Benzinga | Aug 2, 2021 07:30AM EDT

Kingsoft Cloud Announces Agreement To Acquire Controlling Interest In Camelot Employee Scheme; Terms Not Disclosed

Kingsoft Cloud Holdings Limited ("Kingsoft Cloud" or the "Company") (NASDAQ:KC), a leading independent cloud service provider in China, announced that the Company made a major strategic move in its Enterprise Cloud Services ("ECS") business by entering into a definitive agreement to acquire controlling interests in Camelot Employee Scheme Inc. ("Camelot"). The proposed transaction is expected to bring significant synergies to the Company, in particular:



* By integrating Camelot's nationwide project execution capacities and resources across major cities in China, including Beijing, Wuhan, Nanjing, Shanghai, among others, the Company expects to further accelerate and enhance the implementation of ECS projects with lower costs and improved efficiency;

* The senior management of Camelot, including its co-founders, president, and other core senior management personnel, will join the Company with their deep industry know-how and long-standing client relationships. This group of senior personnel has worked for Camelot for a long period of time ranging from 15 to 29 years. Prior to Camelot, they worked at IBM, BearingPoint, and other global leading companies;

* Camelot achieved a revenue recurring ratio of approximately 94%1 in 2020, which is expected to readily bolster the Company's ECS with high-quality and visible growth prospects. The proprietary technology solutions offered by Camelot, especially in the internet, technology, financial services, manufacturing and other sectors, will further strengthen the Company's technological capabilities in its ECS offerings;

* With 213 premium customers served in 20202, Camelot offers a high-quality enterprise client base that is highly complementary to the Company's existing ECS business; and

* The revenue backlog of Camelot amounted to approximately RMB3.8 billion as of July 31, 2021.

In connection with the proposed transaction, the Company will issue to each of the two co-founders of Camelot unrestricted ordinary shares and restricted ordinary shares representing approximately 1.6% and 1.0% of its total outstanding shares on a fully diluted basis, respectively, and will issue ordinary shares representing approximately 1.8% of its total outstanding shares on a fully diluted basis to other existing shareholders of Camelot, subject to certain adjustments and lock-up restrictions. The proposed transaction is expected to close by the end of 2021, subject to customary closing conditions, including regulatory approvals. Upon the completion of such transaction, the financial results of Camelot will be consolidated by the Company. The Company will further acquire the remaining stake from other existing shareholders in Camelot by issuing up to RMB782.5 million worth of additional ordinary shares in June 2023, subject to certain conditions. Fangda Partners acted as the PRC legal advisor, and Davis Polk & Wardwell LLP acted as the U.S. legal advisor, to the Company in the proposed transaction.