Borqs Technologies Letter to Shareholders Regarding the Divestment of Solar Subsidiary
On April 26, 2023, Borqs Technologies announced a divestment of its stake in Holu Hou Energy, LLC (HHE) following concerns raised by the Committee on Foreign Investment in the United States (CFIUS) about national security risks. CFIUS mandated the divestment due to HHE's proximity to U.S. military assets. Borqs has engaged the investment bank Cantor Fitzgerald & Company to facilitate this process, which must be completed by September 2023, though a six-month extension may be requested. HHE has recently secured significant contracts in Hawaii, potentially leading to substantial proceeds from the divestment. This move is expected to enhance Borqs' liquidity and may allow for share buybacks. The company plans to pursue further growth opportunities in IoT and AI sectors post-divestment.
- HHE has secured multiple contracts in Hawaii for solar energy systems, expected to generate significant sales.
- Divestment expected to improve liquidity position for Borqs.
- Plans for potential share buybacks after the divestment.
- Divestment was prompted by national security concerns raised by CFIUS.
- Potential risks related to the realization of financial benefits from HHE's contracts.
SANTA CLARA, Calif., April 26, 2023 (GLOBE NEWSWIRE) --
Dear Shareholders of Borqs Technologies, Inc.:
The purpose of this letter is to help clarify the proposed divestment of our company’s ownership in Holu Hou Energy, LLC (“HHE”) and the implications that this transaction may have to Borqs and our shareholders.
Why the divestment
As we have stated in prior press releases, the Committee on Foreign Investment in the United States (“CFIUS”) has notified our company by a letter dated December 13, 2022, that CFIUS has identified risks to US national security arising as a result of Borqs’s investment in HHE. CFIUS advised us that the national security risks arising as a result of Borqs’s investment transaction with HHE relate to foreign proximity to U.S. military personnel and installations through HHE's physical access to customers and their facilities, including at off-base military housing. CFIUS therefore required Borqs and HHE to enter into a National Security Agreement with CFIUS, pursuant to which Borqs must divest its interests in HHE.
Proactive steps by Borqs
In efforts to address the national security concerns of CFIUS, we have signed a National Security Agreement with CFIUS identifying all the steps that Borqs shall take in order to completely remove Borqs’ involvement with HHE, including the transfer of our ownership in HHE into a Divestment Trust which is now under the supervision of an independent trustee. We have appointed Donald R. Kendall, Jr. as our independent trustee and Mr. Kendall has an extensive background of over four decades in investment management, including his role as the Chairperson of the Special Committee of the Board of Directors of SolarCity, supervising the sale of SolarCity to Tesla, Inc. in 2016 for
Successful business expansion by Holu Hou Energy, LLC
Since Borqs’ financial support of HHE, which began with the acquisition of HHE in October 2021, HHE has signed multiple contracts with customers in Hawaii for the deployment of HHE’s solar energy plus storage system and EnergyShare technology for Multi-Dwelling Residential Units such as the recently announced Lendlease Island Palm Communities in Honolulu for large military personnel housing compounds. Installations for these projects are to begin this summer and when completed will be worth well into nine figures in sales for HHE which will possibly translate to a very significant amount in the divestment of the HHE interests by Borqs.
What this means for Borqs
With HHE’s successful business expansion just in the State of Hawaii, we are certain that HHE will have a bright future in other densely populated states with plentiful sunlight such as California. According to CFIUS’s timing of the divestment, Borqs is required to complete the sale of the HHE by September of this year and if approval by CFIUS is granted, there can be a possible extension of another 6 months. We intend to comply with all of the requirements of the US government. The divestment, when completed, is expected to provide a large liquidity position to Borqs, and management may seek approval from the Board of Directors to allocate an appropriate amount for buy back of our outstanding ordinary shares from the market. We believe the current market price is not reflective of the correct value of the Company.
Where will Borqs be heading next
The Management at Borqs is committed to sustainable growth of the Company and creating shareholder value in the long term. We have seen Borqs as a global company at the very beginning and will continue to expand our businesses internationally. Once the divestment is consummated in the coming months, we plan to evaluate acquisition opportunities in North America, Europe and Asia in such sectors as cloud-based Internet of Things (IoT) and robotic and artificial intelligence (AI) that will bring positive impact to the economy, our society and consumers globally. In the meantime, we will keep our shareholders abreast of further developments.
With my warmest regards,
Pat Chan
Chairman & Chief Executive Officer
Forward-Looking Statements and Additional Information
This letter to shareholders includes “forward-looking statements” that involve risks and uncertainties that could cause actual results to differ materially from what is expected. Words such as “forecasts”, “expects”, “believes”, “anticipates”, “intends”, “estimates”, “predicts”, “seeks”, “may”, “might”, “plan”, “possible”, “should”, “estimates” and variations and similar words and expressions are intended to identify such forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Such forward-looking statements relate to future events or future results, based on currently available information and reflect our management’s current beliefs. Many factors could cause actual events or results to differ materially from the events and results discussed in the forward-looking statements, including the possibility that the positive financial results from the contract between HHE and IPC and the proposed divestment as described herein may not be realized, and the negative impact of the COVID-19 pandemic on the Company’s supply chain, revenues and overall results of operations, so the reader is advised to refer to the Risk Factors sections of the Company’s filings with the Securities and Exchange Commission for additional information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. Except as expressly required by applicable securities law, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Investor Contact:
Sandra Dou
Vice President of Corporate Finance
Borqs Technologies, Inc.
IR@borqs.com
www.borqs.com
FAQ
What prompted Borqs Technologies to divest its ownership in Holu Hou Energy?
When does Borqs need to complete the divestment of Holu Hou Energy?
What are the expected benefits of the divestment for Borqs shareholders?
What contracts has Holu Hou Energy secured recently?
Who is handling the divestment process for Borqs?
