SHANGHAI, China, August 9, 2010 -- GSME Acquisition Partners I, a special purpose acquisition company formed for the purpose of acquiring an operating business having its primary business operations in the People’s Republic of China, and privately-held Plastec International Holdings Limited (“Plastec” or the “Company”) today jointly announced that the companies have entered into a merger agreement whereby GSME will issue 7.3 million ordinary shares and Plastec will become a wholly owned subsidiary of GSME, subject to GSME shareholder approval.
The Transaction
Under the terms of the transaction, GSME will acquire 100.0% of Plastec in exchange for 7.3 million newly issued ordinary shares of GSME (representing a total transaction value of approximately $73.4 million based on an agreed upon share price of $10.00). After the closing, GSME is expected to have approximately 11.2 million basic shares outstanding, based on a share price of $10.00 (not taking into account any conversions into cash by GSME shareholders or purchases of GSME shares in connection with the GSME shareholder meeting). Plastec’s current shareholders, which consists of management, high-net worth individuals, and private equity firm Cathay Capital, will then own approximately 66% of the total issued and outstanding shares in the pro-forma company on a fully diluted basis.
The aggregate number of shares to be issued to Plastec’s shareholders in the transaction, including the earnout shares, is derived from Plastec’s estimated 2010 adjusted net income and will be adjusted upward or downward based on Plastec’s actual 2010 net income as set forth in Plastec’s audited financial statements for its fiscal year ended April 30, 2010, which are to be completed and delivered to GSME on or prior to September 15, 2010.
The transaction is subject to approval by the shareholders of GSME and other customary closing conditions. The closing of the transaction is anticipated to occur in October 2010, and simultaneous to the closing of the merger, Plastec will seek listing on a US national securities exchange.
The senior management of Plastec is expected to remain unchanged following the transaction and will become the senior management of GSME. Following the transaction, GSME’s board of directors will be comprised of 3 executive Directors and 2 non-executive Directors appointed by Plastec, one Director appointed by Cathay Capital, and one Director appointed by GSME, of which it has chosen Eli D. Scher, GSME’s Chief Executive Officer and Director. A majority of the Board will be independent non-executive members.
Commenting on the transaction, Mr. Scher stated, “We launched our search for a merger partner with a focus on finding a well-managed, profitable, growing company with a unique niche. In Plastec, we are merging with a company that has a proven track record of profitability in varying economic cycles, strong financial controls, and is a valued portfolio company of the well-regarded private equity firm, Cathay Capital. Further, the Company’s infrastructure expansion during difficult economic conditions over the past two years has it well positioned for immediate and long-term growth. We believe our merger with Plastec represents a favorable P/E multiple (FY2010 P/E: 6.5x basic) and offers the potential for substantial appreciation. We have developed a close working relationship with Plastec’s management team and look forward to being actively involved in the growth of the Company for years to come.”
Mr. Kin Sun Sze-To, Chairman and CEO of Plastec, stated, “We are very excited at the prospect of going public through this merger with the management at GSME, and believe that Plastec is properly positioned for growth. Our firm has an industry-leading market position in the plastic injection molding industry in China, located near raw material suppliers and long-standing customers, and has a stellar reputation within our market. This merger and subsequent US national securities exchange listing will increase our flexibility and access to capital while also increasing our visibility within our industry. We feel there are numerous avenues for potential growth, including expansion into new industries such as auto and industrial applications, either organically or through complementary acquisitions. Our goal is to continue to build upon our unique blend of experience, customer relations, and disciplined operations.”
Cohen & Co. Securities LLC is acting as financial/investment banking advisor to GSME and Graubard Miller is acting as legal advisor to GSME on this transaction.
More detailed financial information regarding the transaction and Plastec’s financial information and operations can be found in the Report of Foreign Private Issuer on Form 6-K to be filed by GSME with the Securities and Exchange Commission shortly after this announcement, and which can be obtained without charge, at the Securities and Exchange Commission's internet site (http://www.sec.gov).
Plastec History
Originally founded in 1993 by Chairman and CEO, Mr. Kin Sun Sze-To, Plastec is a plastic injection molding and finishing business. Injection molding is a design and manufacturing process in which plastic resins are transformed into the templates used in the mass production of items such as consumer electronics, home appliances, and telecommunications equipment.
With over 4,600 employees, Plastec currently operates 5 separate, high-output, low-defect facilities (over 159,000 square meters) in the Guangdong province in Southern China and Jiangsu Province in Eastern China. These facilities consist of state-of-the-art injection and precision tooling machines, and are strategically located near the Company’s manufacturing customers. The Company has a dedicated team of over 125 design engineers and technicians, and has the ability to produce approximately 100 to 120 molds per month with a highly competitive lead time.
Plastec’s customer base is global, the largest percentage of which are based in Japan, Korea, Europe, and the United States. Plastec’s customers are universally recognized manufacturers of products such as consumer electronics, home appliances, telecommunication devices, and children’s educational products. For its fiscal year 2010, Plastec created molds that it estimates were used to create hundreds of thousands of products. The Company has a history of precision quality control, with an industry-leading low customer return rate of 0.2 – 0.7%. This low-default rate, quick turnaround time, and competitive pricing has led to relationships with its large, multi-national customers that average over 5 years, with several lasting over a decade.
Capital Investment and the Opportunity for Plastic Molding in China
The global plastics market grew from 2005 – 2009 at a CAGR of approximately 3.4%, while China’s plastic component demand grew at 17% during this same time period. Key drivers for the growth in Asia included shorter production cycles, growth in the domestic electronics manufacturing industry, and more expansive support by the Chinese government.
However in 2007, the overall outsourcing consumer electronics industry began to decline globally, despite continuing to grow locally in China. This significantly affected Plastec’s domestic competitors in the plastic component industry, eliminating many smaller companies. During this time, Plastec’s management made a strategic decision to invest in capital expenditures in advance of a turnaround in the Asian and global market. During its fiscal years 2008 – 2010, the Company invested approximately $75 million in state-of-the-art machinery, tooling, and general expansion.
About GSME
GSME Acquisition Partners I, a Cayman Islands corporation, is a special purpose acquisition company formed for the purpose of acquiring an operating business having its primary business operations in the People’s Republic of China. GSME consummated its initial public offering on November 25, 2009 and generated aggregate gross proceeds of $36,000,000.
About Participants in Solicitation
GSME and its directors and executive officers and Plastec and its directors and executive officers, as well as Cohen & Co Securities LLC., may be deemed to be participants in the solicitation of proxies from the holders of GSME ordinary shares in respect of the proposed transaction. Information about the financial interests of the foregoing individuals and entities will be set forth in GSME’s proxy statement described below.
In connection with the proposed transaction and required shareholder approval, GSME will furnish to the Securities and Exchange Commission a copy of its proxy statement under cover of a Form 6-K, which proxy statement will be mailed to its shareholders. GSME shareholders and other interested persons are urged to read the proxy statement and other relevant materials when they become available since they will contain important information about GSME, Plastec and the proposed transaction with Plastec. Such persons can also read GSME’s proxy statement for a description of the security holdings of the GSME officers and directors and their respective interests in the successful consummation of the proposed transaction. The proxy statement will be mailed to shareholders as of a record date to be established for voting on the proposed transaction. GSME shareholders may obtain a free copy of such filings at the Securities and Exchange Commission’s internet site (http://www.sec.gov).