Rakon sells Chinese subsidiary stake
Rakon has sold the majority of its Chinese subsidiary Rakon Crystal to Chinese-listed firm ZheJiang East Crystal Electronic (ECEC).
Rakon, the NZX-listed manufacturer of crystal timing devices used in electronics, said that ECEC, a specialised electronic components manufacturer listed on the Shenzhen Stock Exchange, would buy 80 per cent of the shares in Rakon Crystal for US$18.8 million (NZ$24m).
Rakon Crystal owns a manufacturing facility in Chengdu, China.
Rakon went into a trading halt shortly before midday today pending the announcement. The halt has since been lifted.
The company's stocks were trading at 27 cents shortly after the announcement, up 3 cents from this morning.
The acquisition would result in a new joint venture ownership of Rakon Crystal, with Rakon holding 5 per cent of the company's shares and existing partners continuing to own the other 15 per cent, Rakon said.
ECEC had expressed an intention to buy a stake of up to 5 per cent of Rakon's shares on-market, the company said.
The acquisition would see Rakon and ECEC working together in the areas of technology, capital, management and markets for smart wireless devices (SWD) by sharing resources and capabilities, it said.
In the 12 months to March 31 Rakon's core business (which excludes SWD) accounted for 70 per cent of the company's $176.3 million sales revenue.
Rakon's revenue was down 1 per cent on the previous year.
The company also posted a full-year net loss after tax of $32.8m in its results released on May 23, which saw its share price fell 25c to close at 21c.
Rakon reported $36.1m of debt for the year.
Directors had previously announced plans to reduce debt to less than $15 million by the end of the 2014 financial year.
However, the new agreement meant debt could be reduced both earlier and to below the target of plans previously announced, Rakon said.
Managing director Brent Robinson said the company's Chengdu plant enabled the joint venture to be at the centre of manufacturing for consumer electronics, supplying components to the world's leading manufacturers and to the smartphone market.
ECEC would fund the expansion of the Chengdu plant enabling the joint venture to achieve greater scale, Robinson said.
"It's a purpose-built plant with considerable capacity to be expanded from its current 20 per cent utilisation," he said.
Rakon also had a joint venture in India with Centum that worked well, Robinson said.
"[We] can see similar benefits being achieved through a partnership with ECEC," he said.
Bringing ECEC into the joint venture would enable Rakon to benefit from having low-cost, high-volume manufacturing expertise and access to Chinese capital markets, Robinson said.
"This change will enable Rakon to enhance its focus on the high-margin markets where we currently see growth and profit opportunities that can be driven by our significant technical strengths and differentiation" he said.
The final sale and purchase agreement would be established by the end of September and a full update would be provided with interim result announced in November.