2nd Nov 2009 11:40
02 November 2009
RedHot Media International Limited
('RedHot' or the 'Company')
USD 1.0 million investment in RH Media Group Sdn. Bhd.
The Directors of RedHot Media International Limited are pleased to announce an investment of USD 1.0 million in its wholly-owned subsidiary, RH Media Group Sdn. Bhd. ("RHMG") by Kumpulan Modal Perdana Sdn. Bhd. ("KMP"), a Malaysian government linked corporation based in Kuala Lumpur, (the "Investment"). The Company intends to use the net proceeds of the Investment to enable the Company to pursue its stated strategy of growing organically and through potential acquisitions, particularly in China.
The Investment is for USD 1.0 million in RHMG, for receipt of 1 million Class A Redeemable Convertible Cumulative Preference Shares ("RCCPS"). KMP has been granted a coupon rate of 8% per annum for the investment and KMP has the right to convert the RCCPS into ordinary shares in RHMG at their discretion. RHMG shall warrant an exit strategy for KMP upon conversion of its RCCPS via a listing of RHMG on a mutually accepted stock exchange within 48 months from the date of Investment with either: (i) a return of 3 times the Investment value, or (ii) a 40% discount to the listing price, whichever results in lower cost per share at point of conversion. In the event a listing does not occur within 48 months from the date of Investment, KMP at its sole discretion shall have an option to either grant a 12 month extension, or exercise a put-option for 2 times of the initial Investment value. The put option, if exercised, would be paid in cash or an equivalent value through the issuance of equity by the Company based on a 5-day average of the Company's share price prior to the date of exercise.
In the event of a breach of agreement by RHMG, insolvency or liquidation of RHMG, commencement of any criminal prosecution against the board of directors of RHMG or Cheong Chia Chieh ceasing to be a director of the Company, KMP shall reserve the right to redeem the RCCPS or exercise a put-option to RHMG which grants KMP returns of Investment with an 8% coupon rate and 10% annual rate of return of the Investment value to be paid in cash or an equivalent value by issuance of equity of the Company's shares based on a 5-day average of the Company's share price prior to the date of exercise.
Group Managing Director of RedHot, Mr. Cheong Chia Chieh, said "This investment from KMP has proven shareholders have increasing confidence in our business growth and expansion strategies in China, even under such an economic climate. We believe our business will continue to grow and expand steadily and increase shareholders' value."
For further information please contact:
|
RedHot Media International Limited |
|
|
Cheong Chia Chieh |
Tel: +601 2329 5522 |
|
Raymond Hor |
Tel: +603 7651 0188 |
|
Allenby Capital Limited (Nominated Adviser and Joint Broker) |
Tel: +44 (0)203 328 5656 |
|
Imran Ahmad/Nick Athanas |
|
|
Religare Hichens, Harrison (Joint Broker) |
Tel: +44 (0)207 382 4450 |
|
Daniel Briggs/Colin Rowbury |
Notes to Editors:
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.
A media broker conventionally purchases advertising space on behalf of its clients and earns commissions from the media providers based on the amount of advertising purchased. The AxChange business model adopts a pull marketing approach by aggregating demand from advertisers and consumers/merchants to generate additional sales for both the media owners and advertisers respectively.
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 & China (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 (with offices in Beijing, Shanghai, Guangzhou).
Related Shares:
RHM.L