Network Convergence

China Oriental Culture Acquires Interests of Hunan Mobile TV and Beijing Jiahua

Updated:2011/11/25 16:58

Regarding the Memorandum of Understanding signed on 2nd September 2011 which the Company intends to acquire shares of Hunan Mobile TV and Beijing Jiahua, China Oriental Culture Group Limited (the "Company" or China Oriental Culture", stock code: 2371) is pleased to announce that the Company has entered into the Acquisition Agreement on 24th November, 2011 to acquire the effective interests of 49% in Hunan Mobile TV and 95% in Beijing Jiahua owned by Qingda Tech with an aggregate total adjsuted Consideration of not more than HK$876 million.

Among total consideration, HK$30 million shall be paid in cash within six months after Completion; the remaining HK$188 million will be financed by the allotment and issue of the First Tranche Consideration Shares (being 400,000,000 Shares) to the Vendors at an issue price of HK$0.47 each upon Completion, with a discount of approximately 7.8% to the closing price of HK$0.51 per Share as quoted on the Stock Exchange on the Last Trading Day. The total Consideration shall be adjusted upward by HK$235 million and HK$423 million upon fulfillment of the First Adjustment Condition and the Second Adjustments Conditions respectively, to the maximum adjusted Consideration of HK$876 million.

The First Adjustment Condition

If the number of subscribers of Hunan Mobile TV during the Profit Guarantee Period (12 months after the contract date) attains 600,000 or more, China Oriental Culture will pay an additional amount of HK$235 million by procuring the Company to issue: (i) the First Tranche Convertible Bonds (which are convertible into a total of 400,000,000 Conversion Shares) in an aggregate principal amount of HK$188 million; and (ii) the Second Tranche Consideration Shares (being 100,000,000 Shares) in an aggregate amount of HK$47 million of at an issue price of HK$0.47 per Share.

The Second Adjustments Conditions

If the net profit after tax of Qingda Tech for the Profit Guarantee Period is not less than RMB230 million (equivalent to HK$282.2 million); and the total number of subscribers of Hunan Mobile TV as at the last day of the Profit Guarantee Period is not less than 1,000,000, China Oriental Culture will pay an addition amount of HK$423 million by procuring the Company to issue Second Tranche Convertible Bonds (which are convertible into a total of 900,000,000 Conversion Shares) in an aggregate principal amount of HK$423 million.

Hunan Mobile TV is the largest operator of the terrestrial digital television network at the provincial level, with a sizeable number of household subscribers amounting to about 300,000. It is principally engaged in the building, development and operation of wireless mobile television network, the transmission of multi-media information and the production, publication, transmission, use and management of television advertisement. Due to the low investment costs required for establishing its wireless network, it is suitable for rural areas where construction and maintenance costs for cable television network is relatively high. Beijing Jiahua is principally engaged in the development and promotion of arts and culture related activities in the PRC. The current activity of Beijing Jiahua is to assist the provincial television stations in the production of TV drama and TV programs.

Commenting on the agreement, Mr. Li Qing, Executive Director of the Company, said: "the Acquisition and the scope of business of Hunan Mobile TV would provide the Company with a unique opportunity to participate in terrestrial digital television industry and related business activities in the PRC with lucrative potential. The Acquisition provides synergies to the Group's existing capabilities in the outdoor advertising and TV drama production businesses in the PRC, and provide an excellent opportunity for the Group to expand its cross-media platform."

 Source:einnews
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