Empire Industries Ltd.
TSX VENTURE : EIL

Empire Industries Ltd.

December 17, 2010 07:00 ET

Empire Industries Announces Private Placement, Convertible Debenture and Joint Venture With Qiguang Group of China

WINNIPEG, MANITOBA--(Marketwire - Dec. 17, 2010) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES.

Empire Industries Ltd. (TSX VENTURE:EIL) today announced that it intends to complete a non-brokered private placement , issue a convertible debenture and enter into a joint venture with Guangdong Qiguang Steel Structures Co. Ltd. ("Qiguang") of China.

Private Placement- The Company will issue up to 40 million Units at a price of $0.05 per Unit for gross proceeds of up to $2.0 million with each Unit consisting of one common share and one-half of one warrant. Each whole warrant will entitle the holder to purchase one additional common share at a price of $0.10 per share for a period of two years from the date of closing of the offering. Qiguang has committed to participate in the private placement for up to 9 million Units for gross proceeds of up to $450,000. It is anticipated that the officers and directors of Empire may subscribe for more than 25% of the private placement. The Private Placement will also be available to certain accredited investors including current shareholders. Proceeds from the private placement will be used for working capital purposes for Empire's North American activities.

Convertible Debenture – Qiguang has also committed to subscribe for up to $1.0 million of a convertible debenture with Empire. The convertible debenture will have an annual coupon of 10%, a term of 5 years and be convertible at $0.06 in the first year, with the conversion price increasing by a penny per year until maturity. It will be a condition of the convertible debenture that no conversion will take place until such time as the TSX Venture Exchange has approved Qiguang as an Insider of Empire. Upon conversion, two Empire directors will resign and Qiguang will add a director to the Empire Board. The Convertible Debenture will also be available to certain accredited investors including current shareholders for up to a further $1.5 million.

Joint Venture – Empire and Qiguang have also agreed to enter into a joint venture agreement whereby a new company will be incorporated in China that will be owned 49% by Empire and 51% by Qiguang. The jointly owned company, called Qiguang Dynamic Structures, will be capitalized initially with $1.5 million. Empire's share of the capitalization will be funded through limited recourse loans from Qiguang, secured by a pledge of Empire's joint venture shares. Additional working capital required to fund the growth of the joint venture will be funded by Qiguang and Chinese banks. The joint venture will operate out of an existing 400,000 square foot facility on 24 acres of land in Dongguan, Guangdong, P. R. China., initially leasing approximately 80,000 square feet for joint venture business.

The joint venture will target three markets:

  • the rapidly growing and largely under-served domestic Chinese market requiring complex steel fabrication design/build services;
  • fabricated steel sub-components made in China and exported to the Western Canadian industrial market; and
  • manufacturing of Empire's engineered products in China for the Asian market, under license, that Empire has been manufacturing for decades in North America.

"I am delighted to announce that a strategic alliance has been entered into between Empire and the Qiguang Group from China." said Guy Nelson, CEO and President of Empire. "We have been working on two service contracts in China with the Qiguang Group over the past number of months and it became apparent very quickly how compelling a strategic alliance between our two companies could be. I have been convinced for some time, the recession notwithstanding, that if we could consummate this particular Asian strategic alliance and recapitalize our company to execute the strategy, that there would be no barriers to success that could not be overcome."

Mr. Qiguang Qiu, CEO and owner of the Qiguang Group was quoted as saying, "This joint venture combines Qiguang's proven skills in marketing, fabrication and installation in the rapidly growing Chinese market together with Empire's experience, unique engineering expertise and proprietary engineered products, to make a truly unbeatable combination."

About Qiguang Group

Qiguang Group is based in southern China and is one of the fastest growing steel fabricators in China. It has over 1500 employees and eight subsidiaries all in the steel fabrication, steel supply and construction business in China. The Qiguang Group processed more than 70,000 tonnes of steel in 2009 and had consolidated revenues in excess of $100 million. The Qiguang Group has the required Class 1 certifications issued by Ministry of Construction to fabricate and install steel structures in China. Qiguang Group started the business in 2000 and has grown organically since then. For more information about the Qiguang Group, visit www.qiguanggroup.com

About Empire Industries

Empire Industries is based primarily in western Canada and operates in two market segments: Specialized Engineered Product Manufacturing and Steel Fabrication. It also participates in a strategic partnership in the industrial maintenance services sector through its equity stake in ACE Industrial Services, based in Fort McMurray. The Company's business operations are focused on the infrastructure, commercial and industrial construction marketplace of western Canada and select niche export markets internationally. Empire's common shares are listed on the TSX Venture Exchange under the symbol EIL.

Reader Advisory

This news release contains forward-looking statements, within the meaning of applicable securities legislation, concerning Empire's business and affairs. In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". These forward looking statements are based on current expectations, and are naturally subject to uncertainty and changes in circumstances that may cause actual results to differ materially. Readers are cautioned not to place undue reliance on such forward-looking statements. Forward-looking information is provided as of the date of this press release, and Empire assumes no obligation to update or revise them to reflect new events or circumstances, except as may be required under applicable securities laws.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information