Shanghai Yongli Belting Co. Ltd. has been aggressively expanding into injection molding, with the latest move the acquisition of a $200 million molder with plants in China and Thailand, but which is traded over-the-counter in the United States.
Yongli announced Nov. 17 it is acquiring Plastec International Holdings Ltd., a wholly owned subsidiary of Plastec Technologies Ltd., for 1.25 billion yuan ($195.3 million).
Yongli, listed on the Shenzhen Stock Exchange in China, has been expanding from its belting business into injection molding by purchasing automotive molding assets in China and North America. Its recently acquired automotive unit in Qingdao, for example, has big-name customers like Tesla.
The acquisition of Plastec is expected to broaden its molding portfolio to include toys, electronics, telecommunication and office appliances.
More importantly, the deal will connect Yongli with leading OEMs, as Plastec's largest customers include Lego, Canon, HP, Samsung, and Keurig Green Mountain. About half of Plastec' $195 million in 2015 sales came from toy giant Lego A/S.
Based in the Virgin Islands
Plastec International is incorporated in the British Virgin Islands with main operations in Hong Kong, mainland China and Thailand through more than a dozen wholly owned subsidiaries. Its manufacturing bases are located in China's Yangtze and Pearl River deltas, as well as Southeast Asia, for fast response and delivery time. Plant locations include Shenzhen, Dongguan, Kunshan and Bangkok.
Plastec has nearly 500 injection molding machines ranging from 25 to 1,000 tons of clamping force and a wide range of capabilities, including two-color molding, overmolding gas-assisted molding, in-mold labeling and vertical molding. Its 850-ton high-precision press can reach precision of 0.01 mm, Yongli said in a detailed filing.
Plastec designs and manufactures molds in-house, with the capability of producing 100 to 120 sets of molds within one to three months. The largest mold it has made boasts a weight of 7.5 metric tons. It also offers extensive secondary-process finishing and parts assembly services including Class 100,000 clean room production.
Yongli said it sees the core advantages of Plastec to include just-in-time production.
Yongli expects the deal to boost its market position and technical competitiveness, expand its production capacity to complement its existing manufacturing in North and East China, strengthen its profitability and ensure steady cash flow.
The Shanghai-based company is raising 1.45 billion yuan through a private offering to five investors including Yongli Chairman Shi Peihao to cover the acquisition cost as well as to increase its cash flow.
Yongli will make an initial payment of 875 million yuan ($136.7 million) within 60 days after the deal is cleared by regulators. The remaining 30 percent — 375 million yuan (or $58,6 million) — will be paid under the condition of Plastec achieving net profit performance targets in 2016, 2017 and 2018.