China Healthcare Acquisition Corp Signs Definitive Agreement to Acquire Europe Asia Huadu Environment Holding Pte, Ltd.
Following the consummation of the acquisition Madame Wang Lahua, thecurrent Executive Director of EAHE, will be our Executive Chairman and CHMwill change its name to Global Huadu Environment Holdings, Inc. Madame Wangindirectly owns 100% of EAHE. Madam Wang Lahua is also the Deputy Director ofWater Pollution Control Committee of China Environmental Protection IndustryAssociation and an Environmental Engineering adjunct professor of TsinghuaUniversity and Huangshi College.
EAHE, through its subsidiaries, has been engaged in the manufacture ofenvironmental protection equipment and in the water treatment industry inChina for over 20 years and has developed extensive management experience inthe water treatment industry. EAHE received a Certificate of Approval for theestablishment of enterprises with foreign investment in the People's Republicof China in 2004.
Based on the consolidated financial statements of EAHE which have beenaudited in accordance with US GAAP, EAHE's revenues grew 339% in 2007 fromUS$11.6 million to US$39.4 million and net income grew 316% from US$3.0million in 2006 to $9.5 million in 2007. For the six months ended June 30,2008, unaudited revenue and net income were US$24.9 million and US$5.8million, respectively. For the years ending 2007 and 2006 an averagetranslation rate of Renminbi into U.S. Dollars of RMB7.604 and RMB7.960,respectively, were used. For the six months ended June 30, 2008, the averagetranslation rate was RMB7.0702.
EAHE is a leading company in China in the water treatment industry.Through its subsidiaries in China, using its proprietary core oxygenationbiomembrane technology, the company manufactures water and sludge treatmentequipment for sale in China and abroad. The company also providesconstruction and engineering services for water and sludge treatment projectsin China. Its subsidiary, Europe Asia Huadu (Yixing) Environmental ProtectionCo., Ltd. is a recommended enterprise for urban sewage treatment equipment bythe Ministry of Construction and the Ministry of Science and Technology ofChina. Customers include steel and petrochemical companies, airports, urbansewage and water treatment plants.
Summary of the Transaction
Under the terms of the acquisition agreement, CHM will acquire 100% of thestock of EAHE for a total payment of 10,500,000 restricted shares of commonstock of CHM. Based on the closing price of $5.75 per share on the AmericanStock Exchange on August 5, 2008, the value of the acquisition is $60,375,000.
The owner will also be entitled to receive a potential earnout payment ofup to 3,800,000 additional shares of common stock of CHM as follows:
-- 1,200,000 shares if net income of EAHE exceeds US$12,000,000 for theyear ended December 31, 2008;
-- 1,300,000 shares if net income of EAHE exceeds US$16,000,000 for theyear ended December 31, 2009; and
-- 1,300,000 shares if net income of EAHE exceeds US$20,000,000 for theyear ended December 31, 2010;
provided, that if net income for the first earnout period does not exceed$12,000,000 t
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