Frankfurt-listed Shanghai Chengbang Auto Accessories has signed a memorandum of understanding with Royal Master Finance, a black-empowered private financing firm based in SA, for Royal Master to buy 30 percent of its stock, possibly worth R1bn.
The deal will also see Royal Master assist the Shanghai-based company to build a manufacturing plant in SA employing 500, for an undisclosed sum. The plant will produce automotive parts including alternators, rotors, starters and stators for companies such as Isuzu, Nissan, Opel, General Motors, Bosch, Mitsubishi and Ford.
The companies say Royal Master will fund the expansion into this market, also assisting the Chinese company to get a JSE listing.
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"We are thrilled to have this opportunity to acquire 30 percent of Shanghai Chengbang," Sabelo Sibanda, Royal Master CEO, said yesterday. "SA’s automotive industry is a global turbo-charged engine for the manufacture and export of vehicles and components.
"Most importantly we want to create employment opportunities for South Africans, and the unemployed graduates in our sector."
The Department of Trade and Industry last week said it had no knowledge of the deal.
But Mr Sibanda said about 50 South African engineers would be trained at Shanghai Chengbang’s head office in China, so they could transfer skills to SA.
US-based Dutchess Capital said last week it would inject €200m into Shanghai Chengbang. The group specialises in international short- term funding for growth-stage and mature public companies.
"We were introduced to Shanghai Chengbang (through) Royal Master Finance. We are happy to provide them with a term sheet for an Equity Line Facility of €200m to help in their expansion efforts," Douglas Leighton, managing partner of Dutchess Capital said from Boston, US.
Zadok Hakim, Shanghai Chengbang Auto Accessories chairman said last week from Texas that building of the South African plant would start in March next year, and was expected to take eight to 12 months to finish.
A South African office of the company would operate from mid-January. The main market for production would be SA, and countries such as Botswana, Kenya, the Democratic Republic of Congo and Nigeria, Mr Hakim said.
"SA has a growing need for auto parts," he said. "(It) is a great international platform that can supply the need of auto parts to the population of SA and to neighbouring countries."
Charles Moffat, president of business development at Royal Master, said yesterday from Cape Town that the stake in Shanghai Chengbang would be funded by Royal Master profits.
He said Dutchess Capital would provide €200 m in March next year.
He also said the group would spend up to R10bn on expanding projects in Botswana, Kenya, Congo and Nigeria, including building plants and buying up existing auto-parts outlets.
He said the dual listing on the JSE would be in September next year, through a reverse merger helped by JSE-approved Arcay Moela Sponsors.
"Our aim is to buy a profitable outfit which is already listed on the JSE and reverse merger through it," he said.
"Dutchess Capital will hold up to 34.99 percent of Shanghai Chengbang."