Annual Report 2007 - Hmdatalink.com hm datalink

Management Discussion and AnalysisFormation of 51%-owned Shanghai LTI.In March 2007, the Group set up a new productionjoint-venture, named Shanghai LTI AutomobileComponents Company Limited, with ManganeseBronze Holdings Plc to manufacture the iconicLondon Taxies and other limousine and taxi vehiclesin a leased plant from Shanghai Maple starting fromthe end of 2008. The Group invested US$53.8 millionfor a 51% stake in Shanghai LTI, plus a 22.83% stakeor 5.7 million new shares in MBH, which in turn owns48% stake in the joint venture. Total investment ofShanghai LTI is estimated to be around US$99.5million, which is funded by shareholders’ capitalcontribution and subsequent bank borrowings.Estimated production capacity at Shanghai LTI is40,000 units per annum per shift.Formation of 46.8%-owned Hunan GeelyAutomobile Components Company Limited(“Hunan Geely”).The Group set up 46.8%-owned Hunan Geely on 20April 2007 to invest in a new plant under constructionin Xiangtan of Hunan province. The Xiangtan plantwill have an initial production capacity of 50,000 unitsper annum per shift and is scheduled to start massproduction in the first half of 2008. The initial modelsto be produced in Xiangtan plant include “GeelyKingkong” and “Vision”. Total capital contributionfrom the Group for the initial 46.8% stake in HunanGeely in 2007 amounted to US$11.7 million, whichwas funded by the Group’s internal financialresources.Acquisition of Additional Stakes in MajorOperating Associates.The Group announced on 13 July 2007 that it hadsigned an agreement with its controlling shareholderto acquire 44.19% stakes in each of the Group’sfive operating associates: Zhejiang Geely, ShanghaiMaple, Zhejiang Kingkong, Zhejiang Ruhoo andHunan Geely Automobile Components CompanyLimited (“Hunan Geely”) – an associate establishedin April 2007 to invest in a new plant underconstruction in Xiangtan of Hunan province, raisingits equity interests in these operating associatesto 91%, for a total consideration of HK$1,611million to be satisfied by the issue of 1,289 millionnew shares of the Company at HK$1.25 per share.The consideration of HK$1,611 million has beendetermined with reference to the unaudited netasset value of the operating associates on 30 June2007. The acquisitions had been approved by theindependent shareholders of the Company. However,as at the issue date of this annual report, theapprovals from the relevant government bodies haveyet to be obtained.By virtue of the acquisitions, the Group’s fiveoperating associates – the key earnings contributorsto the Group – have become subsidiaries ofthe Group, thus allowing the Group to fullyconsolidate their financial results into the Company’sconsolidated financial statements upon completion.Acquisitions of the Remaining Stake inZhejiang Fulin.The Group completed the acquisition of theremaining 49% stake in Zhejiang Fulin on 20December 2007, raising its equity interests to 100%,for a total consideration of HK$23.3 million in cash.The consideration is based on the 49% attributableinterest in unaudited net asset value of Zhejiang FulinGEELY AUTOMOBILE HOLDINGS LIMITED14ANNUAL REPORT 2 0 0 7