Galleon in new China foray
Companies: GON
20/02/2008
Entertainment group Galleon Holdings is paying up to 8 million for fast-growing specialist Chinese media concern Yunbo.
AIM-quoted Galleon is paying an initial 1.5 million cash to acquire Yunbo, a wireless short-messaging service (SMS) and multi-media messaging service provider, which holds nationwide SMS billing codes for major groups China Mobile and China Unicom and earned 470,000 last year. The British company, which lost 392,000 on 4.5 million turnover in the year to September, is to pay another 500,000 cash in May and a further sum in shares equivalent to between four and seven times Yunbos 2008 earnings above 1.5 million, up to a maximum shares and cash payment of 8 million.
Galleons chief executive Stephen Green explains the deal is aimed to spearhead the London-based companys drive into Chinas interactive mobile entertainment market. He says it flows directly from Octobers 1.5-to-2 million paper purchase of Hong Kong-based Phoenix Investment Global, which he calls the quasi gatekeeper to key Chinese media concerns such as Hunan ETV.
The Phoenix guys have been teeing this one up for us, says Green, who claims the projected multiple represents a significant discount to similar sector deals. He points out that mobile service providers in China hold on to clients payments for 90 days or more and charge 15 to 20 per cent of billings.
Yunbo is expanding into selling content, such as dating game shows, to mobile phone users and one of the two vendors of Yunbo, Lushy Assets Ltd, has a licence to operate in every Chinese province. Green says Phoenix also has a cash-generative and profitable deal with TV3, Malaysias largest TV station and is working on co-production deals elsewhere in the region.
Floated at a mere 1p in 2001, Galleons shares hit 34.75p last October and now trade at 28p, up 0.25p today, valuing the company at 28 million. If these Chinese deals live up to expectations, they could make further progress, stockmarket conditions permitting.
http://www.growthcompany.co.uk/news-and-comment/306671/galleon-in-new-china-foray.thtml