425: Quetta Acquisition Corporation Announces Merger Agreement with KM QUAD, a Leading Automotive Film Product Designer and Manufacturer

Quetta Acquisition Corporation will merge with KM QUAD, a Cayman Islands company and parent of Jiujiang Lida Technology Co., Ltd., to create a Nasdaq-listed entity focused on automotive protective films.

Summary

• Quetta Acquisition Corporation (QETA) has entered into a merger agreement with KM QUAD, the parent company of Jiujiang Lida Technology Co., Ltd. (QUAD), a Chinese film product designer and manufacturer.
• The merger will result in QUAD becoming a wholly-owned subsidiary of Quad Global Inc., which will be listed on Nasdaq under a new ticker symbol.
• KM QUAD shareholders will receive 30 million ordinary shares of Quad Global at the effective time of the transaction.
• Certain KM QUAD shareholders' shares will be subject to a six-month lock-up period after the closing.
• The transaction is subject to regulatory approvals, shareholder approvals from both Quetta and KM QUAD, SEC effectiveness of the registration statement, and Nasdaq approval of the listing application.
• The aggregate consideration to be paid to QUAD shareholders for the Acquisition Merger is $300 million, payable in newly issued Purchaser Ordinary Shares, valued at $10.00 per share.
• The board of directors of the post-closing company will consist of five directors, with QETA designating one independent director and QUAD designating four directors, two of whom must be independent.
• QUAD will bear 50% of QETA's transaction costs, capped at $500,000, 50% of QETA's public company expenses, capped at $100,000, and extension fees of QETA covering nine extensions over nine months, in the total amount of $540,000.
• If the Closing does not occur prior to October 10, 2025 due to a delay in obtaining CSRC approvals, QUAD shall be responsible for any extension fees and other related fees incurred by QETA beyond October 10, 2025 not to exceed $100,000 per month.

Sentiment

Score: 7

Explanation: The document presents a positive outlook on the merger, highlighting the strengths of both companies and expressing confidence in future growth. However, it also includes standard disclaimers and risk factors, which temper the overall sentiment.

Positives

• KM QUAD has a strong focus on research and development with approximately 40 employees dedicated to it.
• KM QUAD has a vast distribution network throughout China, covering over 200 cities.
• KM QUAD has 113 intellectual property rights in China, including 72 registered trademarks, five trademark applications currently pending, 15 copyrights, 14 registered patents, 15 patent applications currently pending, and two domains.
• QUAD's current management team will continue running the combined company after the Transaction.

Negatives

• Certain KM QUAD shareholders' shares will be subject to a six-month lock-up period after the closing, which could limit trading activity.
• The transaction is subject to regulatory approvals, shareholder approvals, SEC effectiveness, and Nasdaq listing approval, any of which could delay or prevent the merger.

Risks

• The occurrence of any event, change, or other circumstances that could give rise to the termination of the merger agreement.
• The outcome of any legal proceedings that may be instituted against Quetta or KM QUAD.
• The inability to complete the business combination due to failure to obtain shareholder approval or other closing conditions.
• Delays in obtaining or the inability to obtain necessary regulatory approvals, including from PRC regulators.
• The inability to obtain or maintain the listing of the post-acquisition company's ordinary shares on Nasdaq.
• The risk that the business combination disrupts current plans and operations.
• The ability to recognize the anticipated benefits of the business combination may be affected by competition and the ability to grow and manage growth profitably.
• Changes in applicable laws or regulations.
• KM QUAD or the combined company may be adversely affected by other economic, business, and/or competitive factors.

Future Outlook

The parties plan to remain Nasdaq-listed under a new ticker symbol upon the closing of the transaction, with QUAD's current management team continuing to run the combined company.

Management Comments

• Mr. Qiuping Ke, Chief Executive Officer of KM QUAD, remarked: 'For 20 years, QUAD has evolved alongside the automotive protective film market. Our mission, Cutting-Edge Automotive Film Solutions, reflects our commitment to continuously developing innovative products that protect vehicles while adding unique colors and advanced functionalities. With a strong focus on research and development and robust manufacturing capabilities, we have gained extensive expertise, established a comprehensive brand matrix, and developed a nationwide distribution network. Our products address critical challenges facing the rapidly growing electric vehicle market, helping owners protect and customize their cars while effectively reducing in-car temperatures. We are thrilled to collaborate with Quetta, as we share a common vision and business approach, and we are confident their team will help us achieve our goals and drive long-term success.'
• Mr. Hui Chen, Chief Executive Officer of Quetta, stated: 'Our aim is to identify a company with solid product offerings, a proven track record, and good prospects for future growth. We believe that we have found these qualities in KM QUAD. We look forward to completing this transaction and working with KM QUADS management team to help them thrive as a public company while they continue to grow.'

Industry Context

The announcement reflects the ongoing trend of SPACs merging with private companies to facilitate their entry into the public market. The focus on automotive protective films aligns with the growth in the automotive industry, particularly the electric vehicle market, and the increasing demand for vehicle customization and protection.

Comparison to Industry Standards

• It's difficult to directly compare KM QUAD to publicly traded companies due to its specific focus on automotive protective films within the Chinese market.
• However, comparable companies in the broader automotive films and coatings industry include Eastman Chemical Company (EMN) and 3M Company (MMM), though these are much larger and more diversified.
• Assessing KM QUAD's financial performance against industry benchmarks for revenue growth, profitability, and market share within the Chinese automotive film market would provide a more relevant comparison.
• The valuation of $300 million should be assessed in the context of KM QUAD's revenue, growth rate, and profitability compared to similar transactions in the SPAC market and the broader automotive industry.

Stakeholder Impact

• Shareholders of Quetta will have the opportunity to vote on the merger and participate in the potential upside of the combined company.
• Employees of KM QUAD will continue to operate the business under the new ownership structure.
• Customers of KM QUAD will continue to receive automotive film products and services.
• Suppliers of KM QUAD will continue to provide materials and services to the company.
• Creditors of KM QUAD will be subject to the terms of the Merger Agreement.

Next Steps

• Quetta will prepare and file a registration statement on Form F-4 with the SEC.
• Quetta will call a special meeting of its shareholders to approve the transaction.
• The parties will seek regulatory approvals, including from PRC regulators.
• The parties will work to satisfy the closing conditions outlined in the Merger Agreement.
• The combined company will apply for listing on Nasdaq under a new ticker symbol.

Key Dates