PacificNet (PACT.PK) has entered into a definitive agreement to acquire a controlling interest in Guangzhou Dianxun Digital Network Technology Company, Ltd ("Clickcom"), a leading mobile Internet company in China serving the four operators including China Mobile, China Unicom, China Telecom, and China Netcom.
Clickcom offers a wide variety of wireless internet services such as SMS, WAP, and Java mobile applications. The acquisition should be completed in January 2005.
The purchase consideration for 51% of Clickcom is based on three times the anticipated earnings of Clickcom in 2005, payable 30% in cash and 70% in restricted shares of PACT. The purchase price is payable upon achievement of certain quarterly earn-out targets based on net profits, through the issuance of 130,000 restricted shares of common stock of PacificNet. PacificNet will also issue warrants to purchase 50,000 shares of PacificNet's common stock, at a strike price based on the five-day Volume Weighted Average Price of PacificNet's common stock before signing the agreement. The warrants are exercisable for a period of three years.
"This strategic acquisition is a compelling move by PacificNet to capture part of the rapidly growing value-added telecom services market in China," said Tony Tong, CEO of PacificNet. "We have high respect for Clickcom's business success and the strong telecom experience offered by their founders. We are planning further strategic moves in the VAS market which we believe will increase our customer base, revenue and profit fundamentals, and improve our shareholder value. We believe this acquisition should be accretive to PacificNet's revenues, profits, and earnings per share in 2005."
"With the early success of our value added telecom services in China, we believe the market potential is strong for our VAS products, especially for wireless SMS and internet content," said Wen Chu, CEO of Clickcom. "We believe our unique and innovative communication products will contribute positively to PacificNet's overall revenues and profits. We look forward to growing along with the PacificNet VAS platform. This transaction should create great synergies in management, sales/marketing and VAS technology. With China being the largest and fastest growing telecom market in the world, with over 310 million mobile subscribers and 75 million wireless XiaoLingTong subscribers, we believe our strong experience in the mobile value-added services will contribute positively to PacificNet's bottom line."