Feilo Acoustics: Acquires Equity in Two Lighting Companies for Over 35 Million Euros; Chairman Resigns

Feilo Acoustics Acquires Equity in Two Lighting Companies for Over 35 Million Euros

Becomes the Sole Shareholder of Havells Sylvania

Feilo Acoustics released an announcement on external investment on the evening of May 16.

1. The Company proposes to acquire 20% equity of Feilo Malta Limited ("FML") held by the related party Havells Holdings Limited ("HHL") at a price of EUR 34.50 million through Inesa UK Limited, a wholly-owned subsidiary of Shanghai Feile Investment Co., Ltd. ("Feile Investment"), a wholly-owned subsidiary of the Company;

2. The Company proposes to acquire 100% equity of Havells Sylvania (Thailand) Limited ("Thailand Company") held by Thai Lighting Asset Company Limited, Havells International Ltd., and the natural person Mr. Poomthep Malakul Na Ayudhaya at a price of EUR 1.60 million through Feilo Sylvania Asia Pacific Limited, Flowil International Lighting (Holding) B.V., and Feilo Sylvania Europe Limited, wholly-owned subsidiaries of Feilo Malta Limited, a controlling subsidiary of the Company.

The announcement states that, in accordance with the Company's internationalization strategy and the relevant provisions regarding the counterparty's drag-along right stipulated in the Share Purchase Agreement signed when the Company's wholly-owned subsidiary Feile Investment acquired the integrated 80% shares of the international lighting industry giant Havells Malta Limited (now renamed Feilo Malta Limited, or "FML") in 2015, the Company is required to acquire the remaining 20% equity of FML within the next 2-3 years. Meanwhile, if the originally divested SPV2 companies (i.e., Sylvania Brazil and Thailand companies) achieve profitability and have positive net assets, the Company is required to acquire SPV2 at a consideration not exceeding EUR 8 million.

Therefore, based on the due diligence findings of the professional institutions engaged by the Company in finance, taxation, and legal aspects on SPV2 companies, the Brazilian company carries significant legal and tax risks, and its sustained profitability is doubtful. Hence, after negotiation with the counterparty, the Company has resolved to adjust the scope of this transaction to the 20% equity of Feilo Malta Limited and the 100% equity of Havells Sylvania (Thailand) Limited ("Thailand Company") under SPV2. The Brazilian company is not included in the scope of acquisition, and the Brazilian company will be terminated by the Indian party at its own discretion.

The information shows that in 2007, Sylvania was acquired by India's Havells Ltd. Currently, Havells holds the Sylvania brand globally except in North America, where the brand belongs to OSRAM.

According to the announcement, the transaction target Feilo Malta Limited is a company in which Inesa UK Limited, a wholly-owned subsidiary of the company's wholly-owned subsidiary Shanghai Feile Investment Co., Ltd., holds 80% of the equity, while HHL holds the remaining 20% equity. It mainly engages in the design, manufacture and distribution of lighting products (including mould components, light bulbs and luminaire products) through its 52 subsidiaries. The Thailand company mainly engages in the design, manufacture and distribution of lighting products (including mould components, light bulbs and luminaire products) in Thailand.

Main financial data of the transaction target

Feilo Acoustics stated that after friendly negotiations between the two parties, the consideration for the transaction of the 20% equity in FML is EUR 34.5 million, and the consideration for the transaction of the 100% equity in the Thailand company is EUR 1.6 million.

Industry insiders analyzed that Feilo Acoustics is a state-controlled large listed company in the lighting industry. In recent years, it has been focusing on the development direction of the smart lighting industry, committed to transforming from a traditional manufacturing enterprise to a modern service-oriented manufacturing enterprise providing overall lighting solutions. The company has taken domestic and overseas mergers and acquisitions as a breakthrough for transformation and upgrading, successively completing the acquisition of 100% equity of Shen'an Group and the equity acquisition of the Sylvania Group (i.e., Havells Sylvania), enabling the company to complete the extension from the general lighting field to the engineering lighting field, and enabling the listed company to obtain an international century-old brand and sales channels in 48 countries. As a result, the comprehensive solution capabilities of Feilo Acoustics in the lighting application industry have been continuously improved.

The announcement pointed out that, firstly, upon completion of the acquisition of the remaining 20% equity in FML, Feilo Acoustics will become the sole shareholder of the Sylvania Group, which will be conducive to further integration between the company's existing businesses and the Sylvania Group in terms of markets and channels, products and technologies, human resources and management experience, achieving complementary advantages, resource sharing and technological integration.

The company will further advance the integration of the Havells Sylvania Group, fully leveraging the synergy between Feile Audio and Sylvania. This will enhance Feile Audio's competitiveness and brand influence in the global lighting market, further expand its market share worldwide, effectively improve operating performance, and deliver better returns to shareholders.

Secondly, with international lighting giant GE exiting the entire Southeast Asian market, this has created vast development opportunities in the region. Currently, international lighting giants such as Philips are actively capturing the business space left by GE in Southeast Asia through significant price reductions. The Southeast Asian lighting market is currently experiencing positive growth, with market size steadily expanding. As an important market in Southeast Asia, Thailand has a stable domestic political situation, and Sylvania's Thai subsidiary has already established a stable sales channel network and brand trust locally. Therefore, acquiring the Thai company will lay a solid foundation for the company's development in Southeast Asia, enhancing its market share and influence in the region.

Havells Sylvania, founded in 1901, is a globally leading lighting technology enterprise with over 100 years of history, possessing rich industry experience and a highly competitive position in the lighting industry. To date, Havells Sylvania's sales network spans 48 countries worldwide, with 500 sales and marketing personnel and over 6,000 distributors. According to the introduction, Havells Sylvania owns three major brands: SYLVANIA, Lumiance, and Concord, each focusing on different markets such as retail household and large-scale lighting projects, meeting the needs of different customers.

Feile Audio Chairman Cai Xiaoqing Resigns

Interestingly, Cai Xiaoqing, president of Shanghai Instrument Group and chairman of Feile Audio, who had previously participated in the share purchase agreement concerning the acquisition of world lighting giant Sylvania, announced his resignation on the same day.

Feile Acoustics announced that the Board of Directors received a written resignation from Mr. Cai Xiaoqing, Chairman of the Company, on May 16, 2017. For work reasons, Mr. Cai Xiaoqing applied to the Board of Directors to resign from his positions as Chairman, Director, and member of the relevant special committees of the Board of Directors. After his resignation, Mr. Cai Xiaoqing will no longer hold any position in the Company. #p#Page Title#e#

Feile Acoustics stated that, in accordance with the relevant provisions of the Company Law and the Articles of Association, Mr. Cai Xiaoqing's resignation report shall take effect from the date on which it is received by the Company's Board of Directors. Mr. Cai Xiaoqing's resignation has not caused the number of members of the Company's Board of Directors to fall below the statutory minimum, nor does it affect the normal operation of the Company's Board of Directors or the Company's normal production and operation.

Cai Xiaoqing, male, born in 1964, holds a postgraduate degree, a Master of Engineering, and is a senior management professional as well as an Executive Master of Business Administration (EMBA) researcher. He previously served as Deputy Director, Director, Deputy Director-General (presiding over work), and Director-General of the General Office of the 805th Research Institute of the Shanghai Aerospace Bureau; Deputy Director (Director-level) of the Comprehensive Planning Office of the Shanghai Municipal Economic Committee, Director of the Science and Technology Division, and Director of the Equipment Industry Division; as well as Deputy District Chief of the People's Government of Minhang District. He currently serves as President and Deputy Secretary of the Party Committee of Shanghai INESA (Group) Co., Ltd.