Longwei announces financing plan
for purchase of Haujie Petroleum assets
May 10, 2011 12:27 PM
Longwei Petroleum Investment Holding Ltd announced its plan for financing the acquisition of the assets of Haujie Petroleum Co Ltd. The company has entered into a letter of intent to acquire the assets of a fuel storage depot, with a 100,000-metric-ton storage capacity, in northern Shanxi Province for RMB 700 million (approximately US $106.5 million). The company expects the facility to contribute approximately $300 million to revenues and $40 million to net income during the fiscal year ending June 30, 2012.
Longwei has previously stated that it intends to finance the asset acquisition using a combination of cash on hand, bank and other financing, and working capital assets. To further clarify its plans, the company has increased its deposit paid from about US $20 million to US $32.8 million as of March 31, 2011 and will finance at least 50% of the asset acquisition through cash on hand. The balance of the 50% purchase price will be financed through either debt or equity financing. The company has stated it will not use its common stock to finance more than US $25 million of the asset acquisition price at a per-share price of no less than US $3. If the company cannot establish suitable terms for debt or equity financing, it will complete the purchase price using cash generated through operations. Longwei intends to close the asset purchase on or before June 30, 2011.
The company signed a letter of intent with Shangxi Jiangtong Chemicals Co Ltd to acquire the assets of Haujie, Jiangtong’s wholly owned subsidiary, for RMB 700 million (about US $106.5 million). The assets of Haujie include land-use rights for 98 acres of land, 100,000-tonnage fuel tanks with accessory facilities and equipment, a special transportation railway line, and a 3,000-square-meter office building. The assets are in Xingyuan Township, Fanshi County (south of the main train station) in northern Shanxi Province, China.
Based on an anticipated 25% minimum annual growth rate in its organic business due to increasing demand and rising prices for finished petroleum products, the company anticipates that its Taiyuan and Gujiao facilities will contribute $625 million to revenues and $85 million to net income on an adjusted basis for the fiscal year ending June 30, 2012. On a combined basis with the newly acquired assets, total revenues for the fiscal year ending June 30, 2012 are anticipated to be about $925 million and net income to be $125 million.
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