Contemporary Amperex Technology $3750 (-10,56 %) will acquire Shenghua New Material in a CNY 2.1 billion (USD 295 million) deal to strengthen its research, development, production and market expansion capabilities in high-quality lithium iron phosphate cathode materials.
CATL's stake in Shenghua will increase from 18.7 percent to 51 percent after the transaction, the target's current major shareholder Fulin Precision announced last night, adding that it will also invest CNY1 billion in the company, but its stake will drop from 80 percent to 47 percent.
This move will provide Shenghua with strategic resources, accelerate the development of its core business and increase its profits, Fulin Precision said, without mentioning whether the transaction will lead to adjustments in Shenghua's daily operations and decision-making processes.
In March, CATL invested CNY 339 million (USD 47.6 million) to become Shenghua's second-largest shareholder. In addition, the Ningde-based battery giant plans to provide Shenghua with an upfront payment of CNY500 million (USD70.2 million) this month and CNY1 billion in November to help Shenghua finance new production lines for LFP cathodes and other battery materials, which will later be supplied exclusively to CATL, Fulin Precision said on Sept. 18.
Shenghua is expanding its production capacity and plans to increase its annual production capacity of LFP cathode materials from 300,000 tons to 440,000 tons by the end of this year and 500,000 tons next year to meet the long-term demand of major customers. The corresponding sales last year amounted to 126,200 tons and generated revenue of CNY 4.8 billion, accounting for 57 percent of total sales, according to a financial report.
Compared with the ternary lithium batteries widely used by international electric car manufacturers, LFP batteries are cheaper, safer and more environmentally friendly, and dominate the Chinese new energy vehicle market in terms of both installed capacity and applications.