PacificNet (PACT.PK) has entered into an agreement to acquire a majority and controlling interest in Guangzhou Wanrong Information Technology Company.

The acquisition is expected to close within a month and to be accretive to PacificNet's earnings in 2006.

The purchase consideration for 51% of the equity interest of Guangzhou Wanrong is approximately US$1,380,000, which represents about five times the anticipated future annual net income of Guangzhou Wanrong.

The purchase consideration is payable entirely in restricted shares of PACT valued at $8 per share, or about 172,000 restricted shares. Under the purchase agreement, Guangzhou Wanrong has made a guarantee to generate US$500,000 in annual net income. In the event of a shortfall, the purchase price will be adjusted accordingly.

PacificNet will also invest approximately US$370,000 in Guangzhou Wanrong for general corporate purposes. The purchase price is payable upon achievement of certain quarterly earn-out targets based on net income.

Since its inception in 2003, Guangzhou Wanrong has achieved strong growth in its VAS including SMS, WAP, JAVA, MMS, IVR, multimedia entertainment download services, media interactive products, mobile email services, life, sports, entertainment, and business information services.

Guangzhou Wanrong was granted nationwide SMS service numbers "2388" for China Mobile and "9928" for China Unicom.