For Immediate Release
Hong Kong, March 27, 2002 - TOM.COM LIMITED ("TOM", stock code: 8001) announced today that it has entered into separate Memoranda of Understanding to acquire controlling stakes in four leading players in China's outdoor media market. The four companies are Shenyang Sano Jinxiang Advertising Co., Ltd. ("Sano"), Sichuan Southwest International Advertising Co., Ltd. ("Southwest"), Xiamen Bomei Advertising Co., Ltd. ("Bomei") and Fujian Seeout Outdoor Advertising Co., Ltd. ("Seeout").
TOM just announced acquiring a 60% stake in Liaoning New Star Prosperity Advertising Co., Ltd. ("New Star") in February this year. Including the four new acquisitions, TOM's outdoor media network will consist of 12 leading regional outdoor media companies owning a total of over 170,000 square metres in advertising space, with presence in 22 key economic cities in the Mainland.
SANO ACQUISITION
TOM intends to acquire a 60% stake in Sano for RMB36.10 million (approx. HK$34.06 million), out of which 42% or RMB15.00 million will be paid in cash and the rest via the issue of about 3.6 million TOM shares at HK$5.51 per share.
Under the MOU, Sano has to meet audited 2002 profit after tax guarantee of RMB6.80 million. If its profit after tax that year is more than RMB6.25 million but less than RMB6.80 million, TOM will be compensated 60% of the shortfall. If its profit after tax in 2002 falls below RMB6.25 million, the final consideration for the stake will be adjusted proportionately.
Sano also guarantees that its profit after tax during 2003-2005 will achieve a compound annual growth rate (CAGR) of at least 15%. In case of any shortfall, TOM will be compensated accordingly through increased dividend entitlements.
Sano is the largest outdoor media company in Shenyang, Liaoning province. Shenyang has the highest outdoor expenditure among Mainland cities after Beijing, Shanghai and Guangzhou. Sano was established in 2000 with a quality asset portfolio of over 7,800 square metres of advertising space. These assets include 412 bus shelter lightboxes in prime locations, huge billboards on building exteriors in Shenyang's commercial districts and unipoles along the airport highway.
Sano has an average occupancy rate of 70%. It has both domestic and international advertisers -- its key clients are such companies as Motorola, Siemens, Carlsberg, Legend and Intel. According to Sano's management, it recorded revenue of about RMB18.60 million and profit after tax of about RMB6.80 million in 2001. Sano's founder and general manager, Mr. Wang Cheng Cheng has more than 20 years' experience in outdoor advertising - a key factor for Sano's success in Shenyang.
The Sano acquisition is a strategically significant step for TOM as it complements the New Star (Liaoning province) acquisition and two other acquisitions, announced last year, in Shandong province. Through Qilu International Advertising, in Jinan, and Qingdao Chunyu Advertising, in Qingdao, TOM first established a presence in Shandong province. Both Liaoning and neighbouring Shandong are China's largest outdoor advertising markets after Beijing, Shanghai and Guangzhou. The Sano acquisition further cements TOM's leadership position in northeast China's outdoor media sector.
SOUTHWEST ACQUISITION
TOM intends to acquire a 70% stake in Southwest for a total consideration of about RMB46.43 million (approx. HK$43.80 million). About 42% of the consideration, or RMB19.53 million will be paid in cash and the remaining balance will be settled via the issue of about 4.6 million TOM shares at HK$5.51 per share. The consideration will be adjusted proportionately if Southwest's audited profit after tax in the 12 months after the execution of a definitive agreement does not meet the 2001 profit after tax level.
Based in Chengdu, Sichuan province, Southwest was set up in 1992 by founder and general manager Mr. Xiao Jing Xun. Southwest is the largest outdoor media advertising company in Sichuan which is amongst the top 10 cities with the highest advertising expenditure.
Southwest owns key outdoor advertising assets along the 360-kilometre Chengdu-Chongqing highway, which has the highest traffic flow in the region. These highway assets include 30 unipoles and over 100 outdoor billboards at flyovers, toll booths and tunnels. Total advertising space is around 29,300 square metres with an occupancy rate of 80%. In addition, Southwest is also advertising agent for over 40,000 square metres of outdoor advertising media including billboards along Sichuan's major highways.
According to Southwest's management, it had in 2000 revenue of RMB14.50 million and profit after tax of RMB5.30 million. In 2001, its revenue and profit after tax grew to RMB28.60 million and RMB9.60 million respectively.
The addition of Southwest complements TOM's already strong presence in southwest China - TOM's first outdoor media subsidiary, Fench Star, in Kunming, Yunnan province. TOM will be able to gain a larger market share riding on its pricing advantage and market leadership position in the southwest region.
BOMEI ACQUISITION
TOM intends to acquire a 60% stake in Bomei for about RMB25.68 million (approx. HK$24.22 million), out of which 42% or RMB10.80 million will be paid in cash and the rest via the issue of about 2.5 million TOM shares at HK$5.51 per share.
Under the MOU, the consideration for the stake will be adjusted proportionately if Bomei's 2001 audited profit after tax does not meet RMB5.00 million. Bomei also guarantees that its profit after tax during 2002 to 2004 will achieve a CAGR of at least 15%. In case of any shortfall, TOM will be compensated accordingly through increased dividend entitlements.
Bomei is the largest outdoor advertising company in Xiamen, Fujian province, established by founder and general manager Mr. Chen Mao Sheng in 1995. Xiamen has been a Special Economic Zone since 1981 and has one of the highest per capita GDP among Chinese cities. Given its strategic location and flourishing trade activities, Xiamen is positioned to benefit from the "Cross Strait Three Links" trade development that is expected to fuel economic growth further.
Bomei owns a portfolio of over 7,800 square metres of quality outdoor media assets ranging from giant billboards, unipoles and lightboxes. Its assets have a high occupancy rate of over 70% and key clients include Coca-Cola, Ericsson, Honghe Tobacco and Nokia. It is expected that Bomei will benefit from the bigger advertising spending from international clients, contributing to the profitability of TOM's outdoor media business.
According to Bomei's management, its revenue and profit after tax in 2001 was about RMB19.80 million and about RMB5.00 million respectively.
SEEOUT ACQUISITION
Under the MOU, TOM intends to acquire a 60% stake in Seeout for about RMB54.35 million (approx. HK$51.27 million), out of which 42%, or about RMB22.58 million will be paid in cash and the rest via the issue of about 5.4 million TOM shares at HK$5.51 per share. The consideration will be adjusted accordingly if Seeout's 2001 audited profit after tax does not meet RMB11.07 million.
In addition, TOM is guaranteed that Seeout's profit after tax will achieve a CAGR of at least 15% from 2002 to 2004. TOM will be compensated accordingly in the case of any shortfall via increased dividend entitlements.
Based in Fuzhou, Fujian province, Seeout was established in 1997 and is the largest outdoor media company in Fujian province. Its portfolio of outdoor assets totals over 12,800 square metres including unipoles and billboards along the Fuzhou-Xiamen-Zhangzhou highway, unipoles, billboards and lightboxes in Fuzhou city and the surrounding areas. It also owns exclusive advertising rights for 14 bus shelters along Fuzhou's busiest street.
Seeout's outdoor media assets have an occupancy rate of around 83% and the company has cultivated a stable customer base which includes China Unicom, China Mobile, Master Kang noodles, Huiquan Beer and other local advertisers.
According to Seeout's management, its 2001 revenue and profit after tax was RMB54.00 million and RMB11.07 million respectively.
With the Bomei and Seeout acquisitions, TOM establishes an unrivalled position in Fujian's outdoor media market. These two companies, together with TOM's existing outdoor business in Guangzhou, offer TOM a significant presence in China's southeast region.
TOM's NATIONWIDE OUTDOOR MEDIA NETWORK
TOM has aggressively pursued an expansion strategy to consolidate leading outdoor media players in key economic cities nationwide. These new acquisitions make TOM the largest outdoor media operator in the Mainland. TOM's network owns the most diversified outdoor media asset base, with 44% in billboards, 31% in unipoles and the rest in street furniture and transport assets.
As with the previous acquisitions, the four newly acquired companies are all leaders in their respective cities and provinces, with strong management experience in the outdoor advertising field and good relationship with government authorities. All four companies record occupancy rates of between 70% and 80% and high net profit margins of at least 20%.
Mr. Sing Wang, Chief Executive Officer and Executive Director of TOM, said, "We are pleased to announce the new acquisitions today, which underpin TOM's commitment to be the leader in China's outdoor media sector. We have established strong presence in key cities such as Beijing, Shanghai and Guangzhou as well as Yunnan, the production base for tobacco industry, and Henan, China's most populous province. The newly acquired companies will position us for further growth in other parts of China, with our network expanding its coverage and reach."
TOM has established a holding company to integrate the assets of the 12 companies in TOM's outdoor media network. The TOM Outdoor Media Group will be the central platform to provide value-adding services to its outdoor subsidiaries and total outdoor solutions to its clients. These include unified branding, coordinated pricing and media buying, central financial management, research and development, etc.
MARKET OUTLOOK
According to Zenith Optimedia 2001, outdoor advertising in Mainland China is estimated to grow from US$665 million in 2001 to US$1 billion in 2004. The market is highly fragmented with 38,000 operators owning 1.2 million outdoor media units, with the majority having less than 1% market share. In consolidating these players, TOM will be able to build the largest outdoor media network to take advantage of this burgeoning market.
(Notes to Editors)
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
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