China Lending Prepares to Increase Stake in Lixin to More Than 80%
In the next three years, Lixin has pledged to reach an annual net profit of no less than $3 million as part of its deal with CLDC.
Today's announcement by China Lending Corp. (Nasdaq: CLDC) that it plans to significantly increase ownership in a financial services company failed to impress investors as its stock ended 2 cents lower, at $1.19 per American depositary share.
In a statement Monday, CLDC said it signed a deal to buy a majority stake, up to 80.5 percent of equity interest, in Zhejiang Lixin Enterprise Management Holding Co. Ltd., which provides financial services in the Yangtze River Delta Region.
The announcement came after CLDC said late last month that it had acquired 1 percent of Lixin, currently operated by Zhejiang Lixin Holding Co. Ltd. At the time, CLDC saw its stock soar 13 percent.
Now, the lending company said it planned to purchase its larger stake in Lixin from six selling shareholders. The shareholders, who would be issued cash or new shares from CLDC, are Shaoxing Gedun Furniture Co. Ltd., Hangzhou Yinxiang Assets Management Co. Ltd., Shaoxing Aoyuan Intellectual Technology Co. Ltd., Dayu Yangguang (Beijing) Assets Management Co. Ltd., Jialin Zhu, and Zhejiang Hengmao Construction Co. Ltd., according to the announcement.
In the next three years, Lixin has pledged to reach an annual net profit of no less than $3 million as part of the agreement.
CLDC added that the transaction was expected to be completed in a series of steps, with the first closing planned by June 30. The exact terms of the deal have yet to be finalized.
"After three months of growing collaboration and cooperation, we decide to take the Lixin partnership to the next level," the chairwoman of CLDC, Jingping Li, said today.
"We look forward to a smooth transaction in the next several months that could potentially lead to China Lending gain majority control in Lixin," she said, "further transforming the Company into a profitable and well diversified financial services company with geographical outreach well beyond the Xinjiang Uyghur Autonomous Region."