Successful Acquisition Depend on LYC-Rampancy Settlement

Resource from: cbcc-yinx Likes:2941

Feb 02,2007

Successful Acquisition Depend on LYC-Rampancy Settlement Yongcheng Coal & Electricity Group(YCEG) has confirmed the acquisition plan with Luoyang Bearing Group(LBG) on their latest talks. Both sides agreed to accomplish the plan by Luoyang LYC Bearing's merging the Luoyang Bearing Group. However, they are still in talks about investment, merging procedures, assets distribution, empolyer settlement etc. It's expected to be worked out after the Spring Festival holiday. (LYC Bearing is a joint venture formed by LBG and YCEG, the latter control it.) Although the new ownership of LBG has become clear, how to cope with the LYC-rampancy is a critical and pressing matter facing the new owner, YCEG. In order to survive, most of LBG's subsidiaries have been forced to employ price-reduction in selling, directly influencing LYC Bearing's sale. And according to the acquisition agreement signed by YCEG and LBG, whether or not a LBG subsidiary can produce LYC bearings depend on the outcome of talk between both sides. Thus, lacking of mandatory terms lead to the LYC-rampancy. At present, five LBG subsidiaries are producing LYC brand bearings, which is 8 to 10 percent cheaper than those from LYC Bearing. Besides, competition among LYC producers also shift the initiative to raw material suppliers. In past, LYC Bearing can pay the suppliers in a two-months delay. Now, the suppliers refuse to deliver material before cash in account. This cause the pressure LYC Bearing faced in cash flow. At present, nearly half of equipments in LYC Bearing have been left unused. For YCEG, how to solve the LYC-rampancy become the key issue bearing on the future of this acquisition.

(cbcc-yinx)

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