Elcoteq SE has signed a Letter of Intent with Chinese industrial investor, Kaifa, on equity investment of 50 MEUR and plans to restructure debt

Elcoteq has signed a conditional Letter of Intent with Chinese technology company Shenzhen Kaifa Technology, a separately listed company of China Electronics Corporation (CEC) Group, concerning an equity investment of 50 MEUR. CEC has been Elcoteq’s successful joint venture partner in China since 2002. The intended transaction together with the required debt restructuring would significantly strengthen Elcoteq’s financial situation, increase company’s financial capability to manage existing and new customer projects, and hence ensure Elcoteq’s turnaround back to growth and profits.

Elcoteq and Shenzhen Kaifa Technology Company Limited (“Kaifa”) have signed a Letter of Intent concerning a major equity investment. Kaifa belongs to the CEC Group of technology companies. The CEC Group consists of more than 200 different technology companies; from semiconductor, computer and mechanics companies to software development.

As an equity investment Kaifa would subscribe new shares to be issued by Elcoteq with the amount of 50 MEUR. Elcoteq and Kaifa are also negotiating about further financing, which is subject to certain financial performance criteria.

Kaifa’s investment is depending on Elcoteq’s creditors agreeing on restructuring of current debt, which will include partial debt-to-equity swap and it needs shareholders’ approvals. The actual number of shares to be issued to Kaifa will be determined after the negotiations with the creditors have been completed, aiming at Kaifa becoming the biggest single shareholder of Elcoteq with a minimum ownership of 30%. The definitive agreement is planned to be signed during the third quarter of 2009.

Pohjola Corporate Finance has been engaged to advice the company in these debt negotiations.

“This transaction gives us the strengthened financial basis for future growth. It also makes perfect business sense by providing us with a very influential partner in China - Kaifa being part of the CEC Group. Hence this co-operation creates a very solid platform for developing our service offering into various new areas”, says Mr. Jouni Hartikainen, President and CEO of Elcoteq. “Elcoteq brings us a global manufacturing network which helps us to serve our Asian and other customers wishing to expand their operations worldwide, so it is a logical step in our strategy”, says Mr. Tam Man Chi, Chairman of the Board and President of Kaifa.

About Kaifa

Kaifa was established in 1985 and is publicly listed in Shenzhen Stock Exchange (Stock Code 000021SZ). It employs approximately 7,400 persons. The Group’s principal activities are developing, manufacturing and selling computer and electronic communication products with annual net sales of approximately 1.44 billion euros (2008). Major products include magnetic head of computer disc drivers, hard disk plates, computer hardware and software systems and equipment, communications equipment, electrical apparatus and spare parts, household computers and video games. Kaifa’s products are sold in the People’s Republic of China but majority are exported to other Asia Pacific countries and America. Kaifa’s branches and R&D teams cover sites in Hong Kong, Singapore and USA. For more information, please visit www.kaifa.com.cn and www.cec.com.cn.

About Elcoteq
Elcoteq SE is a leading electronics manufacturing services (EMS) company in the communications technology field. Elcoteq’s global service offering covers the entire lifecycle of products, from product development to after market services. By further combining mechanics expertise into its service offering, Elcoteq’s vision is to be a leading integrated electronics manufacturing services (IEMS) company.

Elcoteq provides global end-to-end solutions consisting of product development services, supply chain management, NPI, manufacturing, and after market services for the whole lifecycle of its customers’ products. These products include Personal Communications products such as mobile phones and their parts, Home Communications products such as set-top boxes and flat panel TVs as well as Communications Networks products such as base-stations, tower-top amplifiers, and microwave systems.

Elcoteq’s consolidated net sales for 2008 totaled 3.4 billion euros. Elcoteq SE is listed on the Nasdaq OMX Helsinki Ltd. For more information visit the Elcoteq website at www.elcoteq.com.