China Holdings Acquisition Corp. maintains a focus on acquiring companies with primary operations in Asia. The company announced Friday a definitive share purchase agreement in which it will acquire Jinjiang Hengda Ceramics Co. Ltd., a leading Chinese ceramic tiles manufacturer, for 5,743,200 shares valued at approximately $56.2 million. The deal is expected to close November 21, 2009, resulting in the formation of China Ceramics Co. Ltd.
Hengda Ceramics currently has one production facility with nine manufacturing lines, and is in the process of executing a series of phases to build a 12-line production facility by the end of 2011, with the first phase expected to be completed next month.
â€œOur proposed acquisition of Hengda Ceramics presents our shareholders with a compelling opportunity to participate in the continued urbanization of China as well as the countryâ€™s investment in residential and commercial infrastructure,â€ Paul K. Kelly, chairman and CEO of CHAC stated in the press release. â€œThis opportunity reflects our stated objective to establish a platform in China by acquiring a company with a leadership position in its industry and a proven track record of growth. Their expansion through the construction of a new facility in Gaoan to meet growing market demand should help better position the company for the future.â€
Hengda Ceramicsâ€™ market position and financial standing were part of the appeal. The company reported 2008 revenue at USD$113.4 million and 2008 net income at USD$42.1 million. The ceramics manufacturer realized a revenue compound annual growth rate (CAGR) of 25.1% and net income CAGR of 23.9% – net income CAGR from 2009 to 2011 is expected at 36.8%.
â€œThrough its focus on quality control, research and development and manufacturing, Hengda has positioned itself as a leader in the ceramic tile industry and delivered year-over-year growth in revenues and profitability in the last three years,â€ Kelly stated. â€œWeâ€™re impressed with the many accomplishments of Hengdaâ€™s management team and we look forward to working with them, and Hengdaâ€™s employees, to build upon the strong foundation theyâ€™ve created and helping the company achieve even greater success in the future.â€
According to the press release, Hengda Ceramics owns 33 design patents and four utility patents in China. Though its domestic sales attribute for 95% of products sold, the company has exported products to Japan, Russia, Eastern Europe, South Korea, United Kingdom, Thailand, Spain, Turkey and Egypt, proving its flexibility and expansion abilities.
â€œWe believe that the timing and the valuation of this acquisition will prove to be an appealing way for China investors to participate in the countryâ€™s construction industry growth,â€ added Jim Dunning, president of China Holdings Acquisition Corp.