Wednesday 12th October 2011
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Wellington Drive technologies, the unprofitable maker of energy-efficient refrigeration motors, has granted a manufacturing and distribution licence to German customer Ziehl-Abegg AG as part of a deal to change the terms of their supply agreement.
The Auckland-based company will face a bill of US$745,000, as expected, to supply Ziehl with motors and components to settle orders worth US$6.3 million, it said in a statement. That will mop up most of the company’s existing inventory, and manufacturing of the final orders will be completed at Wellington Drive’s Singapore facility by the end of March next year, with both parties bearing the cost equally.
The new terms of their agreement grant Ziehl an exclusive licence to manufacture and distribute motors, which won’t lead to any new royalty payments to Wellington Drive.
In lieu of all warranty and support obligations, Wellington Drive will supply extra motors on top of the agreed upon deal.
The deal is part of Wellington Drive’s restructuring bid to reduce costs and working capital, and focus on its refrigeration business. The manufacturing of ventilation motors is being transferred to contract partners to help cut costs, the company said.
Because the size of the deal represents more than half of its average market capitalisation, Wellington Drive needed a waiver from NZX listing rules, which was granted, to go ahead with the transaction.
Wellington Drive has never turned a profit since its inception in 1986, and has tapped patient shareholders for some $32.2 million over the past year to keep itself afloat.
The shares were unchanged at 16 cents in trading today, and have shed 58% this year.
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