Ballard Power Systems recently announced that the Company had successfully closed a strategic collaboration transaction with Weichai Power Co., Ltd. Ballard provides clean energy products that reduce customer costs and risks, and helps customers solve difficult technical and business challenges in power and energy.
– Total gross proceeds of $183.8M at $3.54 per share
– New China joint venture and $90M technology transfer program
"This strategic collaboration with Weichai – a leading automotive equipment manufacturer specializing in the production of powertrains, automobiles, intelligent logistics, automotive parts and components – underscores our high conviction in the opportunity for Fuel Cell Electric Vehicles, or FCEVs, in China's Heavy Duty Motive market," stated Randy MacEwen, Ballard President and CEO. "We see our collaboration with Weichai as an important validation of the FCEV value proposition and Ballard's technology leadership in PEM fuel cells. We expect our partnership to be a positive long-term catalyst for Ballard's business and for shareholder value."
Ballard's strategic collaboration with Weichai includes the following key elements:
i. Equity Investment – an equity investment in Ballard has been made by Weichai in the amount of approximately $163.6 million, representing a 19.9% interest in the company, through the subscription and purchase of shares from treasury at a price of $3.54, which reflects a 15% premium to the 30-day VWAP of $3.08.
In addition, Zhongshan Broad-Ocean Motor Co., Ltd. – a current Ballard strategic investor and Chinese partner – has invested a further approximately $20.2 million, through the subscription and purchase of shares from treasury at the same price of $3.54 to maintain its 9.9% ownership position in Ballard.
As a result, the Weichai and Broad-Ocean equity investments in Ballard have generated total gross proceeds of approximately $183.8 million. The use of proceeds are expected to include investment in Ballard's core fuel cell business, equity contributions to a joint venture company established by Weichai and Ballard to finance Ballard's ownership position in the joint venture's operations, and support of potential M&A transactions.
The Weichai and Broad-Ocean investments are subject to 2-year "standstill" and resale restrictions (subject to customary exceptions). For so long as Weichai holds at least 15% of Ballard's outstanding shares, it will have the right to nominate two directors to Ballard's board of directors, and Ballard will expand its board from the current seven directors to nine directors. Weichai has also agreed that, in the event of a third-party offer to buy Ballard, Weichai will have the right to make a superior proposal or otherwise must vote its shares in accordance with the Ballard board recommendation.
ii. China Joint Venture and Technology Transfer – Weichai and Ballard will establish a joint venture company in Shandong Province to support China's Fuel Cell Electric Vehicle market, with Ballard holding an initial 49% ownership position. The JV will manufacture Ballard's next-generation LCS fuel cell stack and LCS-based power modules for bus, commercial truck and forklift applications with exclusive rights in China and will pay Ballard $90 million under a program to transfer technology to the JV in order to enable these manufacturing activities. The JV will purchase Membrane Electrode Assemblies for LCS fuel cell stacks exclusively from Ballard under a long-term supply agreement.
Weichai and Ballard will fund pro rata shares of the JV based on an agreed business plan. Weichai will hold three of five JV board seats and Ballard will hold two, with Ballard having certain shareholder protection provisions. Ballard will also retain an exclusive right to the transferred technologies outside China.
Broad-Ocean has also expressed an interest in acquiring a 10% ownership position in the JV, which would correspondingly reduce Ballard's ownership position from 49% to 39%. Discussions regarding this investment are currently underway between the parties.
iii. Fuel Cell Sales – Weichai intends to build and supply at least 2,000 fuel cell modules by 2021 for commercial vehicles using Ballard technology. Specific terms related to the scope of supply, product mix, pricing and timing of shipments are under discussion between the parties.
Ballard is continuing discussions with the Synergy-Ballard joint venture and other partners in China to address current issues and future opportunities.
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