Press Releases

Manganese Bronze signs heads of terms with Zhejiang Geely Holding Group Co., Ltd. for Chinese joint venture

4th October 2006

Manganese Bronze Holdings Plc is pleased to announce that it has signed Heads of Terms with Chinese car manufacturer Zhejiang Geely Holding Group Co. Ltd. (“Geely”) to establish a joint venture company to produce the iconic London black taxi in Shanghai.

The Heads of Terms, which are not legally binding, establish the intention of producing definitive legally binding agreements within the next few weeks.  Total investment in the joint venture is forecast at £53 million of which Manganese Bronze’s share is £19.85 million.  The investment will cover the purchase of land (£9.0 million) intellectual property (£5.6 million) and fund construction and factory fit out.  Final assembly and sales will be undertaken by Shanghai Maple, a subsidiary of Geely, which will have the right to sell these vehicles within Asia, while Manganese Bronze will have the right to sell them in the rest of the world.

Manganese Bronze will satisfy its investment by licensing its intellectual property rights valued for the joint venture at £5.6 million and issuing 5.7 million new ordinary shares to Geely (representing 23.0% of Manganese Bronze’s enlarged issued ordinary share capital) based on a valuation of £2.50 a share (with £14.25 million being invested by Geely in the joint venture).  The valuation is based on the share price when this transaction was initially negotiated and represents the average share price for the last six months.  The shares and intellectual property secure an initial stake of 37.6% in the joint venture.  Geely will fund the joint venture total cash investment of £38.4 million, with Shanghai Maple providing the land valued at £9.0 million, which combined secure a 62.4% stake in the joint venture.  Manganese Bronze has the right to purchase shares in the joint venture from Geely for £6.6 million to increase its stake to 50% at any time over the next five years.

The joint venture agreement will be subject to regulatory approval in China, and this transaction will require approval by Manganese Bronze shareholders at an Extraordinary General Meeting.  The transaction would constitute a Class 1 transaction and a circular will be sent to shareholders once the definitive documentation has been finalised.

Manganese Bronze has been pursuing a strategy of controlled international expansion following the divestiture of its loss making components division.  The group has been seeking a manufacturing partner in China in order to develop a low cost manufacturing facility and to gain access to a country with a growing vehicle market. Following extensive talks, Geely stood out as one of the most respected automobile companies in China and the prime partner for a joint venture.

Geely entered automobile manufacturing in 1996 and has rapidly grown as the key brand for low cost vehicles in China.  It now has an annual production capacity of 250,000 vehicles, 200,000 engines and 150,000 gearboxes from four separate manufacturing bases.  This capacity is growing rapidly as Geely meets customer demand for its vehicles which has grown in excess of 50% in the last six months.  Geely have a wide and impressive range of vehicles which are manufactured in some of the most modern automobile manufacturing facilities in China.

The intended capacity of the joint venture facility will be 20,000 vehicles, with production planned to commence in mid 2008 subject to timely completion of legal agreements and shareholder approval.  The cost of producing the London taxi is expected to be significantly lower due to higher volumes and purchase of components from Geely’s current low cost suppliers.  The joint venture will provide Manganese Bronze with a low cost manufacturing base which should increase appeal to new markets outside China and allow rapid access to the large and fast growing Chinese vehicle market.

Tim Melville-Ross Chairman of Manganese Bronze, said;

“We are delighted to have signed these Heads of Terms with Geely.  Geely is one of the fastest growing car companies in China, with impressive manufacturing, supply chain, engine and dealership facilities.  The joint venture will increase the appeal of our iconic vehicle around the world. We look forward to concluding a final agreement in the near future.”

Chairman Li Shufu of Geely, said;

“We are very pleased to have signed these Heads of Terms with Manganese Bronze.  The London black taxi is an iconic vehicle and we believe that the joint venture can create significant value for shareholders of both sides. We look forward to a significant export opportunity with Manganese Bronze. This is an important agreement for Geely and we are confident that the joint venture will be a success.”

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Notes for Editors:

For further details on Geely please see www.geelyauto.com.uk and www.geely.com.

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