In late March, an equity investment agreement was signed by Zhejiang Provincial Economic Construction Investment Co., Ltd. (hereinafter referred to as “ZPECI”) and Hangzhou Ozma CNC Equipment Co., Ltd. (“Ozma”), marking a successful step of ZPECI to strengthen its capacity of advanced equipment manufacturing via M&A. Dacheng Hangzhou office’s capital markets and finance lawyers, led by senior partner Jiang Yinhua,  advised ZPECI on the transaction.

Established in 1991, Ozma is a provincial-level high-tech enterprise engaging in the R&D, production and distribution of numerically controlled filament-winding machines and complete sets of automated production lines for downstream manufacturers of auto parts, electronic components, motors, instruments and meters. The company currently owns or is applying for thirty-six patents and has been involved in a variety of important research projects at both national and provincial levels, including those covered by the National Torch Plan. It has been recipients of Zhejiang Science and Technology Award (second prize) and China Machinery Industry Science and Technology Award (second prize). By the third quarter of 2013, its Deqing-based production site, covering 31,447 m2 and with 20,570.67 m2 of floor space, had completed first-phase construction and was subsequently put into use. The company is now capable of producing 500 numerically controlled filament-winding machines a year, or 270mln yuan of annual output at full capacity.

The acquisition in question involved 260mln yuan in equity transfer and capital increase. It signals a concrete step taken by an SOE in Zhejiang province to transform and upgrade itself as well as engage in more effective investment. Moreover, it echoes the resolution made by the 3rd Plenary Session of 18th CPC Central Committee that mixed-ownership businesses should be encouraged. In 2014, Dacheng’s Hangzhou office will see a lot of M&A transactions involving SOEs and large-scale non-SOEs in the pipeline, from such sectors as rail transport, new materials, hydropower and machinery manufacturing, judging from the pile of contracts and partnership agreements signed with clients.