Qiao Xing Universal Telephone, Inc., one of China’s largest manufacturers and distributors of telecommunications products, has announced the acquisition from the minority shareholder the remaining 20% equity interest of Qiao Xing Mobile Communication (QXMC) – a company registered in the British Virgin Islands and holding a 93.4% interest in the Chinese-foreign joint venture CEC Telecom (CECT) for $43 mn USD. This amount is expected to be paid partly in cash and partly in shares of Qiao Xing Universal Telephone. The valuation of QXMC was based on the implied valuations from the convertible debenture that was completed in June 2006.
Qiao Xing Universal Telephone has agreed to the DKR Management on the issuance of $24mn USD in stock and 26mn USD in a convertible provided Funds for the acquisition of the 20% minority interest in QXMC. The terms were finalized on September 18 and consist of 2 million shares placed at $12 and a CB with a conversion price of $14.30.
The acquisition should be finished at the end of December 2006, and the closing remains subject to customary closing conditions. Qiao Xing Universal Telephone decided to acquire the BVI company based on the historical operating performance of CEC Telecom, and also the strategic consideration of converting QXMC into a 100% subsidiary to regulate the ownership structure of CEC Telecom.
According to a recent Sino Report, BVI company owned CEC Telecom’s market share is 1/10 among all mobile phone brands and 1/4 among local Chinese brands. Although it has relatively higher selling prices than most local brands, it has increased its market share, possibly due to the flexibility to other differentiated products.
Qiao Xing Universal Telephone, Inc. has grown its net sales from approximately $46.4 million in 1997 to $356 million in 2005. The Company’s product portfolio includes telecommunications terminals and related products, including fixed wireless phones, VoIP telephones, advanced mobile phones, PDAs and consumer electronic products. Last week the company announced on significant increase in operating income in the second quarter 2006.