. 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."
Jonway Automobile, with approximately 800 employees, is currently manufacturing approximately 1,000 vehicles per month and has a capacity to produce up to 30,000 vehicles per year at its modern, 3.6 million square foot plant in Sanmen on approximately 141 acres of land. Focused on quality, Jonway is ISO 9000 and China Compulsory Certification (CCC) certified. Jonway distributes through a nationwide network of auto dealerships in China and distribution partners in Europe and Egypt. Jonway's 3-door SUV has been CE approved in Italy by its European partner for the European market.
"ZAP's engineering enables us to expand into the EV market and position our company to be one of the leaders in China's EV market," said Alex Wang, CEO of Jonway Automobile. "The ZAP team also brings us international market access and automotive distribution channels for the new models that we are designing, and ZAP will help us meet the required international standards for these new markets."
Earlier this year, ZAP integrated electric drive systems into several Jonway vehicles through its joint venture ZAP Hangzhou. These vehicles are now being showcased and used as electric taxis at the Shanghai Expo. Jonway has also agreed to produce the ZAP Alias electric car, which is now one of the remaining 15 finalists in the Progressive Insurance Automotive X PRIZE competition. ZAP is also one of the five companies selected by the United States Postal Service to engineer and retrofit a gas powered delivery van with a 100 percent electric power train.
Dr Priscilla Lu added, "The new ZAP Jonway combined company enhances the complementary strengths of each, and uniquely positions the company in the EV market. Jonway Automobile has quality mass production manufacturing as well as access to the Chinese automobile market. ZAP can now apply its in-depth experience in EV technologies and engineering integration know-how to produce a new line of EV models for Jonway Automobile and provide access to worldwide international distribution channels. Jonway, with physical asset value assessed at around US$60 million in land, buildings and modern manufacturing facilities, is cash flow positive, debt-free, has growing revenues, and offers shareholder value for ZAP. ZAP Jonway has now become a significant automotive manufacturer/distributor worldwide".
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