Weichai America Corp. to invest $60
million in Power Solutions
Power Solutions International, Inc. (“PSI” or the “Company”)
(Nasdaq:PSIX), a leader in the design, engineer and manufacture of
emissions-certified, alternative-fuel power systems, announced
today a share purchase agreement with Weichai America Corp.
(“Weichai America”), who will invest $60 million in PSI through a
combination of newly issued common equity and preferred shares.
Weichai America is a fully owned subsidiary company of Weichai
Power Co., Ltd. (HK2338, SZ000338) (“Weichai”), a China-based
leading global designer and manufacturer of diesel engines, having
sold more than 4 million heavy duty diesel engines, with products
sold in more than 110 countries around the world.
The two companies have also agreed to a strategic
collaboration agreement under which they will work together to
accelerate market penetration opportunities for each company’s
respective product lines across various geographic markets and end
user segments. Through the alliance, PSI will gain access to
Weichai’s international manufacturing facilities and supply chain
network.
Gary Winemaster, chairman and chief executive
officer of PSI, commented, “The opportunity to partner with a
global leader like Weichai enables PSI to strengthen our capital
structure and significantly accelerate our growth trajectory.
Through this alliance, we will dramatically expand adoption of our
engines and technologies for transportation, power generation, and
industrial applications within our current markets, including
China, the world’s largest market opportunity. In addition, through
access to Weichai’s extensive and complementary product offering,
we will greatly expand our range of products, increasing the size
of our overall addressable market across all of our end user
segments. The combination of a broader and deeper product
set, enhanced financial strength and expanded geographic reach will
enable PSI to better serve a larger customer base and deliver
long-term shareholder value. Lastly, it positions us nicely
to exceed our original long-term sales target of $1 billion.”
Shaojun Sun, executive president of Weichai
commented, "Our strategic investment into PSI will further enhance
Weichai’s globalization strategy and brand recognition by
strengthening our presence in the key North American markets. Our
collaboration with PSI will create synergies particularly in the
areas of product manufacturing, sales and marketing and cost
reduction by leveraging the experience, expertise and resources of
Weichai and PSI, and will lay a solid foundation for PSI’s future
growth in the Chinese and other new markets."
Strategic BenefitsThe alliance
will provide significant strategic benefits to PSI by leveraging
Weichai’s strengths and capabilities in engine research and
development, manufacturing capabilities, procurement, distribution
and extensive sales channels in China and other emerging
markets. The collaboration will enable PSI to broaden its
existing product portfolio to meet the demands of its customers,
improve its speed to market, and provide expanded access and
exposure to new markets. The parties will collaborate on a
wide range of areas with the aim to increase the revenue and
profitability of PSI.
Under the terms of the strategic collaboration
agreement, PSI and Weichai have identified specific areas of
initial cooperation including the development of engines for
stationary natural gas applications based on Weichai’s base
engines, the identification of suitable Weichai products to be
developed for sale in North America and commitment to a long term
supply agreement under which Weichai will provide castings to PSI
at a competitive cost. The companies have also agreed to a detailed
program for sharing of best practices across both organizations to
capitalize on the strengths of each operation.
Equity InvestmentAs part of the
agreement, Weichai America will purchase 2,728,752 newly issued
shares of Common Stock of PSI at $8.00 per share, for cash
consideration of $21,830,016. Weichai will also purchase
2,385,624 shares of Series B Convertible Perpetual Preferred Stock
of the Company (“Preferred Stock”) (automatically convertible into
4,771,248 shares of Common Stock 20 days following the distribution
of an information statement relating to stockholder written
consent) for an aggregate purchase price of $38,169,984, reflecting
an as converted price of $8.00 per share of Common Stock. Following
the transactions, Weichai America will own an aggregate of 40.71
percent of PSI’s total issued and outstanding Common Stock on a
fully diluted basis (assuming the conversion of the purchased
Preferred Stock into Company Common Stock as of such
time).
If the Preferred Stock has not been automatically
converted into Common Stock within 180 days after the closing date
(the “Accrual Date”), holders of Preferred Stock shall be entitled
to participate equally and ratably with the holders of shares of
Common Stock in all dividends on the shares of Common Stock as if
the Preferred Stock were converted into shares of Common Stock.
Following the Accrual Date, the holder of Preferred Stock shall be
entitled to quarterly cumulative dividends at the annual rate of 10
percent of the $16.00 per share liquidation preference.
Additionally, Weichai America will be issued a
stock purchase warrant upon the closing date which will have a
limited exercise window of 90 days beginning on the eighteen month
anniversary of the date of issuance. The warrant is
exercisable for 4,055,709 shares of Common Stock, or such number of
additional shares of Common Stock such that upon exercise Weichai
America holds an aggregate number of shares of Common Stock equal
to 51 percent of the total Common Stock outstanding. The warrant
will be exercisable at a price per share of Common Stock equal to
85 percent of the VWAP during the preceding 20 consecutive trading
day period prior to exercise, or 50 percent of such preceding VWAP
price if the Company is delisted from Nasdaq. The exercise price is
subject to further reduction pursuant to a formula that provides
for such adjustment in case the Company’s 2017 adjusted EBITDA is
less than $22,000,000 or its net book value per share as of
December 31, 2016 (in each case as determined from the Company’s
audited financial statements for such fiscal years) is less than
$8.00, provided that the aggregate amount of such downward
adjustments in the 2018 Warrant exercise price shall not exceed
$15,000,000. The warrant is also subject to other conditions and
terms which are outlined in the Company’s Form 8-K filing with the
Securities and Exchange Commission.
Strengthened Financial Position and Capital
StructureThe $60 million in total proceeds will be used as
an opportunity to refinance the Company’s debt structure, which
will result in a significantly improved capital structure and
support the Company’s long-term growth objectives. The Company
presently expects to negotiate a restructured short-term debt
facility with one or more of its existing lenders, which will
include appropriate consents and waivers from its debt holders. The
Company believes that the Weichai investment positions the Company
to secure a longer-term debt structure which is appropriate for
current and future needs.
GovernanceOn the date of closing,
the size of the Company’s board of directors will be increased to
seven and the Company will appoint as directors two individuals
designated by Weichai America, one of whom will be chairman of the
board. Thereafter, at the next annual meeting of Company
stockholders the Company will nominate three individuals designated
by Weichai America, one of whom will be chairman of the board.
In addition, PSI and Weichai will establish a
steering committee to oversee the implementation of the strategic
collaboration, comprising three top-level executives from each
company. The committee will provide strategic direction and make
informed decisions regarding the direction, management and
implementation of the collaboration projects.
Timing and Conditions to CloseThe
closing is anticipated to occur no later than April 4, 2017. The
closing is subject to customary closing conditions, including the
performance by the Company of agreements and covenants required to
be performed prior to the closing date including the Company
obtaining required third party consents.
Wunderlich Securities is acting as financial
advisor, and ReedSmith is acting as legal advisor to PSI.
About Power Solutions International,
Inc. Power Solutions International, Inc. (PSI
or the Company) is a leader in the design, engineer and manufacture
of emissions-certified, alternative-fuel power systems. PSI
provides integrated turnkey solutions to leading global original
equipment manufacturers in the industrial and on-road markets. The
Company's unique in-house design, prototyping, engineering and
testing capacities allow PSI to customize clean, high-performance
engines that run on a wide variety of fuels, including natural gas,
propane, biogas, gasoline and diesel.
PSI develops and delivers powertrains purpose built
for the Class 3 through Class 7 medium duty trucks and buses for
the North American and Asian markets, which includes work trucks,
school and transit buses, terminal tractors, and various other
vocational vehicles. In addition, PSI develops and delivers
complete industrial power systems that are used worldwide in
stationary and mobile power generation applications supporting
standby, prime, distributed generation, demand response, and
co-generation power (CHP) applications; and mobile industrial
applications that include forklifts, aerial lifts, industrial
sweepers, aircraft ground support, arbor, agricultural and
construction equipment. For more information on PSI, visit
www.psiengines.com.
About Weichai Founded in 2002,
Weichai Power Co., Ltd. (Weichai) is the largest car parts and
power system conglomerate in China. It controls dozens of quality
companies including Shaanxi Heavy-duty Motor Company Limited,
Shaanxi Fast Gear Co., Ltd., Zhuzhou Torch Spark Plug Co., Ltd.,
KION Group AG, Linde Hydraulics GmbH & Co. (KG) and DH Services
Luxembourg Holding S.à.r.l. Weichai’s business covers four major
segments: complete vehicles, powertrains, hydraulics and parts and
components, and it formulates one of the most complete and the most
competitive industry chains in China. Weichai is listed on the Main
Board of the Stock Exchange of Hong Kong and on the Shenzhen Stock
Exchange. For more information on Weichai, visit
www.weichai.com.
Weichai America Corp. (Weichai America),
headquartered in Chicago, IL, is a fully owned subsidiary company
of Weichai Power Co., Ltd.
Cautionary Note Regarding Forward-Looking
StatementsThis press release contains forward-looking
statements, regarding the current expectations of the Company about
its prospects and opportunities. These forward-looking
statements are covered by the "Safe Harbor for Forward-Looking
Statements" provided by the Private Securities Litigation Reform
Act of 1995. The Company has tried to identify these forward
looking statements by using words such as "expect," "contemplate,"
"anticipate," "estimate," "plan," "will," "would," "should,"
"forecast," "believe," "outlook, " "guidance," "projection,"
"target" or similar expressions, but these words are not the
exclusive means for identifying such statements. The Company
cautions that a number of risks, uncertainties and other factors
could cause the Company's actual results to differ materially from
those expressed in, or implied by, the forward-looking statements,
including, without limitation, the final results of the Audit
Committee’s internal review as it impacts the Company’s accounting,
accounting policies and internal control over financial reporting;
the reasons giving rise to the resignation of the Company’s prior
independent registered public accounting firm; the time and effort
required to complete the restatement of the affected financial
statements and amend the related Form 10-K and Form 10-Q filings;
the Nasdaq Hearing Panel’s decision and inability to file
delinquent periodic reports within the deadlines imposed by Nasdaq
and the potential delisting of the Company’s Common Stock from
Nasdaq and any adverse effects resulting therefrom; the subsequent
discovery of additional adjustments to the Company’s previously
issued financial statements; the timing of completion of necessary
re-audits, interim reviews and audits by the new independent
registered public accounting firm; the timing of completion of
steps to address and the inability to address and remedy, material
weaknesses; the identification of additional material weaknesses or
significant deficiencies; risks relating to the substantial costs
and diversion of personnel’s attention and resources deployed to
address the financial reporting and internal control matters and
related class action litigation; the impact of the resignation of
the Company’s former independent registered public accounting firm
on the Company relationship with its lender and trade creditors and
the potential for defaults and exercise of creditor remedies and
the implications of the same for its strategic alternatives
process; the impact of the previously disclosed investigation
initiated by the SEC and any related or additional governmental
investigative or enforcement proceedings. Actual events or results
may differ materially from the Company’s expectations. The
Company’s forward-looking statements are presented as of the date
hereof. Except as required by law, the Company expressly disclaims
any intention or obligation to revise or update any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Actual events or results may differ materially from
the Company’s expectations. For a detailed discussion of factors
that could affect the Company's future operating results, please
see the Company's filings with the Securities and Exchange
Commission, including the disclosures under "Risk Factors" and
"Cautionary Note Regarding Forward-Looking Statements" in those
filings. Except as expressly required by the federal securities
laws, the Company undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
changed circumstances or future events or for any other reason.
Power Solutions International, Inc.
Jeremy Lessaris
VP of Global Marketing & Communications
+1 (630) 350-9400
jlessaris@psiengines.com
Power Solutions International, Inc.
Philip Kranz
Director of Investor Relations
+1 (630) 451-5402
Philip.Kranz@psiengines.com
Power Solutions (PK) (USOTC:PSIX)
Historical Stock Chart
From Mar 2024 to Apr 2024
Power Solutions (PK) (USOTC:PSIX)
Historical Stock Chart
From Apr 2023 to Apr 2024