China.com Inc, a Hong Kong listed subsidiary of CDC Corporation(CHINA), says its shareholders have approved the acquisition by CDC Mobile of Timeheart at an extraordinary general meeting of shareholders.
The transaction was deemed to be a very substantial acquisition under Hong Kong securities regulations requiring shareholders' approval. The transaction was unanimously approved at the shareholders' meeting with over 3.3 billion shares voting in favor of the acquisition.
Timeheart, a leading Mobile Valued Added Service (MVAS) provider in China, has been operating since 2001 and provides a full suite of MVAS products through PDA, WAP, MMS, IVR, SMS and media stream with connectivity at both the national and provincial levels of all four telecom operators in China. Timeheart's strength in the north-eastern and western provinces of China is a good complement to CDC Mobile's success in the coastal regions of China. For the year ended December 31, 2005, Timeheart recorded a net profit of approximately HK$3.5 million as calculated under Hong Kong GAAP.
"We are gratified that our shareholders have endorse our strategy with their overwhelming support of this major transaction. This acquisition reflects our confidence in China's vast MVAS market and it will further strengthen our position as one of the leading players in the largest and fastest growing mobile market in the world," said Xiaowei Chen, Ph.D., executive director and CFO of China.com. "Timeheart provide us with complementary products that will deepen our product offerings and make us even more competitive in a market which has excellent long-term prospects."
As part of this previously announced acquisition, the maximum consideration payable, subject to the achievement of certain financial milestones over the next 15 months, is approximately HK$15.7 million. The maximum consideration will be comprised of approximately HK$2.1 million in cash and HK$3.7 million in China.com shares and the remaining balance of approximately HK$9.9 million in shares of CDC Mobile. This acquisition will be earnings accretive for CDC Corporation and China.com Inc and is expected to close within the week.
In recent years, MVAS companies have floundered under lack of demand in mainland China coupled with consumer-friendly laws that hamper many of these companies from making money via spamming their users. In recent quarterly earnings reports, many wireless service companies like Linktone (LTON), Kongzhong (KONG), Tom.com (TOM), and China.com saw weak earnings, and even some losses, coming from their MVAS divisions.
