irasia.com


Hutchison Whampoa Limited


For Immediate Release

TOM acquires 50% of Hong Xiang

Entering China's Music and Entertainment Market

Hong Kong, March 5, 2002 - TOM.COM LIMITED ("TOM", stock code: 8001) announced today that it has entered into an agreement to acquire 50% of (Hong Xiang).

Guangzhou-based Hong Xiang is engaged in audio and video manufacture and distribution. This acquisition signifies TOM's first move into China's audio-visual and entertainment industry, positioning TOM as a media and entertainment company.

Under the agreement, TOM will pay RMB125.1 million (approx. HK$118 million) for the controlling stake in Hong Xiang, out of which RMB45 million (approx. HK$42.45 million) or about 36% will be paid in cash. TOM will pay another RMB65.1 million (approx. HK$61.4 million) via the issue of 11,151,548 new TOM shares at HK$5.51 each. The remaining RMB15 million (approx. HK$14.15 million) is an earn-out payment.

TOM will only issue the earn-out payment, via the issue of TOM shares at HK$5.51 each, if Hong Xiang's 2002 after-tax profit is not less than RMB30 million.

Hong Xiang also guaranteed that its 2002 after-tax profit will grow at least 10% each year in the five years to 2006. The profit guarantee in the five-year period can be accumulative, i.e. an aggregate of RMB183.15 million. Should there be a shortfall in any year during the five-year period, TOM is entitled to compensation either in the form of dividend entitlements, disposal of TOM shares under lock-up, or cash.

Hong Xiang is China's leading manufacturer and distributor of music, film and TV programmes with a 10-year track record. Its library footage of movies, TV programmes, and educational documentaries total over 4,000 hours. Currently 25% of Hong Xiang's revenue comes from its audio distribution - albums from China, Hong Kong and international pop stars, classical music, Chinese music, etc whereas 75% of its revenue comes from video distribution - both Chinese and western films, TV dramas, documentaries, etc. In 2000, Hong Xiang recorded revenue of RMB141.2 million and after-tax profit of RMB16.8 million. Its 2001 revenue rose to RMB212.1 million, with after-tax profit of RMB30 million.

TOM Chief Executive Officer and Executive Director Sing Wang said, "With this acquisition, TOM widens its business platform further and creates additional synergies with TOM's existing media assets and telecom value-added services (VAS) business. Strong content-driven revenues from Hong Xiang will supplement revenues of TOM's media and telecom VAS businesses. Gaining access to China's vast audio and video market is only our first step, we aim to build ourselves into the leading music and entertainment group in Greater China."

Hong Xiang's proprietary content such as TV dramas, documentaries, and local artists' productions (content which is either completely produced by Hong Xiang or whose copyrights have been sold to Hong Xiang by copyright owners) accounts for 90% of its library footage, while the remaining 10% is licensed from media companies such as Universal Music Group (UMG), EMI, BBC, Golden Harvest, Shaw Brothers and local producers and television stations such as CCTV.

Hong Xiang is one of the biggest audio and video distributors in China. Its product types include laser discs (LDs), video compact discs (VCDs), digital video compact discs (DVDs), compact discs (CDs) and audio and video cassettes. In 2001, about 69% of its revenue was generated from VCD/CD sales and 31% from DVD sales. Its 2000 sales of VCDs of over 17 million copies accounted for roughly 20% of the market.

Mr. Wang also added that the strategy will not only maintain a steady revenue flow for TOM, but offers a substantial buffer to TOM at times when advertising income is vulnerable to economic downturns. He said successful media conglomerates around the world usually have strong revenues from content businesses.

The value of Hong Xiang's proprietary content is huge particularly when distributed on TOM's multiple media platforms. For example Hong Xiang's audio and video content can be converted into online and even print formats. On the other hand, it is probable that TOM's online and print content be repackaged into audio and visual formats.

Hong Xiang's products are distributed via some 600 provincial wholesalers to about 3,000 retail outlets in almost every province in China. The nationwide distribution network will offer extra value to TOM in raising brand awareness. For example, such a network could be used to distribute TOM's other media services and print products. In future, new opportunities in synergies will be explored in the area of broadband content, and development of wireless communications.

According to China's official statistics, the total distribution value of China's audio and visual market in 2000 was about Rmb1.42 billion. China's deregulating entertainment market offers huge development and revenue potential as there are few dominant players. Through Hong Xiang, TOM is establishing a foothold in a rapidly growing industry. TOM will leverage on Hong Xiang's close ties with international media companies and explore potential of cooperation with these global players.

Zhang Baocheng, Hong Xiang General Manager, said, "There is indeed plenty of development potential for Hong Xiang as TOM has such a diversified media asset base. TOM will also bring in management expertise, and help to expand our content syndication and distribution network."

The Central Government's determination to fight piracy of intellectual property will help audio and video distributors like Hong Xiang. With the piracy problems to be gradually resolved, the potential of the value growth of copyrighted products will be enormous.

To download sample covers of Hong Xiang audio-visual products, please click
http://hk.tom.com/event/press/20020305/index.htm

(Notes to Editors)

(Hong Xiang) was established in August 1993 in Guangzhou. Founder and General Manager Zhang Baocheng is an entrepreneur who has been active in China's film and music production and distribution industry with well-established business relationships with global and local media companies.

Mr. Zhang himself also runs a retailing business - Jingcai Wuxian Culture Co. Ltd (Jingcai), a retail chain of over 200 audio-video products outlets all over China. Jingcai is one of the major retail outlets of Hong Xiang's products.

About TOM.COM LIMITED

TOM.COM LIMITED (TOM) is a joint venture between Hutchison Whampoa Ltd., Cheung Kong (Holdings) Ltd. and other strategic investors. TOM was listed on the Growth Enterprise Market of the Stock Exchange of Hong Kong in March 2000 (stock code: 8001).

TOM has pioneered the cross media strategy, building a portfolio of online and offline media assets through acquisitions and organic growth. Its goal is to be the industry leader in each of its four business segments - sports marketing, outdoor media, print media and Internet portals. TOM is also building a strong platform to offer telecom value-added services.
(http://corp.tom.com/about/en/index.shtml)


####
For press enquiries:
Rachel Chan, TOM.COM LIMITED
Tel: (852) 2121 7810
Fax: (852) 2127 7576
Email: rachelc@hk.tom.com


Source: Hutchison Whampoa Limited
  • Press Releases
  • Company's Index
  • irasia.com

  • © Copyright 1996-2024 irasia.com Ltd. All rights reserved.
    DISCLAIMER: irasia.com Ltd makes no guarantee as to the accuracy or completeness of any information provided on this website. Under no circumstances shall irasia.com Ltd be liable for damages resulting from the use of the information provided on this website.
    TRADEMARK & COPYRIGHT: All intellectual property rights subsisting in the contents of this website belong to irasia.com Ltd or have been lawfully licensed to irasia.com Ltd for use on this website. All rights under applicable laws are hereby reserved. Reproduction of this website in whole or in part without the express written permission of irasia.com Ltd is strictly prohibited.
    TERMS OF USE: Please read the Terms of Use governing the use of our website.