WINNIPEG, Friday, December 17, 2010 – Empire Industries Ltd. (TSX-V: EIL) today announced that it intends to complete a non-brokered private placement , issue a convertible debenture and enter into a joint venture with Guangdong Qiguang Steel Structures Co. Ltd. (“Qiguang”) of China.
Private Placement- The Company will issue up to 40 million Units at a price of $0.05 per Unit for gross proceeds of up to $2.0 million with each Unit consisting of one common share and one-half of one warrant. Each whole warrant will entitle the holder to purchase one additional common share at a price of $0.10 per share for a period of two years from the date of closing of the offering. Qiguang has committed to participate in the private placement for up to 9 million Units for gross proceeds of up to $450,000. It is anticipated that the officers and directors of Empire may subscribe for more than 25% of the private placement. The Private Placement will also be available to certain accredited investors including current shareholders. Proceeds from the private placement will be used for working capital purposes for Empire’s North American activities.
Convertible Debenture – Qiguang has also committed to subscribe for up to $1.0 million of a convertible debenture with Empire. The convertible debenture will have an annual coupon of 10%, a term of 5 years and be convertible at $0.06 in the first year, with the conversion price increasing by a penny per year until maturity. It will be a condition of the convertible debenture that no conversion will take place until such time as the TSX Venture Exchange has approved Qiguang as an Insider of Empire. Upon conversion, two Empire directors will resign and Qiguang will add a director to the Empire Board. The Convertible Debenture will also be available to certain accredited investors including current shareholders for up to a further $1.5 million.
Joint Venture – Empire and Qiguang have also agreed to enter into a joint venture agreement whereby a new company will be incorporated in China that will be owned 49% by Empire and 51% by Qiguang. The jointly owned company, called Qiguang Dynamic Structures, will be capitalized initially with $1.5 million. Empire’s share of the capitalization will be funded through limited recourse loans from Qiguang, secured by a pledge of Empire’s joint venture shares. Additional working capital required to fund the growth of the joint venture will be funded by Qiguang and Chinese banks. The joint venture will operate out of an existing 400,000 square foot facility on 24 acres of land in Dongguan, Guangdong, P. R. China., initially leasing approximately 80,000 square feet for joint venture business.
The joint venture will target three markets:
- the rapidly growing and largely under-served domestic Chinese market requiring complex steel fabrication design/build services;
- fabricated steel sub-components made in China and exported to the Western Canadian industrial market; and
- manufacturing of Empire’s engineered products in China for the Asian market, under license, that Empire has been manufacturing for decades in North America.
“I am delighted to announce that a strategic alliance has been entered into between Empire and the Qiguang Group from China.” said Guy Nelson, CEO and President of Empire. “We have been working on two service contracts in China with the Qiguang Group over the past number of months and it became apparent very quickly how compelling a strategic alliance between our two companies could be. I have been convinced for some time, the recession notwithstanding, that if we could consummate this particular Asian strategic alliance and recapitalize our company to execute the strategy, that there would be no barriers to success that could not be overcome.”
Mr. Qiguang Qiu, CEO and owner of the Qiguang Group was quoted as saying, “This joint venture combines Qiguang’s proven skills in marketing, fabrication and installation in the rapidly growing Chinese market together with Empire’s experience, unique engineering expertise and proprietary engineered products, to make a truly unbeatable combination.”
About Qiguang Group
Qiguang Group is based in southern China and is one of the fastest growing steel fabricators in China. It has over 1500 employees and eight subsidiaries all in the steel fabrication, steel supply and construction business in China. The Qiguang Group processed more than 70,000 tonnes of steel in 2009 and had consolidated revenues in excess of $100 million. The Qiguang Group has the required Class 1 certifications issued by Ministry of Construction to fabricate and install steel structures in China. Qiguang Group started the business in 2000 and has grown organically since then. For more information about the Qiguang Group, visit www.qiguanggroup.com