Borqs’ acquisition target, KADI, received clearance from customer for commercial production of its electric vehicle control modules

Borqs Technologies Inc (NASDAQ:BRQS) announced that its acquisition target Shanghai KADI Machinery Technology Co Ltd (KADI) has received clearance from an end-user for production and delivery of its electrical vehicle control modules.

The company said that the end-user is Dong Feng Motors Groups’s Super Dragon Electric Bus Program which tested samples from KADI over a six month period.

As quoted in the press release:

Such products represent about 10% of a RMB 320 million supply contract (equivalent to US$50 million at the current exchange rate) for EV control modules to be delivered over a two-year period, awarded to KADI by the automotive contractor – Shenzhen Espirit Technology Co., Ltd.

KADI’s control module designed for Dong Feng Bus is a 3.0KW DCDC converter that converts from a high voltage of 540V to a low 24V for use in steering control, air conditioning and other bus operations.

As previously disclosed in the Company’s filings with the SEC, the Company has entered into a letter of intent to initially acquire 60% of KADI. The parties are currently negotiating a definitive agreement and expect to finalize the terms of the acquisition within the next two months.  Borqs believes its software engineering experience can enhance KADI’s R&D capabilities while Borqs’ supply chain management team will ensure efficient delivery of the hardware module products.  The proposed consideration to be paid by Borqs includes $11.7 million in cash (of which $5.0 million is to be paid at closing, with the balance to be paid over 1.5 years) and up to $3.3 million in Borqs shares to be paid over three years (of which $0.2 million is to be paid at closing, with the balance subject to the satisfaction of certain earn-outs). Borqs is contemplating a public offering of shares in the coming weeks to support the cash needs for this potential acquisition, which offering will need to close before the consummation of the acquisition. No assurance can be made that the parties will reach a definitive agreement and proceed to closing, or that the Company will be able to raise sufficient funds or fulfill all necessary closing conditions to complete the proposed acquisition.

Hu Lin, the Chairman and General Manager of KADI: “We are excited that the first customer has confirmed our products for delivery and that more will be following.  We look forward to our potential cooperation with Borqs and the synergies that we expect to generate between our two businesses.”

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