Lixun Precision (002475.SZ) plans to acquire shares in Leoni AG and its wholly-owned subsidiary to advance the globalization process of the company's automotive business

Zhitong Finance App News, Lixun Precision (002475.SZ) issued an announcement. In order to accelerate the globalization process of the company's automobile business and enhance the overall competitiveness of the company's automotive wiring products in the global market, the company held the 3rd meeting of the 6th board of directors and the 3rd meeting of the 6th board of supervisors on September 13, 2024 to deliberate and pass the “Proposal on Acquisition of Shares in Leoni AG and its Wholly-owned Subsidiaries”. Through this equity transaction, the company plans to acquire 50.1% of Leoni AG (hereinafter referred to as “Leoni Company”) and 100% of the shares of Leoni KabelGmbH (hereinafter referred to as “Leoni K”), a wholly-owned subsidiary of Leonia G.

Leoni AG has two core businesses: Automotive Cable Solutions Division (hereinafter referred to as “ACS Business” or “Automotive Cable Division”) and Wiring System Division (hereinafter referred to as “WSD Business” or “Wiring Harness Systems Division”). Among them, the main operator of the ACS business is Leoni K, and the main operator of the WSD business is Leoni Bordnetze Systeme (hereinafter referred to as “Leoni B”), another wholly-owned subsidiary of Leoni AG. Prior to this transaction, Leoni B owned 4 wholly-owned subsidiaries Leonische Holding, Inc., Leoni Cable S.A. de C.V., and Leoni Cable de Chihuahua S.A., which operated the ACS business. To ensure the smooth running of this transaction, L2-Beteiligungs GmbH, the sole shareholder of Leoni AG (hereinafter referred to as “L2-” L2- “Beteiligungs” or “seller”) will induce the above four companies to complete the asset restructuring of their subsidiaries according to the business segment before the equity settlement date.

After review and approval by the board of directors, the company will sign a “SHARE PURCHASE AGREEMENT” (hereinafter referred to as “SPA ACS” and “SPA WSD”, collectively referred to as the “SPA Agreement”) with L2-Beteiligungs, Leoni AG, and other parties involved in the transaction, respectively, on transactions related to ACS business and WSD business. The transaction structure agreed upon in the SPA agreement is as follows:

ACS business-related transaction: Luxshare Precision Limited (“Hong Kong Lixun”), a wholly-owned subsidiary of the Company, and Time Interconnect Technology Limited (“Huiju Technology”), a holding subsidiary of the Company, jointly established Time Interconnect Singapore Pte. Ltd. (hereinafter referred to as “Singapore Convergence”), with a registered capital of US$400,000, of which Hong Kong Lixun holds 51% of the shares of Singapore Convergence and Huiju Technology holds 49% of the shares in Singapore Convergence. Thereafter, Singapore Convergence will acquire 100% of the shares of Leoni K held by Leoni AG for a transaction consideration of €320 million. If the consolidated net asset value of Leoni K shown in the delivery statement provided by Leoni AG is lower than the transaction consideration on the 60th or 60th day after the delivery date, the purchase price should be adjusted downward, and the difference will be returned to the bank account under the Singapore Gathering name. After the transaction is completed, Leoni AG will continue to hold 100% of the shares of all operators related to the WSD business, including Leoni B.

WSD business-related transactions: Luxshare Precision Singapore Pte.Ltd. (hereinafter referred to as “Singapore Lixun”), a wholly-owned subsidiary of the company, will acquire 50.1% of Leoni AG held by L2-Beteiligungs for a transaction consideration of 205.41 million euros, corresponding to 25.05 million shares. The remaining 49.9% of Leoni AG's shares will continue to be held by L2-Beteiligungs.

According to the announcement, Leoni has a history of development for more than 100 years as the world's leading supplier of cable, wire and harness system solutions. Its main products cover standardized cables, special cables, and custom-developed wiring systems and related components, which are widely used in the automobile manufacturing industry, communications industry, pharmaceutical equipment industry and other fields. With this acquisition, on the one hand, it helps the company to achieve resource exchange, complementary advantages and strategic collaboration with Leoni in product development, market expansion, customer access, capacity layout, material procurement, etc., and while improving its own operational efficiency and R&D innovation capabilities, it quickly forms the company's differentiated competitive advantage in the field of global automotive wiring harnesses, and provides more convenient and efficient vertical integration services for Chinese car companies to go overseas and traditional overseas car companies.

On the other hand, on the basis of summarizing and refining valuable endogenous epitaxial experiences, the company combines the advantages of process optimization, vertical integration, and factory operation accumulated over many years to provide Leoni and Leoni K with optimization and empowerment in open source savings and business development, including but not limited to finance, business, procurement, production, personnel structure, internal control, etc., to help Leoni and Leoni K achieve better business performance in the future.