2nd Dec 2008 07:00
RedHot Media International Limited
('RedHot' or the 'Company')
Acquisition of AllChina Group
2 December 2008
The Directors of RedHot Media International Limited are pleased to announce the acquisition of a 60% controlling interest in AllChina Group ("AllChina"), an advertising agency based in Beijing, China (the "Acquisition").
The initial consideration for the Acquisition consists of RMB1m in cash and 156,000 US$1 convertible preference shares (the "CPS") in Bizworld International Pte Limited ("Bizworld"). Bizworld is a British Virgin Islands company, newly incorporated for the purposes of the Acquisition. Through their holding of the CPS, the vendors of AllChina will retain a 40% interest in the business. AllChina consists of the assets and business of China MediaMart Advertising Co. Ltd. ("CMAD"), a limited company incorporated in China. The Company is not purchasing the share capital of CMAD.
The vendors of AllChina also own China MediaMart Information Technology Co. Ltd. ("CMIT"), which holds an Internet Content Provider ("ICP") licence to provide internet content in China. As part of the Acquisition agreement, the vendors of AllChina have contracted to novate 100% of the economic interest of all future transactions entered into by CMIT. This element of the transaction is structured in this way to ensure retention of the ICP licence. The principal business of CMIT is the operation of an advertisement e-marketplace, www.allchina.cn and sale of advertisement space on various media.
Collectively, CMAD and CMIT had audited 2007 consolidated pro-forma group revenue is RMB5.8m, a loss of RMB0.74m and net assets of RMB0.34m. No liabilities of CMAD or CMIT are being acquired. As part of the Acquisition agreement, the Company will receive an annual management fee of RMB1m from Bizworld. The two executive director vendors of the business have agreed to remain in position for a period of 3 years from acquisition.
Additional cash consideration equivalent to the audited post-tax profit of Bizworld for 2008, 2009 and 2010 shall be payable to the vendors, subject to a cap of RM5m, RM6m and RM7m respectively.
The Transaction supports the Company's strategy as announced in the admission document to expand its regional reach and strengthening further its presence in PRC for the growth of its business in this region. The businesses and assets were identified due to its existing online media trading platform and ICP license to operate its business, and its existing reach to wide database of media resources and advertising agencies in PRC.
The Directors believe that the Transaction will provide the following benefits:
- Immediate market penetration and expansion into PRC, especially the northern China region around Beijing
- Integration of allchina.cn e-marketplace with RHI's original Axchange business model
- Acquisition of new client base
- Acquisition of new industry expert and talents
Group Managing Director Cheong Chia Chieh said today-
"We are delighted to be making these acquisitions to further our presence in China and to help grow our existing business globally. We believe these acquisitions are an important step in our plans to aggressively grow the AxChange model and extend our reach as we announced we would at admission less than two months ago.
We look forward to working together with the management and personnel at the new companies and integrating them into the RedHot business, allowing us to both benefit from the global synergies this transaction will create. We are very confident of the capability and integrity of the management team. The CEO, Charles is from Qingdao University and Tsing Hua University, while the Operations and Finance directors, Deanna has an EMBA from Beijing University. The Chairman, Mark has a Master in Economics from Beijing University and is now a senior manager with Wells Fargo Bank in Chicago. From its commencement in June 2006 to June 2007, the allchina e-marketplace has achieved significant growth with 3 million transactions, 50,000 VIP members and more than 1,000 participating media partners including Alibaba.com, Shanghai Media Group, Xinhua Financial Media, etc. We believe allchina.cn could be one of the leading media e-marketplace in China in the future."
This announcement should be read in conjunction with the Admission Document. Terms defined in the Admission Document have the same meaning when used in this announcement.
For further information, contact:
RedHot Media International Limited
Melissa Gilmour or +44 7970 767869
Cheong Chia Chieh or +601 2329 5522
Raymond Hor +603 7651 0188
Blomfield Corporate Finance Limited +44 207 489 4500
James Pinner or
Nick Harriss
Religare Hichens, Harrison plc +44 207 382 4450
Daniel Briggs or
Colin Rowbury
Notes to editors:
Exchange rate: £1 = RMB10.43
RedHot Media International Limited (AIM: RHM), is a Cayman Islands incorporated holding company. Its primary activity is that of media broking group, including an innovative barter sales trading activity, in Malaysia and the People's Republic of China ("PRC"), with the majority in Malaysia. As a media broker it purchases advertising space on behalf of its clients and earns commissions from the media providers based on the amount of advertising purchased.
RedHot also acts, to a lesser extent, as a non-stockholding distributor for certain clients (for whom it also acts as a media broker) with the intention of generating higher margins for the Group than would be obtained in conventional media buying.
Using this distribution based business model (AxChange), which the Directors aim to grow, RedHot enters into a contract to draw down various lines of inventory and then, as the inventory is sold through RedHot's distribution network, the proceeds from the sales are used to purchase media space for the same client.
The AxChange business model has been designed to free up working capital; allowing RedHot's customers to pay for advertising and assist new entrants into Malaysia (where capital controls are still in place) in selling their products using RedHot's established distribution network. RedHot also believes the model provides benefits to its distributors; providing them with lower unit prices and access to credit facilities to which they otherwise would not have access.
The Company aims to extend this model to work in other Asian countries; initially China (initially opening offices in Beijing, Shanghai, Guangzhou and Macau) followed by Vietnam (initially opening offices in Ho Chi Minh City and Hanoi).
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