5 May 2015
Tanfield Group PLC
("Tanfield" or the "Company")
Smith Electric Vehicles announces Conditional Joint Venture with FDG Electric Vehicles
The Board of Tanfield (AIM ticker: TAN) is pleased to update the market regarding its investment Smith Electric Vehicles ("Smith"). Smith is a leading producer of all-electric medium-duty commercial vehicles and yesterday announced that it has executed a conditional agreement to form an exclusive joint venture ("the JV") with strategic partner and investor FDG Electric Vehicles Limited ("FDG"). FDG is an international company listed on the Hong Kong Stock Exchange and is a vertically integrated electric vehicle manufacturer engaged in the R&D, production and distribution of all-electric vehicles.
Summary of JV terms:
• Smith will invest Smith brand, licence for Newton™ EV design and IP
• Strategic partner FDG will invest $15M in cash and $30m in assets, licence for commercial EV design and IP
• The New Joint Venture entity to be responsible for US product development, sales and marketing.
• Smith will be responsible for manufacturing and maintain its right to territories outside of the USA.
• Smith will hold 20 million shares out of a total of 42.5 million. This represents a holding of 47% for Smith.
• Smith will distribute all the shares in the New Joint Venture to its common stockholders on a pro rata basis.
• The agreement is conditional on certain conditions precedent including , inter-alia, necessary government approvals and FDG due diligence.
A copy of the full announcement made by FDG on the Hong Kong Stock exchange is available at www.fdgev.com
The Joint Venture
The new entity, a private Delaware corporation, will offer a combined portfolio of all-electric vehicles and fleet electrification solutions for customers in the United States and its protectorates across a broad range of segments including delivery and transit. This portfolio includes the Smith Newton platform configuration and Smith sub systems (Smith Drive™, Smith Link™ and Smith Power™), the FDG all-electric commercial EV platform, its lithium-ion batteries and all-electric power-train, as well as infrastructure, energy contracts and financing.
Smith has conditionally agreed to contribute, convey, assign, transfer and deliver to the JV:
(i) an exclusive licence for the use of the Smith Intellectual Property (including all know how and trade secrets) in the USA;
(ii) an exclusive licence for the use of the brand "Smith" and all related goodwill in the USA;
(iii) the executed OEM Supply Agreement no later than 30 June 2015;
(iv) the exclusive sales and distribution rights of Electric Vehicles in the USA;
(v) the exclusive rights to form a battery rental business in the USA;
(vi) goodwill including but not limited to Smith's customers; and
(vii) executed offer letters from certain employees.
The vehicles will be Smith branded and the New Joint Venture will contract exclusively with Smith for product development services, vehicle manufacturing, service and support. Smith retains its rights outside of the United States for the commercialisation of the Newton and Edison vehicles and Smith sub systems.
Consideration
FDG has conditionally agreed to enter into a licence agreement to use the FDG EV IP in the United States; enter into a Battery Supply Agreement no later than 30 June 2015; enter into a Vehicle Kit Supply Agreement no later than 30 June 2015 and contribute US$5,000,000 in cash to the New Joint Venture with an additional US$10,000,000 in cash to the New Joint Venture upon, inter alia, the execution of the Battery Supply Agreement and the Vehicle Kit Supply Agreement.
The New Joint Venture has conditionally agreed to issue 17,500,000 Shares to FDG (or its nominee) upon fulfillment of the conditions and issue an additional 5,000,000 Shares to the FDG (or its nominee) upon, inter alia, the execution of the Battery Supply Agreement and the Vehicle Kit Supply Agreement. The New Joint Venture will issue 20,000,000 shares to Smith in consideration for its input of assets.
Effect on Tanfield
Under the terms of the JV agreement Smith Electric will distribute all the shares in the New Joint Venture to its common stockholders on a pro rata basis, of which Tanfield currently hold 5.76%. Based on the current valuation of the New Joint Venture that has been agreed between the Joint Venture parties in contributing their respective assets, the Board of Tanfield believes, subject to the Joint Venture agreement completing, that this will represent approximately $2.3m of value to Tanfield while still retaining its existing 5.76% holding in Smith Electric which is currently valued at $10.7 million.
It is understood from Smith that it still intends to pursue a listing on a US stock exchange as previously announced. Further details will be made available as they are known.
The New Joint Venture intends to raise an additional $20m in cash with the current Smith common stockholders having a first right of refusal to participate on a pro rata basis. As more details are known, the Board will consider Tanfield's position.
General Comment:
The Tanfield Board notes these developments within Smith which it views as positive. The joint forces of Smith and FDG and the combined investment in EV technology presents significant opportunities in a developing EV market.
Notes for Editors:
Tanfield is a passive investment company with two investments, Smith Electric Vehicles and Snorkel. Tanfield currently holds 5.76% of the equity of Smith (excluding warrants: Tanfield has approximately 14 million warrants with an exercise price of $0.31) and 49% of the equity of Snorkel.
The announcements made by Smith and FDG can be found at www.tanfieldgroup.com and www.fdgev.com and www.smithelectric.com respectively.
Contacts:
Tanfield Group Plc
Roy Stanley
0845 155 7755
WH Ireland Limited - Nominated Adviser
James Joyce / James Bavister
0207 220 1666
Peterhouse Corporate Finance Limited - Broker
Duncan Vasey / Peter Greensmith
0207 220 9797
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