U.S.-based American firm Zap has signed definitive agreements with China's Jonway Group to acquire 51% stake in Zhejiang Jonway Automobile Company Ltd.

Zhejiang Jonway Automobile Company Ltd. is a wholly owned subsidiary of Jonway Group, a 20-year-old Chinese vehicle manufacturer. According to the terms of the definitive agreements, Zap will acquire 51% of Jonway Auto for USD29.03 million in cash. The boards of directors for Zap and Jonway Auto approved and signed the merger agreement on July 2, 2010.

Jonway Auto reported annual revenues of approximately USD40 million in 2009 and approximately USD20 million for the first quarter of 2010. According to the terms of the transaction, Jonway Auto will be debt-free upon the closing of the transaction.

According to the terms of the definitive agreements, Zap has the right to acquire the remaining 49% of Jonway Auto at the same valuation by March 30, 2011 or at a then current valuation after that date. Zap and Jonway intend this transaction to be phase one of a two-phase acquisition, whereby the two companies will combine their complementary expertise, leveraging Zap's EV technology and Jonway Auto's quality ISO 9000 certified mass production capabilities to address the new alternative energy vehicle market. Zap intends to acquire the remaining 49% of Jonway Automobile following completion of the first phase and following final regulatory approval.

Earlier this year, Zap integrated electric drive systems into several Jonway vehicles through its joint venture Zap Hangzhou. These vehicles are now being showcased and used as electric taxis at the Shanghai Expo. Jonway has also agreed to produce the Zap Alias electric car.