SHENZHEN, China, Sept. 24, 2012 /PRNewswire/ -- Cogo Group, Inc. (NASDAQ: COGO) Cogo, one of the leading gateways for global semiconductor companies to access the industrial and technology markets in China, today announced the current status of the proposal by its CEO and Chairman, Jeffrey Kang, through his personal investment vehicle, Envision Global Group ("Envision"), to purchase certain Company subsidiaries[i] representing approximately 30% of the Company's total assets, liabilities and business operations. The Audit Committee continues to conduct due diligence to understand the legal and accounting ramifications in the many different jurisdictions involved.
However, the material terms are anticipated to be as follows:
- Total consideration will be $78 million, which will be paid in two installments, $10 million at closing and an additional $68 million on or before December 31, 2012.
- In the event the second installment payment is not made, title to the target companies will be transferred back to Cogo.
- Cross guarantees to banking institutions among the companies will be maintained, subject to approval by applicable banks, in order to maintain better financing terms for all the companies.
Additionally, since Cogo is not currently in possession of any material insider information, it can begin executing a stock buyback program for Cogo shares on the open market pursuant to a 10b5-1 plan it has put in place with its broker. In May 2012, at the company's Annual General Meeting, Cogo shareholders authorized a 10 million-share buyback program. Given that Cogo shares trade at approximately 30% of Tangible Book Value ("TBV") as reported at the end of the second quarter of 2012, the Company believes that a buyback program is a prudent use of cash.
Consistent with prior publicly reported figures, Envision would have gross margins in the range of 5-6%, which is below the 7.1% gross margins reported for all of Cogo in the second quarter of 2012. Additionally, Envision would currently constitute approximately 25-30% of total Cogo revenue.