CATL to Acquire LFP Cathode Material Supplier for $295M in China

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Contemporary Amperex Technology will acquire control of Shenghua New Material through a CNY2.1 billion (USD295 million) deal aimed at strengthening its research, development, production, and market expansion of high-quality lithium iron phosphate cathode materials.

Following the transaction, the company’s ownership stake in Shenghua will increase to 51 percent from 18.7 percent. The current leading shareholder, Fulin Precision, announced that it will also invest an additional CNY1 billion in the company. This investment will reduce Fulin Precision’s stake from 80 percent to 47 percent.

This strategic move is expected to bring valuable resources to Shenghua, accelerate the growth of its core business, and improve profitability. However, details about potential adjustments to Shenghua’s daily operations and governance were not specified.

Shares of Fulin Precision jumped to the daily trading limit of 20 percent, reaching CNY22.22 (USD3.12) during midday trading in Shenzhen. Meanwhile, CATL’s stock increased by 1.17 percent to CNY402 (USD56.46).

Earlier in March, CATL invested CNY339 million (USD47.6 million) to become Shenghua’s second-largest shareholder. The battery manufacturer from Ningde also plans to prepay CNY500 million (USD70.2 million) this month and CNY1 billion in November to support Shenghua’s development of new production lines for LFP cathodes and other battery materials. These products are expected to be supplied exclusively to CATL.

Shenghua is expanding its production capacity, aiming to increase its annual output of LFP cathode materials from 300,000 tons to 440,000 tons by the year’s end, and further to 500,000 tons next year to meet the growing demand from key clients. Last year, its sales of related products surpassed 126,200 tons, generating about CNY4.8 billion in revenue, which accounted for 57 percent of its total income.

Unlike the more common ternary lithium batteries used by many international electric vehicle manufacturers, LFP batteries are more affordable, safer, and environmentally friendly. They currently dominate China’s new-energy vehicle market in terms of both capacity and application.