The demand for anode materials used in Li-ion batteries has grown exponentially because of the widening adoption of NEVs. Consequently, companies that are involved in the manufacturing of anode materials have also experienced rapid growth as well. Seeing opportunities, many Chinese companies have crossed into the field of battery anode materials. They include Sunstone, Jereh Group, Shandong Jingyang, Guibao, Sunway, and LB Group. The market is now receiving one more new entrant.
Liaoning Fuan Heavy Industry announced on August 9 that it will be acquiring holding subsidiary Tianquan Fuan Carbon Material Technology in its entirety for RMB 3.6 billion. The fundraising connected to this transaction will raise no more than RMB 1.065 billion. Once the deal is completed, Tianquan Fuan will be a wholly-owned subsidiary, and it will also establish a new business unit dedicated to the processing works on anode materials used in Li-ion batteries.
Established in 2004, Fuan Heavy Industry has been primarily involved in steel casting. It manufactures large machinery parts and components for power infrastructure (e.g., thermal power plants and hydropower dams) and railway infrastructure. It also provides services related to metallurgy, chemical processing (e.g., desulfurization, denitrification, and particle removal), and coal processing.
Fuan Heavy Industry crossed into the field of battery anode materials in September 2021, when it formed a joint venture with BTR called Sichuan Ruian New Material Technology. The joint venture will build up 100,000 tons per year of production capacity for anode materials. Later, on May 19 this year, Fuan Heavy Industry disclosed its intention to acquire 100% of holding subsidiary Tianquan Fuan. Technically, Fuan Holding Group is the majority shareholder of Tianquan Fuan. After Tianquan Fuan becomes a wholly-owned subsidiary, its graphitization operation will be upgraded to become its core business. Furthermore, this graphitization capacity will foremost meet the demand from BTR.
Tianquan Fuan was established in May 2019 and has provided graphitization service to some domestic customers in addition to BTR. Examples include Shanshan, Kaijin, XFH, and Zhongke Electric. These customers are all involved in the provisioning of anode materials used in Li-ion batteries equipped in NEVs, energy storage systems, and consumer electronics.
In terms of financial performance, Tianquan Fuan’s revenue figures for 2020, 2021, and January-March 2022 came to RMB 14.4647 million, RMB 245 million, and RMB 108 million respectively. The net profit and loss figures (attributable to the parent company) for the same three periods, in order, came to a loss of RMB 6.7603 million, a profit of RMB 60.0969 million, and a profit of RMB 28.3459 million. Tianquan Fuan has stated that its net profit figures for 2022, 2023, and 2024 will reach at least RMB 188 million, RMB 494 million, and RMB 560 million respectively. The cumulative net profit (attributable to the parent company) for the three-year period will also reach at least RMB 1.242 billion.
Fuan Heavy Industry intends to acquire 100% of the shares in Tianquan Fuan through cash payment and share issuance. The transaction is also technically a merger among related companies. Fuan Holding Group as the largest shareholder has 40% of the shares in Tianquan Fuan, and these shares will be transferred to Fuan Heavy Industry upon the completion of the transaction.
Fuan Heavy Industry said that the value of the transaction (or Tianquan Fuan’s assets) is RMB 3.6 billion. In addition to cash payment and share issuance, Fuan Heavy Industry will also raise no more than RMB 1.065 billion from no more than 35 specific investors through a private placement of shares. The proceeds from the fundraising will be used to finance the acquisition and supplement the listed company’s working capital.
Fuan Heavy Industry added that the acquisition of Tianquan Fuan will be beneficial to the upgrading of its business operations in the long run and strengthen its presence in the supply chain for Li-ion batteries. Tianquan Fuan will serve as the foundation for building up the businesses related to graphitization and anode materials. Hence, the deal will expand the room for future growth.
This article is a translation of a Chinese article posted by Martin at TrendForce. It contains information that is either sourced from other news outlets or accessible in the public domain. Some Chinese names are transcribed into English using Hanyu Pinyin.
