Optical and wireless technology solution developer Arasor International (ASX:ARR) has decided to pull the plug on efforts to get its Chinese JV operational, and will seek compensation from its former executive chairman for the failure.
In a statement, Arasor said it had been attempting to get the ZAT venture with ZTEI off the ground for nearly three years. Arasor had invested $750,000 to become a 49% owner in the JV.
ZTEI is an investment company subsidiary of Chinese telecom equipment vendor ZTE.
At the time of the signing, Dr Simon Chao, then executive chairman of Arasor and CEO of ZAT, had committed to compensate Arasor to the tune of US$10 million ($10.2 million) if the operation did not hit a specific target to kick off the joint venture.
An investigation of the JV's potential recently conducted by Arasor has determined that ZAT has no future, and the company has decided to call on Chao's guarantee, Arasor said.
“When I joined the board of Arasor I was personally led to believe by Simon that he would live up to his commitments to the shareholders of Arasor,” the company's current chairman Reg Bancroft said.
“However it has become clear that ZAT will not provide what we were led to believe and we have no option to look to Simon to discharge his commitment.”