Cogo Chairman and CEO Jeffrey Kang Proposes
Acquiring 30% of Cogo Assets, Liabilities and Revenue
• Based on this transaction,
the implied valuation of Cogo shares is $6-$8 a share, compared to
the current share price of $1.84 a share.
SHENZHEN, China, March 15, 2012—Cogo Group, Inc. ("Cogo", or the
"Company") (NASDAQ: COGO), a leading gateway for global
semiconductor companies to access the industrial and technology
markets in China, today announced that its founder, CEO and
Chairman, Jeffrey Kang, proposed to the Cogo Board of Directors
that he purchase a series of operating entities accounting for
approximately 30% of Cogo’s total assets, liabilities and revenue
through his personal investment venture, Envision Global Group.
The total purchase price is expected to be between $60 million and
$82 million, depending on the results of an appraisal by an
appraisal firm. The deal is expected to close during the second
quarter of 2011, subject to approval by an audit committee that is
comprised of the independent directors on Cogo’s Board. Since this
is a related-party transaction, the audit committee will oversee
the entire process through to the deal’s closure.
The transaction provides an implied share valuation of $6-$8 a
share. At the NASDAQ close on March 13, Cogo’s share price stood
at $1.84 a share.
The proposal includes the purchase of a series of Cogo’s operating
entities accounting for approximately 30% of all assets and
liabilities (including inventories, accounts receivables and bank
debt), and about 30% of total Cogo revenue. It is expected that
the purchased entities will have higher working capital
requirements than the current Cogo corporate average. Mr. Kang
will continue to serve as Chairman and CEO of Cogo on a full-time
basis. While independent from Cogo, the purchased entities will
continue to be run in the same manner as before. Management of the
purchased entities will be promoted from within, while Mr. Kang
will only serve as a non-executive director.
Subject to stockholder approval, a portion of the proceeds of the
sale will be used to fund a buyback of up to 10 million of Cogo’s
"I am excited to announce my proposal for this unique transaction
intended to unlock value for Cogo shareholders," said Mr. Kang.
"Currently, our share price is less than 30% of Cogo’s tangible
book value, which does not even take into account the fact that
our business generated over $5 million in Non-GAAP operating
profit in the fourth quarter of 2011."
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Cogo Group, Inc. (Nasdaq: COGO) is one of the leading gateways
for global semiconductor companies to access the rapidly
growing Industrial and Technology sectors in China. Through
its unique business-to-business services platform, Cogo
designs customized embedded solutions using technology from
suppliers including Intel, Broadcom, Xilinx, SanDisk,
Freescale, Atmel and others for a customer base of over 1,800
Chinese OEMs/ODMs. Cogo’s customer list includes approximately
100 blue-chip companies, including ZTE, BYD and NARI, as well
as over 1,700 Small and Medium Enterprises (SMEs). The Company
serves a broad list of rapidly growing end-markets in China,
including 3G Smart phones, Tablets, Automotives, High-Speed
Railway, Smart Meter/Smart Grid, Healthcare and High
Definition Television ("HDTV").
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