CDC Corporation (CHINA) has entered into a definitive agreement to sell US$168 million of 3.75% senior exchangeable convertible notes due 2011 to a total of 12 institutional accredited investors in a private placement exempt from registration under the Securities Act of 1933.

"We are very pleased to announce this strategic transaction," said Peter Yip, chief executive officer of CDC Corporation. "The proceeds of this $168 million private placement, together with our substantial cash balance, afford us greater financial flexibility to pursue our expansion plans, which include acquisitions, entry into new vertical markets, increased focus on research and development, as well other strategic initiatives."

The senior exchangeable convertible notes carry a 3.75% coupon which is payable quarterly. Upon a qualifying initial public offering of either CDC Software or CDC Games, the notes become exchangeable into that company's common shares at an exchange price determinable from the IPO price of those common shares.

In the event neither CDC Software nor CDC Games completes a qualifying initial public offering within two years from the issue date of the notes, the notes become convertible into CDC Corporation's common shares at an initial conversion price of $10.37 per share which represents a premium of approximately 60% to the company's 10-day average closing price. The terms of the notes also include customary anti-dilution adjustments and registration rights.

The company intends to use the proceeds from the transaction for acquisitions at both CDC Software and CDC Games, as well as game development, investment in research and development and for other general corporate purposes, including working capital to support new growth initiatives.