China New Energy to acquire BAPP Ethanol Holdings

By China New Energy | December 19, 2013

The Board of China New Energy, an AIM quoted engineering and technology solutions provider to the bioenergy sector, announced it has entered into a memorandum of understanding (MOU) to acquire BAPP Ethanol Holdings Ltd., a wholly owned subsidiary of Sino Distillery Group Ltd., a company listed on the Hong Kong Stock Exchange.

Prior to the completion of the above-mentioned acquisition, the target needs to carry out restructuring. Following restructuring, BAPP will have an indirect 75 percent interest in Harbin China Distillery Company Ltd., an owner and operator of a 60,000 metric ton per annum biorefinery near Harbin in North East China. The remaining 25 percent interest in the Harbin China Distillery Company Ltd. is held by a state-owned company in Harbin.

The terms of the transaction are subject to further due diligence by CNE and further negotiation between CNE and SDG. Upon satisfactory completion of this due diligence, the consideration for the transaction is expected to be approximately RMB150 million (c. GBP15 million or $24.57 million) which will be satisfied by a mixture of equity and convertible bonds.

Except the confidentiality clause, exclusivity clause and governing law and jurisdiction clause, the terms of the MOU are not legally binding and there will be no guarantee that the above-mentioned acquisition will proceed.

If completed, the acquisition of BAPP will help CNE meet its stated strategic goals of expanding its core operation from an EPC company to an operating company. As well as providing a showcase for the company's energy efficiency technology and second generation cellulosic biofuel production technology.

Pursuant to AIM Rules 14, the transaction, if completed, would constitute a reverse takeover and therefore the Company has requested that its shares be suspended from trading on AIM pending an admission document being posted to shareholders or discussions between the Company and SDG ceasing.

Yu, chairman of CNE commented, "If completed, the transaction will be an incredible milestone for CNE; we will gain a valuable recurring revenue stream from operating the bio-refinery in Harbin and the opportunity to build a commercial scale second generation cellulosic biofuel plant that will serve as a reference site to promote our skills and services to Chinese and International sales prospects."