Jiuzi Holdings Enters into a Non-Binding LOI for the Acquisition of Shenzhen Maigesong
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Insights
The recent announcement by Jiuzi Holdings Inc. regarding the planned acquisition of Shenzhen Maigesong and subsequent investment in its rechargeable lithium battery production line is a strategic move that could potentially enhance the company's position within the new energy vehicle (NEV) sector. The two-stage investment aligns with the growing demand for NEVs and their components, particularly in China, which is the largest market for electric vehicles.
The earnout provision tied to revenue targets for Shenzhen Maigesong introduces a performance-based element to the acquisition, which could incentivize the acquired entity to ramp up production and sales efficiently. Such clauses are often used to align the interests of the buyers and sellers, ensuring that the acquired company continues to perform post-acquisition. This could be a positive signal to investors, as it suggests a commitment to achieving specific financial goals.
However, the non-binding nature of the LOI implies that the deal is preliminary and subject to change. Investors should be aware that until a definitive agreement is reached, there is no certainty that the acquisition will proceed as planned. Additionally, the requirement for the Maigesong Shareholders to compensate with their held shares if revenue targets are not met introduces a risk factor, potentially affecting the control and stability of Shenzhen Maigesong.
The financial implications of Jiuzi Holdings' intended acquisition and investment in Shenzhen Maigesong's battery production line must be analyzed in terms of capital allocation, expected return on investment and risk management. The earmarked RMB 30 million investment represents a significant capital expenditure, which could impact the company's short-term liquidity. However, if managed effectively, it could yield long-term benefits by establishing a foothold in the lithium battery market, which is important for NEVs.
Investors should monitor the progress towards the revenue targets stipulated in the earnout provision. Achieving a revenue target of RMB 119.81 million by the end of 2025 and RMB 504.22 million by the end of 2026 would indicate a robust growth trajectory for Shenzhen Maigesong, potentially contributing positively to Jiuzi Holdings' financial performance. Conversely, failure to meet these targets could lead to dilution for current shareholders if compensation measures are enacted.
It is essential to consider the competitive landscape and operational challenges associated with the battery production industry. Price volatility of raw materials, technological advancements and regulatory changes can all significantly impact the profitability and success of the new production line.
From a legal perspective, the structure of the acquisition deal, particularly the inclusion of an earnout provision, requires careful scrutiny. Earnout agreements can be complex and often lead to disputes if the performance metrics are not clearly defined or if there are disagreements over the calculation of the targets. It is imperative for both parties to ensure that the terms of the LOI and any subsequent definitive agreements, are meticulously drafted to prevent future legal complications.
The non-binding LOI indicates that the parties are still in negotiation stages and the final terms may differ significantly from what has been announced. This means that shareholders and potential investors should not consider the acquisition as certain until a binding agreement is in place. Moreover, the legal mechanisms for the proposed compensation by the Maigesong Shareholders in case of underperformance will be a key point of negotiation, as it could affect the governance and control of the acquired entity.
Additionally, the cross-border nature of the deal may involve regulatory approvals and compliance with both Chinese and international business laws, which could influence the timeline and finalization of the acquisition.
Pursuant to the terms of the LOI, Shenzhen Jiuzi will acquire
The LOI includes an earnout provision which provides that Shenzhen Maigesong shall achieve a revenue target of
The inclusion of the earnout provision holds significant importance for both the Company and Shenzhen Maigesong. It clearly defines the rights and responsibilities of both parties and represents not only a risk and challenge but also opportunity and motivation. Both parties will work together to achieve the revenue targets and promote the sustained development and growth of the enterprise.
About Jiuzi Holdings, Inc.
Jiuzi Holdings, Inc., headquartered in
About Shenzhen Maigesong Electric Technology Co., Ltd.
Maigesong Electric specializes in the design and development of embedded battery control systems, providing customers with products or key components through ODM or SKD models, as well as intellectual property licensing. It also provides comprehensive technical support and ancillary services. The company holds nearly a hundred patents and has obtained over ten system certifications, including UL (UL2054-2011) (
Forward-Looking Statements
All statements other than statements of historical fact in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties. They are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy, and financial needs, including the expectation that the Offering will be completed. Investors can identify these forward-looking statements by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. Specifically, forward-looking statements may include statements related to the following matters of the Company:
- Ability to implement its business plan;
- Changes in the Company's product and service market; and
- Expansion plans and opportunities.
These forward-looking statements are based on information available as of the date of this press release and our management's current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements, including the occurrence of any event, change or other circumstances that could give rise to the terms of the LOI not hereafter being memorialized in a definitive agreement; the outcome of any legal proceedings that have been, or will be, instituted against the Company or other parties to the LOI following announcement of the LOI and transactions contemplated therein; the ability of the Company to meet NASDAQ listing standards in connection with the consummation of the transaction contemplated therein; the inability to complete the transactions contemplated by the LOI due to the failure to meet certain closing conditions; risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the announcement of the LOI and consummation of the transaction described therein; costs related to the proposed acquisition; changes in applicable laws or regulations; the ability of the combined company to meet its financial and strategic goals, due to, among other things, competition, the ability of the combined company to grow and manage growth profitability, maintain relationships with customers and retain its key employees; the possibility that the combined company may be adversely affected by other economic, business, and/or competitive factors; and other risks and uncertainties described herein, as well as those risks and uncertainties discussed from time to time in other reports and other public filings with the Securities and Exchange Commission by the Company. The Company undertakes no obligation to update forward-looking statements to reflect subsequent events, circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and you should not place undue reliance on these forward-looking statements in deciding whether to invest in our securities. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
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SOURCE Jiuzi New Energy Holding Group Co., Ltd.
FAQ
What acquisition did Jiuzi Holdings Inc. (JZXN) announce?
What is the investment amount for the construction of Shenzhen Maigesong's rechargeable lithium battery production line?
What revenue targets are included in the LOI for Shenzhen Maigesong?
What happens if the actual revenue falls below 80% of the revenue target between 2024 and 2025?
Who will lead the construction of Shenzhen Maigesong's battery production line?
