UQM Technologies’ deal with Hybrid Kinetic hits snag

LONGMONT — UQM Technologies Inc. on Wednesday was unable to conjure up enough shareholder votes to move forward with its pending deal to sell a controlling stake in the Longmont-based company to a subsidiary of Hong Kong-based Hybrid Kinetic Group Ltd. for $48 million in cash.

UQM (Nasdaq: UQM), a manufacturer of electric motors, announced the deal in June that would have HKG’s subsidiary American Compass Inc., buy 66.5 million newly issued shares of UQM common stock.

But after the shareholders’ meeting Wednesday, the deal is in jeopardy, but not necessarily dead, according to Joe Mitchell, UQM’s president and chief executive. 

Shareholders voted on two proposals Wednesday that would amend the company’s articles of incorporation, one that would allow the company to issue enough new stock for Hybrid Kinetic to buy and another that would give Hybrid Kinetic more control by lowering the threshold from requiring two-thirds of shareholders to approve a vote to 51 percent.

Proposal Three, a condition of the deal that in essence would have made Hybrid Kinetic a majority shareholder because it is acquiring 58 percent of the company, was shot down by existing shareholders. The proposal would have reduced the voting requirements for future amendments to the company’s articles of incorporation and other corporate actions from the current two-thirds threshold to a majority threshold.

“Our shareholders, by their votes, said they didn’t want to give up their power,” Mitchell said.

The key vote, however, is Proposal Two, which would increase the number of shares of outstanding stock to permit sufficient shares to be issued to Hybrid Kinetic’s subsidiary.

“Without the stock, we don’t have a deal,” Mitchell said, adding that it is taking time to encourage stockholders to vote on that, but he expressed confidence that the needed votes can be secured. The vote will be continued Jan. 10, when the stockholder meeting is reconvened. Wednesday’s vote was carried over from a meeting that was adjourned Dec. 9.

Both of those proposals require a two-thirds vote by shareholders to pass. A non-vote is counted as a no vote, Mitchell said.

Shareholders earlier this year approved the deal, but that vote only required a 51 percent threshold to pass.

Mitchell said the deal can still go through if Hybrid Kinetic waives the condition of lowering the voting threshold. Either party may terminate the share-purchase agreement after Dec. 25.

“We will have to wait a few more days to determine if the parties agree to continue the potential Hybrid Kinetic investment transaction,” Mitchell said. “I expect we will know something about that when the stock market reopens after Christmas.”

Mitchell said if the transaction with Hybrid Kinetic does not go forward, UQM will work with its investment-banking firm, Business Development Asia Partners, to explore other options.

Mitchell said the electric-vehicle market has shown “some strong momentum in recent months and combined with excellent technology from UQM and growing market opportunities, there are other partnership prospects available that will allow us to execute on our global strategy.”

 

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