Sun New Media plans to acquire a 100% controlling interest in Focus Channel Development, one of China's leading providers of Internet-based software solutions for distribution channel management.
Subject to certain financial milestones, the minimum and maximum total consideration for the acquisition is between 14.9 and 20.9 million shares of Sun New Media (SNMI) common stock.
This strategic acquisition will enable SNMI to expand its service offerings to include both interactive marketing solutions through its existing holdings, and cutting edge logistical and technical coordination solutions.
Based in Wuhan, China, Focus has a track-record of developing software solutions for some of the largest local and multinational consumer products companies in China, including Qingdao Beer, Great Wall Wine, Sony Ericsson, and Bird Mobile Communications.
Focus' proprietary Sales and Consumer Channel Management System (CCMS) allows customers to coordinate partnerships across the distribution lifecycle with cutting edge ASP software platforms. The company says customers using Focus' CCMS system enjoy significant improvements in order accuracy and fulfillment rates and efficient, streamlined payment systems.
Focus management reported gross revenue of $17.07 million with net profit after tax of 0.97 million in 2004, and gross revenue of $21.83 million and net profit of $3.3 million as of Q3 of 2005. All figures were reported in US dollars and are un-audited at this time. As a part of the transaction, Focus has guaranteed a profit of a minimum of US$4.5 million for the first fiscal year after completion of the acquisition. In the second and third fiscal years the profit guarantee will increase to US$5million and US$5.5 million respectively.
As an integral part of the SNMI family of businesses, Focus will benefit from a number of critical synergies that exist within the group's companies. Most importantly, SNMI's proven expertise in the creation and delivery of multimedia marketing and media content will give Focus numerous opportunities to enhance its product offerings by integrating digital multimedia into its existing ASP package. In addition, both Focus and SNMI's existing group of companies will benefit from an expanded nation-wide customer base and numerous opportunities for cross selling.