Mascotte acquires polycrystalline silicon maker

Mascotte Holdings Limited will acquire a controlling 50.1% stake of Sun Materials, a Taiwan-based polycrystalline silicon manufacturer, with a consideration of US$150,000,000. Sun Materials claims a new polySi production process that saves costs and improves the environmental effect of silicon growth and production.

January 20, 2011 – ACN Newswire — Mascotte Holdings Limited (136.HK) will acquire a controlling 50.1% stake of Sun Materials, a Taiwan-based polycrystalline silicon manufacturer, with a consideration of US$150,000,000 (approximately HK$1,170,000,000). The company has reserved the right to acquire the remaining 49.9% share stake, based on the agreement.

Sun Materials is a Taiwan-based polycrystalline silicon manufacturer and it has developed a proprietary technology for solar-grade polycrystalline silicon that holds patents in the US, Europe, Japan, Taiwan and China. Its technology will help to produce high-quality solar-grade polycrystalline silicon used in the solar energy value chain with a view to significantly reduce the plant construction costs, production costs, production hazards and adverse environmental effects of manufacturing solar-grade polycrystalline silicon. Mascotte believes that Sun Materials’ production process is a “disruptive innovation” that has the potential to radically transform the industry landscape in the clean technology market and the transaction will give Mascotte the opportunity to benefit from technology, with the potential to capture a leading position in the solar grade polysilicon market.

Mascotte has established a strategic alliance with Hareon under a strategic cooperation agreement. Headquartered in Jiangsu, China, Hareon is a rapidly growing, vertically integrated manufacturer of solar photovoltaic products including silicon ingot, block, wafers, cells and modules with a global customer base. In addition, Hareon agreed to purchase polycrystalline silicon from Sun Materials after the production plant commences operations. The polycrystalline silicon quality of Sun Materials has been tested by Hareon after carrying out two polycrystalline silicon production trials in December 2010 and January 2011. On the basis of Hareon’s indication of the testing results, Mascotte is pleased to accept that the trial results have fulfilled the relevant conditions for the transaction.

Polycrystalline silicon is a primary raw material used in the solar energy value chain. The traditional process of manufacturing polycrystalline silicon is being associated with environmental risks and general safety concerns by the industry, says Mascotte. Compared to the traditional and modified “Siemens” processes and the fluidized bed reactor (FBR) process, which are commonly used by manufacturers of solar-grade polysilicon, Sun Materials considers the production process it intends to adopt to be innovative in that it uses modular production lines and is designed with a view to using lower-cost feedstock while substantially reducing the consumption of electricity and water.

Sun Materials believes that its technology will significantly assist in reducing the production cost and the adverse environmental effects of manufacturing polycrystalline silicon. This potentially translates into a lower cost of polycrystalline silicon procurement by downstream customers in the solar energy value chain which may allow them to deliver a product that can generate electricity at or below grid parity without the aid of subsidies. Based on the foregoing, the Directors believe that Sun Materials could potentially enjoy the best profit margins in the industry after achieving economies of scale, and at the same time maintain its cost-competitiveness. Its target customers are downstream manufacturers of wafers, ingots and photovoltaic cells. The production will commence in the first quarter of 2011.

Sun Materials has already secured contracts with purchasers of its polycrystalline silicon for all of its production output for 2011. Sun Materials also secured its sales contracts with other domestic and international customers with the latest contract period extending to 2021.

Sun Materials’ plant in Taiwan is designed for a production capacity of up to 3,500 metric tons. Mascotte also plans to expand its production line this year and build another 5 plants to increase its production capacity up to 21,000 metric tons by the first quarter of next year in order to fulfill the large orders and demand from customers.

In the meantime, Mascotte entered into a subscription agreement with Samuel Yang and Improve Forever on January 12, 2011 to issue an aggregate of 354,100,608 shares with a price of HK$0.4 per share, amounting to approximately HK$141,000,000. Yang demonstrates his long-term commitment to Mascotte by agreeing to a minimum commitment of at least 2 years. He is the vice-chairman and chief executive officer of Hareon, founder of NASDAQ-listed JA Solar Holdings Co., Ltd. (NASDAQ: JASO), and a co-founder of Suntech Power Holdings Co. Ltd. (NYSE: STP) and China Sunergy Holdings Co. Ltd. (NASDAQ: CSUN).

In order to complete the Sun Materials acquisition, Mascotte proposes to place the placing shares and the convertible bonds with a view to raising an aggregate amount of approximately HK$2.8 billion to fund the acquisition, the expansion plan and the capital expenditure for Sun Materials. Deutsche Bank is the financial adviser and placing agent for Mascotte.

Sun Materials is a limited liability company incorporated in Taiwan and its principal business is the manufacture of solar grade polycrystalline silicon.

Mascotte Holdings Limited (HKEx:136) is a company incorporated in Bermuda as an exempted company with limited liability, the shares of which have been listed on the Main Board of the Stock Exchange since 1997. The Company implemented a diversification strategy aimed at identifying suitable investment opportunities, including that of renewable energy related businesses, and wishes to expand its involvement in the renewable energy market.

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