Zap acquires majority stake in Chinese auto maker

SANTA ROSA -- Electric vehicle maker Zap will acquire 51 percent of Chinese vehicle manufacturer Jonway Auto for $29.03 million in cash. Zap will also acquire exclusive international distribution rights to Jonway's automobiles in a stock deal valued at $31.5 million based on $1 per share.

The merger agreement was signed by the boards of directors for both companies on July 2.

Jonway has about 800 employees and currently manufactures approximately 1,000 vehicles a month with a capacity to produce up to 30,000 a year. It reported 2009 revenues of $40 million and about $20 million for the first quarter of 2010. Jonway will be completely debt-free upon the closing of the deal.

The transaction intends to combine Zap's electric vehicle technology with Jonway's mass-production capabilities to expand in the growing EV market in China. It will accelerate cost-effective manufacturing of Zap's electric vehicles and gives it access to Jonway's distribution channels.

Zap plans to acquire the remaining 49 percent of Jonway in a second phase of the transaction following final regulatory approval.

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