Ensure sold its Shanghai Fervent stakes to Mayer

Taipei, March 18, 2004 (CENS)--Ensure Co., Ltd., Taiwan's largest manufacturer of aluminum alloy wheels, recently announced it has sold off its stakes in a mainland affiliate--Shanghai Fervent Alloy Wheel Manufacturing Co. to the Taiwan-based Mayer Steel Pipe Corp. and mainland-based Shanghai Automotive Group.

Shanghai Fervent is a joint venture between Ensure and Shanghai Automotive, with the former holding a 80% stake and the latter the remainder. The joint-venture company is also a major supplier to Shanghai Automotive.

Ensure invested in Shanghai Fervent through its overseas affiliate--Sino Regal Assets a few years ago. Recently, the company sold a 20% stake in Shanghai Fervent to Shanghai Automotive at the price of US$1.55 per share and then sold out Sino Regal Assets to Mayer at the same unit price.

Ensure said the disposal of the Shanghai Fervent shares will help it generate earnings of US$5.5 million, which will be used to reimburse debts and finance production expansion. On the other hand, Mayer will make use of the share acquisition to carry out its business diversification project and penetrate the automotive parts and components industry.

The financially-troubled Ensure has been planning to dispose of assets to repay debts. Since moving all domestic production facilities to Hsinwu plant in Taoyuan County, northern Taiwan, a year ago, the company has been seeking to sell out its Chungli plant, also in Taoyuan County. However, the company still fails to sell out the Chungli production facility due to the slowdown of the domestic real estate sector.

Now in a restructuring stage, Ensure has seen influx of orders. But the company is battling for funds to procure materials and launch equipment repair and maintenance. Ensure's vice president T.C. Huang said the sales of its mainland affiliate would help the firm improve its business strength and obtain fresh funds to vitalize operations.

At present, Ensure is capable of rolling out one million aluminum alloy wheels per year. The company boasted it would break even this year and begin making profits next year.

Ensure said the share transfer still needs the final approval of the Investment Commission under the Ministry of Economic Affairs. If everything goes smoothly, Mayer has to offer NT$90 million (US$2.7 million at US$1:NT$33.3) to Ensure as down payment. According to the accord signed by both sides, Ensure will be prohibited from handling sales of aluminum alloy wheels in the mainland market.

With the acquisition of a 60% stake in Shanghai Fervent, Mayer said it would see substantial sales growth because mainland is considered as the world's most promising automobile market.

Shanghai Fervent currently exports 70% of its output to the European Union, the U.S. and Japan, and the remaining 30% to the mainland market. The company garnered revenue of RMB212 million (US$25.63 million) in 2001, RMB296 million (US$35.79 million) in 2002 and RMB438 million (US$52.96 million) in 2003. The company predicted to see revenue expand to over RMB500 million (US$60.45 million) this year with after-tax earnings reaching RMB40 million (US$4.83 million).