Mergermarket, August 2014
Chinese motor manufacturer Zhongshan Broad-Ocean Motor (Da Yang Dian Ji) [SHE: 002249] aims to complete at least one acquisition in the US or Europe by the end of 2015, Director of Investment Zhonghua Liu said.
The CNY 10bn (USD 1.6bn) market cap company is searching for new energy vehicle drive motor makers; those with advanced technology in permanent magnet synchronous motors (PMSM) are the most ideal targets. Manufacturers of other types of new energy vehicle drive motors would also be considered.
Broad-Ocean could spend up to USD 100m on the deal. It has not hired financial advisors especially for potential buys and would welcome approaches, Liu said. China Galaxy Securities is the company’s current financial advisor with Shinewing CPA as auditor.
Targets from Japan or other markets would also be considered, as long as the target owns the technology it needs, Liu added.
The company sees great potential in new energy vehicle business and is therefore looking to quickly boost its presence in the sector via acquisitions. If the potential target had a solid overseas customer base, it would add extra value, but this was not a must, Liu said.
A potential target could be Colorado, USA-based UQM Technologies, according to Bill Russo, founder of Shanghai-based advisory firm Synergistics. He noted that UQM has got both a commercialized PMSM solution with high-kilowatt power and high torque, as well as other systems that can serve the mid-market applications. UQM is more focused on higher payload and higher RPM speed type of applications compared to other companies such as Remy International [RMYI: US].
In order to narrow the technology gap, Chinese players need to make acquisitions; they have a market as the government is likely to build the needed infrastructure for new energy vehicles including refueling or recharging stations, Russo explained, adding that because UQM has received grants from the US government’s Department of Energy, a potential sale to a Chinese player could prove to be politically controversial.
A person familiar with UQM said if the terms and conditions were right, it could consider an outright takeover offer from companies like Broad-Ocean, adding that the company is always looking to build relationships with customers or suppliers.
Broad-Ocean’s revenue increased over 18% to CNY 3.27bn in 2013. Gross profit increased 25% to CNY 603m. The company provides a variety of motors, including those for air conditioners. Motors for air conditioning units are its current core business, accounting for over 65% of total sales.
by Wentao Wang in Sydney, Riccardo Ghia in Hong Kong and Sam Weisberg in New York