BEIJING, Dec. 7, 2015 /PRNewswire/ -- Recon Technology,
Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a leading
independent oilfield services provider operating primarily in
China, today announced that the
Company will acquire a 100% equity interest in Qinghai Hua You
Downhole Technology Co., Ltd. ("QHHY"), a PRC corporation and
oilfield service provider in Qinghai province, pending shareholder approval
of the proposed transaction.
Pursuant to a share purchase agreement executed as of
December 1, 2015 (the "Effective
Date"), the Company has agreed to acquire a 100% equity interest in
QHHY for $6.0 million, including
$3.6 million worth of Recon ordinary
shares and $2.4 million in cash, with
QHHY achieving net profit growth of 15% for fiscal 2016 and fiscal
2017. The Company's shares will be issued at 120% of the weighted
average closing price of Recon's ordinary shares for the past 20
trading days prior to the Effective Date and will be issued only
after Recon obtains shareholder approval for the transaction, which
it expects to obtain sometime around February 2016. The shares will be issued to the
QHHY stockholders, who together collectively own 100% of the equity
interest in QHHY. All ordinary shares issued pursuant to this
agreement will be subject to a 12-month lock up period. All cash
consideration will be payable based on QHHY achieving certain
annual net profit targets for fiscal 2016 and fiscal 2017, which
will be determined based on Recon's review of QHHY's audited
financial statements in September
2016 and September 2017 (For
specific payment method, please refer to Exhibit 1).
Exhibit 1: (US$ million) Earn-out Payment Scenario.
N%
of
Net Profit
Increase
|
|
For the Twelve
Months Ended June 30,
|
|
2016
|
|
2017
|
|
Maximum Cumulative
Amount
|
≥ 30%
|
|
$2.8
|
|
$2.0
|
|
$4.8
|
(15%, 30%)
|
|
$1.4 × (actual growth
rate/15%)
|
|
$1.0 × (actual growth
rate/15%)
|
|
$(2.4,4.8)
|
15%
|
|
$1.4
|
|
$1.0
|
|
$2.4
|
[7.5%,
15%)
|
|
$1.4×(actual growth
rate/15%)
|
|
$1.0 × (actual growth
rate/15%)
|
|
$[1.2,2.4)
|
[0%, 7.5%)
|
|
$0.7
|
|
$0.5
|
|
$1.2
|
< 0%
|
|
$nil
|
|
$nil
|
|
$nil
|
The transaction is subject to Recon shareholder approval and
certain other customary closing conditions.
Mr. Shenping Yin, Chairman and
CEO of Recon, stated, "The acquisition marks an important milestone
for Recon as this will be our first major acquisition since our IPO
in July 2009. We are thrilled to
acquire QHHY, a niche, profitable oilfield service company with a
strong relationship with PetroChina. According to the domestic energy
strategic requirements of 'adjust
and stabilize the oil production in the east while explore the
potential in the west' put forward
by PetroChina, west China has been playing a key role for
China's energy industry.
Qinghai province is one of the
most important areas with remarkable reserve of oil and natural
gas. We view QHHY as a good fit to our long term vision and goals
and expect it to augment our capacity to grow in adjacent
businesses."
About Qinghai Hua You Downhole Technology Co.,
Ltd.
Established in September 2011,
Qinghai Hua You Downhole Technology Co., Ltd. ("QHHY") is an
oilfield service company providing a wide range of downhole
technology support and services primarily in Qinghai province. QHHY has more than 130
employees and is a qualified oilfield service provider for
PetroChina, among other companies. QHHY's solutions are aimed to
keep the working wells safe and help to increase the oil well
production. This is cost effective and important to oil companies
under lower oil price situation.
About Recon
Recon Technology, Ltd. (NASDAQ: RCON) ("Recon")
is China's first independent oil and gas field service
company to be listed on NASDAQ. Working closely with
leading global partners, Recon has achieved rapid growth
supplying China's largest oil and gas exploration
companies, including Sinopec and China National Petroleum
Corporation, with advanced automated technologies, efficient
gathering and transportation equipment and reservoir stimulation
measures. The solutions Recon provides are aimed at increasing gas
and petroleum extraction levels, reducing impurities, improving
safety and lowering production costs. For additional information,
please visit www.recon.cn.
Cautionary Statements
Statements made in this release with respect to Recon's
current plans, estimates, strategies and beliefs and other
statements that are not historical facts are forward-looking
statements about the future performance of Recon. Forward-looking
statements include, but are not limited to, those statements using
words such as "believe," "expect," "plans," "strategy,"
"prospects," "forecast," "estimate," "project," "anticipate,"
"aim," "intend," "seek," "may," "might," "could" or "should," and
words of similar meaning in connection with a discussion of future
operations, financial performance, events or conditions. From time
to time, oral or written forward-looking statements may also be
included in other materials released to the public. These
statements are based on management's assumptions, judgments and
beliefs in light of the information currently available to it.
Recon cautions investors that a number of important risks and
uncertainties could cause actual results to differ materially from
those discussed in the forward-looking statements, including but
not limited to, product and service demand and acceptance, changes
in technology, economic conditions, the impact of competition and
pricing, government regulation, and other risks contained in
reports filed by the company with the Securities and Exchange
Commission. Therefore investors should not place undue reliance on
such forward-looking statements. Actual results may differ
significantly from those set forth in the forward-looking
statements.
All such forward-looking statements, whether written or oral,
and whether made by or on behalf of the company, are expressly
qualified by the cautionary statements and any other cautionary
statements which may accompany the forward-looking statements. In
addition, the company disclaims any obligation to update any
forward-looking statements to reflect events or circumstances after
the date hereof.
Contact:
Recon Technology, Ltd.
Ivy Xia
Tel: +86-10-8494-5799
Email: info@recon.cn
Weitian Investor Relations
Tina Xiao
Tel: +1-917-609-0333
Email: tina.xiao@weitian-ir.com
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SOURCE Recon Technology, Ltd.