Cogo CEO Jeffrey Kang Proposes Acquiring 30.4% Of Company Net Assets

(RTTNews) - Cogo Group Inc. (COGO), a gateway for semiconductor companies to access the industrial and technology markets in China, said Monday that its founder, CEO and Chairman, Jeffrey Kang, submitted a proposal to the Cogo Board of Directors for the purchase of about 30.5% of the company's net assets, which as of the first quarter of 2013, generated nearly 98.7% of its revenues through a company he wholly owns, Brilliant Group Global Limited. The proposed purchase price is $80 million.

Kang has proposed that the transaction close before the end of 2013. Since this is a related-party transaction, the Board has delegated the review and negotiation of the potential transaction to the company's Audit Committee, which is comprised of three independent directors. The Audit Committee is expected to oversee the entire process.

In accordance with the company's organizational documents, the company anticipates that it will hold a meeting of stockholders to approve the transaction if the transaction is approved by Audit Committee.

As a condition of the proposed transaction, Brilliant Group would be required to pay $750,000 to Cogo on a quarterly basis for Cogo's remaining subsidiaries and the target companies to continue to provide cross guarantees to each other until the end of 2014. Consideration is proposed to be payable in 2 installments, of which $10 million would be payable on closing and $70 million by the end of 2013.

Upon completion of the transaction, Net Asset Value of Cogo shares is expected to be more than $6 a share. At the NASDAQ close on July 12, Cogo's share price was $2.05 a share.

Based on Cogo's Q1 2013 unaudited results as filed on Form 6-K on May 31, 2013, the proposed target assets represent approximately 30.5% of the company's net assets, 98.7% of its revenues and 66.5% of its gross profit.

A portion of the proceeds of the sale will be reserved for Cogo's buyback program. There are more than 3.6 million outstanding shares under Cogo's current buyback program authorized for repurchase out of the original 10 million shares. Management plans to authorize another plan to repurchase up to 10 million shares upon completion of the current program. As of July 12, 2013, there are approximately 29.4 million outstanding shares, of which insiders own approximately 40.8%.