New Energy Systems Group to Acquire Shenzhen NewPower Technology Co., Ltd.

December 13, 2009 by Jeff Shepard

New Energy Systems Group, a manufacturer and distributor of battery components in China, announced that it has entered into an agreement to acquire Shenzhen NewPower Technology Co., Ltd., a China-based manufacturer of lithium ion batteries. The cost of the acquisition will be $14.7 million, comprised of $3.0 million in cash and 1.8 million shares of New Energy’s common stock with a value of $11.7 million at $6.42 per share. The transaction is expected to be completed by year-end 2009.

Shenzhen NewPower Technology Co., Ltd. was founded in 2004 and is described as a rapidly growing manufacturer of lithium ion batteries for cell phones and other portable devices. The company’s products range from low end cell phone batteries, to state-of-the art, high capacity batteries.

NewPower expects to generate revenue of approximately $20.1 million in 2009 and $27.4 million in 2010. NewPower expects to generate net income of $1.5 million in 2009 and at least $2.5 million in 2010.

Fushun Li, New Energy’s Chief Executive Officer, commented, "We have known NewPower’s management for many years and are excited to have them join our organization in what we expect to be a seamless integration. We are also pleased by NewPower’s desire to take most of their consideration in the form of New Energy common stock, which reflects their confidence in New Energy’s future prospects."

Li continued, "The NewPower acquisition is strategically important in enabling us to further vertically integrate our business, which is a key differentiator for New Energy Systems within the industry. One example of the benefits of this vertical integration is that since we will now be manufacturing lithium-ion batteries from start to finish, the NewPower acquisition will enable us to capture additional margin in our own finished battery distribution business. As a result of the acquisition synergies, we expect NewPower will contribute more than the $2.5 million of net income projected for 2010 on a standalone basis."

Li concluded, "We are also excited about the opportunity to expand NewPower through cross-selling and leveraging our strong distribution networks. As a result of NewPower’s excess capacity, we can rapidly increase production with minimal capital expenditures. Finally, we believe this acquisition illustrates our ability to identify and acquire strategic businesses that leverage our core strengths and further enhance our position in the rapidly growing lithium ion battery industry."