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JunHe Advises NEVS and SRIT on the Acquisition of NLM Motor

2016.11.24

In August 2015, National Electric Vehicle Sweden AB (NEVS) and State Research Information Technology Co., Ltd. (SRIT) set out a share transfer agreement to acquire a stake in Fujian New Ryoma Automobile Co., Ltd. (“NLM Motor”). Pursuant to the agreement SRIT and NEVS would purchase a portion of shares held by Fujian Motor Industry Group Co., Ltd. (“FJ Motor”) and Longyan Longma Motor Industry Co., Ltd. (“LY Motor”) in NLM Motor, representing 65% of the share capital of NLM Motor, and thereby enter into a joint venture among the parties thereto in China focusing on electric vehicles.  This project is one of the biggest transactions in recent years for cross-border investments and acquisitions in the automotive sector in China..

 

Incorporated in Longyan, Fujian Province in 1997, NLM Motor has the capacity to produce 150,000 vehicles and 300,000 engines annually.  Jointly formed by FJ Motor, LY Motor and other shareholders, NLM Motor is a key State-owned enterprise in Fujian Province.  Since its inception, however, due to its single product line, insufficient capacity utilization and low market share, NLM Motor has never had the ability to improve its profitability on its own and mired in various difficulties.

 

NEVS, which acquired the majority of Saab Automobile assets, has well-established facilities and R&D capabilities for the manufacturing of new energy vehicles.  Upon the completion of this transaction, it plans to focus on the new energy segment, upgrade existing products by utilizing the Saab technologies related to new energy motor, and introduce the EV-optimized Phoenix platform to build NLM Motor into the only new energy motor manufacturing base for EVs based on the Phoenix platform, MINI buses and electric freight vehicles in South China and seize the advantage from the competition in the automotive industry in China.

 

This transaction involves multiple parties, including a foreign enterprise, a well-known domestic government-owned enterprise and a large local State-owned enterprise.  Parties with different cultures and backgrounds exacerbated the difficulties of negotiation and implementation of the project.  Moreover, this transaction is quite complex in structure, covering cross-border acquisition by the foreign company, establishment of a Sino-foreign joint venture in China, as well as matters involving the automotive industrial policy, re-investment into foreign-invested enterprise and transfer of State-owned interests.  This project kicked off in early 2016 and concluded in August 2016, lasting more than six months.  By offering sophisticated legal expertise, extensive professional experience and rigorous work ethic, the JunHe team ultimately helped the clients successfully execute the transaction documents with the other parties to the project after several onsite negotiations, as well as review and revision of transaction documents.

 

Acting as counsel for NEVS and SRIT in this project, the JunHe team provided strong legal support in relation to Chinese law issues involved in this project.  The legal services provided by the JunHe team include, inter alia, performing full legal due diligence on the target, advising on the design and demonstration of transaction structuring, representing the clients during negotiations of the project, reviewing and revising transaction documents.  The JunHe team will further assist the clients consummate the onshore transaction and transfer of State-owned assets which constitute a part of the cross-border acquisition.  JunHe wins praise from both the clients and the counterparties to the transaction for its outstanding performance in this project.

 

Partner LIU, Shijian (Jason) led the JunHe team for this project.

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