The share price of Kenon Holdings Ltd. (NYSE: KEN, TASE: KEN), controlled by Idan Ofer, is up by more than 22% on the Tel Aviv Stock Exchange this morning, after the company announced the sale of its control in Chinese car venture Qoros. Kenon said that "a China-based investor related to the Baoneng group" had agreed to invest approximately RMB6.63 billion (approximately $1 billion) for a controlling interest in Qoros, of which Kenon owns 50%, the other 50% being owned by Wuhu Chery Automobile Investment Company Limited, a subsidiary of Chery Automobile Co. Ltd.
Kenon's statement said that it will have a put option to sell its entire remaining stake in Qoros for $480 million in two stages, and the investor will have an option to increase its stake to 67%. The agreement provides for repayment of existing shareholder loans in Qoros ($145 million each owed to Kenon and Chery); the investor will assume its proportionate obligations under shareholder commitments relating to existing Qoros debt; and the investor has committed to significant vehicle purchases.
The Baoneng group is owned by Yao Zhenhua, recently ranked the fourth richest person in China.
The approvals for the Qoros ownership change have been obtained from the relevant office of the Chinese Ministry of Commerce and the new shareholding structure was registered with the relevant regulatory authority. As a result, the investor now owns 51% of Qoros, and Kenon and Chery's equity interest in Qoros is 24% and 25%, respectively.
The Investment is based on an RMB6.5 billion pre-investment valuation of Qoros (approximately $1 billion), excluding RMB1.89 billion (approximately $290 million) of existing shareholder loans. The Investment Agreement provides for total funding by the investor of RMB6.63 billion, of which RMB6.5 billion will be ultimately invested in Qoros's equity and RMB130 million (approximately $20 million) of the investment will be paid to Kenon.
Following the change in shareholding, Chery is required to repay Kenon a portion of the amounts previously advanced to Qoros by Kenon on behalf of Chery, of approximately RMB120 million (approximately $18 million) out of the total RMB244 million (approximately $38 million) previously advanced.
Any changes in the equity holdings of Qoros as among Kenon, Chery and the investor, including as a result of exercising the put option or investment right as described below, will result in adjustments to the respective parties' pro rata obligations under the Qoros' bank guarantees and pledges.
In addition, the investor has committed that it, or its affiliate, will purchase approximately 100,000 vehicles from Qoros each year in the next three years.
Kenon has an outstanding loan of $69 million with Ansonia Holdings Singapore B.V., a significant shareholder of Kenon. Kenon is required to use the RMB130 million in proceeds that it received from the Investment to repay the loan.
Qoros is seeking consents from its bank lenders for the assumption by the Investor of its pro rata share of the guarantee obligation under Qoros' RMB1.2 billion credit facility and for the repayment of the shareholder loans.
The agreement for the sale of a controlling interest in Qoros to Baoneng is a lifesaver for Qoros, which has been unable to make headway, despite the huge investments in it and the heavy losses suffered by its shareholders. Qoros, founded by Kenon and Chery, develops and markets cars with regular, hybrid, and electric engines in the Chinese market and worldwide. Its losses to date total nearly $1.6 billion.
Qoros is Ofer's second money-losing auto venture, after the Better Place electric car venture collapsed several years ago. Ofer invested in Better Place through Israel Corporation (TASE: ILCO ), together with entrepreneur Shai Agassi. Over NIS 3 billion invested in Better Place was lost.
Published by Globes [online], Israel business news - www.globes-online.com - on January 9, 2018
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