Canadian auto parts maker Wescast Industries Inc. has agreed to be bought by China's Sichuan Bohong Industry Co. Ltd. for C$145.6 million, about C$34 million less than the price it had expected when the deal was first floated in September.
Wescast, which supplies cast iron exhaust manifolds for cars and light trucks, signed a memorandum of understanding with Sichuan Bohong last year that pegged the takeover price at C$13.60 per share, or about C$180 million.
"In that time period, the industry multiples have decreased and the macro economic situation -- softening in China and the slowdown in Europe -- all those would have had an impact on depressing the price," Wescast CEO Edward Frackowiak told Reuters.
Shares of Wescast, which has a market value of C$33 million, rose as much as 61 percent to C$9.00 on Friday on the Toronto Stock Exchange. The stock was the top percentage gainer on the exchange. The shares have lost half of their value since the company signed the initial agreement.
Wescast, which counts Ford Motor Co, General Motors Co and Volkswagen AG as its key customers, said on Friday it agreed to be bought for C$11 per share.
"At the current time we are carrying a little bit more debt than at the time of the first agreement ... with all those factors, it is quite an attractive premium," Frackowiak said.
Sichuan Bohong, founded in 1999, has businesses in manufacturing, automotive brand management, real estate and energy.
"We have an operation in China and Bohong is going to help us with the expansion of the Chinese segment of our business," Wescast CEO said.
The deal, which is expected to close later this year or early next year, is valued at C$195 million including debt, other liabilities and an investment in working capital.
The CEO, however, declined to disclose the debt part of the deal. The transaction took nearly 9 months to come together following the initial agreement after Sichuan Bohong had failed to pay a required C$2 million deposit.
Wescast will keep the guarantee C$2 million, which has since been deposited by Sichuan Bohong, if the deal fails. Wescast's Class B shares will be converted into Class A shares as part of the deal. Canaccord Genuity advised Wescast on the deal.
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