GS YUASA Battery Co., Ltd. is striving to establish a strong presence in the lead-acid and lithium-ion battery markets by combining with Lishi International

On July 25th, Gronhui International (00842. HK) announced that on July 25th, 2023, its wholly-owned subsidiary Leoch Battery Company Limited intends to acquire 70% of the equity of each target company (collectively referred to as Tianjin Jieshi and Shunde Tangqian) from the seller GS Yuasa International Limited, with an initial cash consideration of approximately RMB 206.4 million. After completion, each target company will become a subsidiary of the company with 70% equity, and their respective financial performance, assets, and liabilities will be consolidated into the group's financial performance.

It is reported that Tianjin Jieshi is a company established in China in 1991, mainly engaged in the manufacturing and sales of lead-acid batteries for automobiles, with over 30 years of battery manufacturing experience. Tianjin Jieshi has become an excellent supporting supplier for many globally renowned automobile manufacturers, with over 20000 POP service points in the national after-sales market and three major brands including GS batteries. As of the announcement date, it is owned by 92.5% by the seller and 7.5% by Guangdong Tangshen.

Shunde Tangqian is a company established in China in 2002, specializing in the development, manufacturing, and sales of YUASA Tangqian brand lead-acid batteries for automobiles and motorcycles. Since Shunde Tangshan started production in 2003, its products have been matched with major automobile and motorcycle factories such as Honda, Suzuki, Southeast, Mitsubishi, Toyota, Mazda, etc., and are sold in the domestic after-sales market. They are also exported to countries such as Japan and the United Kingdom. High quality products and services have received unanimous recognition and praise from a large number of users, and have been recognized as excellent suppliers and quality excellence awards over the years. As of the announcement date, it is fully owned by the seller.

The announcement states that the target company is mainly engaged in the development, manufacturing, and sales of lead-acid batteries for automobiles and motorcycles, which is consistent with the main business of the group. The target company has a great reputation in the market and has considerable growth prospects in its field. The company has been looking for opportunities to expand its business scale and market share by acquiring companies that are well managed, technologically advanced, and engaged in its main business. The target company meets the selection criteria, and the board of directors believes that the acquisition provides a golden opportunity for the group to further expand its business scale and scope, increase market share, and enhance its competitiveness in China, which is in line with the group's strategic needs. Due to shared resources such as technical know-how, shared marketing and sales teams, as well as economies of scale, it is expected that the acquisition will create synergies for the group and target company. Given that the target company is one of the world's largest manufacturers of lead-acid batteries for automobiles, the merger between the group and the target company will create a unique strategic position in the market positioning. In addition, by utilizing the technology and quality of the products manufactured by the target company, the group will receive necessary capital and technical support to attract high-quality and large target and/or other strategic market participants to further expand and consolidate their business. In addition, the group expects to achieve significant long-term benefits by combining the expertise of the target company with the well-established distribution channels established by the group in China. The joint venture agreement to be signed between the buyer, seller, and Guangdong Tangqian will record the rights and obligations of each contracting party, as well as the arrangements between the contracting parties regarding the ownership, management, and operation of the target company, and does not involve any capital commitments of the group. The put option arrangement aims to promote the relationship between all parties in order to better develop the joint venture and encourage all parties to fulfill their respective obligations and responsibilities.

Guangdong Yuasa  Battery Co., Ltd. mainly produces energy storage batteries, which are independently operated by YUASA and have no connection with Lishi International