BEIJING, June 15, 2015 /PRNewswire/ -- AirMedia Group
Inc. ("AirMedia" or the "Company") (Nasdaq: AMCN), a leading
operator of out-of-home advertising platforms
in China targeting mid-to-high-end consumers, as well as
a first-mover in the in-flight and on-train Wi-Fi market, today
announced that the Company, AirMedia Technology (Beijing) Co., Ltd., which is a wholly owned
subsidiary of the Company in China, Beijing AirMedia Shengshi Advertising
Co., Ltd. (the "Seller"), formerly known as Beijing Shengshi Lianhe
Advertising Co., Ltd., which is AirMedia's variable interest entity
("VIE") in China as well as the controlling shareholder of
AirMedia Group Co., Ltd. ("AM Advertising"), and Mr.
Herman Guo, who is deemed as actual
controller of AM Advertising under PRC law have entered into a
definitive equity interest transfer agreement (the "Agreement")
with Beijing Longde Wenchuang Fund Management Co., Ltd. ("Longde
Wenchuang" or the "Buyer") to sell 75% equity interest of AM
Advertising (the "Transaction") for a consideration of RMB2.1 billion in cash (the "Consideration"),
which reflected the total valuation of AM Advertising of
RMB2.8 billion after the completion
of the restructuring.
The Consideration payment will be made in two installments. The
first installment of RMB800 million
is required to be received within 15 working days after the
executions of the Agreement and the fulfillment, or waiver by the
Buyer, of certain preconditions, including without limitation, AM
Advertising shall have transferred certain of its subsidiaries that
are not subject of the transaction out of its group and the key
management team members and other employees of AM Advertising shall
each have entered into an employment contract for a term of five
years or more, a confidentiality agreement and/or non-competition
agreement for a term of two years after the termination of
employment. The second installment of RMB1.3
billion is required to be received within 15 workings days
after the later to occur of the confirmation by Buyer on the audit
report of the restructured AM Advertising and the fulfillment of
certain preconditions, including without limitation, the
termination of the equity transfer agreement with Shenzhen
Liantronics Co., Ltd. ("Liantronics") regarding the transfer of 5%
equity interest of AM Advertising to Liantronics and removal of the
VIE structure in connection with AM Advertising. The Seller
guarantees that the preconditions to the second installment shall
be fulfilled no later than September
30, 2015.
AM Advertising is a consolidated affiliated entity and a VIE of
AirMedia. Under the Agreement, AirMedia agrees to restructure AM
Advertising for the Transaction. After the restructuring, AM
Advertising is expected to own and operate all AirMedia's media
business in airports (excluding Digital TV screens in airports and
TV-attached digital frames) and all the billboard and LED media
outside of airports (excluding gas station media network and
digital TV screens on airplanes) (collectively, the "Target
Businesses"). After the restructuring, all AirMedia's businesses
other than the Target Businesses, including but not limited to
in-flight Wi-Fi business, on-train Wi-Fi business, digital TV
screens on airplanes, and gas station media network will be
transferred out of AM Advertising and will not form part of the
subject businesses under the Transaction.
To complete the Transaction, the Company needs to remove the VIE
structure of AM Advertising. AirMedia will hold an extraordinary
general meeting (the "EGM") to approve the Transaction and the
removal of the VIE structure of AM Advertising. A Notice of the EGM
will be announced soon.
As the result of this Transaction with Longde Wenchuang,
AirMedia intends to exercise the call option it obtained under the
equity interest transfer agreement with Liantronics and terminate
the equity interest transfer of 5% equity interest of AM
Advertising to Liantronics. As the time of the execution of the
Agreement, AirMedia has not transferred the 5% equity interest of
AM Advertising to Liantronics.
After the removal of the VIE structure of AM Advertising,
Shenzhen AirMedia Information Technology Co., Ltd., a wholly owned
subsidiary of the Company in China, will acquire the remaining 25% equity
interest of AM Advertising from the Seller and three individual
nominee shareholders, two of them are the Company's officers.
The Agreement contains an earnout structure, in the event that
the net profit (before or after adjustment for non-recurring gains
and losses, whichever is less) of restructured AM Advertising in
each of the fiscal years of 2015, 2016, 2017, and 2018
(collectively, the "Covered Period") is less than the profit target
of RMB1.0592 billion (the "Profit
Target") (being RMB200 million,
RMB240 million, RMB288 million and RMB331.2 million for the fiscal years of 2015,
2016, 2017, and 2018 respectively), other shareholders of AM
Advertising, excluding the Buyer, will be obligated to compensate
the Buyer for the deficiency by transferring their equity interest
in AM Advertising to the Buyer for nil consideration and/or by
cash, based on a pre-determined formula with such compensations in
aggregate being subject to a cap equal to the amount of the
Consideration.
To motivate the management and sales team to achieve the Profit
Target, the Buyer agrees to allocate 50% of the surplus of net
profit in the Covered Period in excess of the Profit Target as a
bonus to the members of the management team of the restructured AM
Advertising who are still on duty at the end of the Covered
Period.
After the execution of the Agreement, neither party shall
arbitrarily terminate the Agreement, or else shall pay the
liquidated damages of RMB400 million
to the counterparty. During the period from the execution of the
Agreement to the completion of the Transaction, the Seller is
prohibited from negotiating or entering into any other agreements,
contracts and memorandums with other investment institutions in
relation to the equity interest transfer of, investment in, and
cooperation with AM Advertising. The Seller shall pay the
liquidated damages of RMB400 million
to the Buyer if it fails to do so.
The Transaction cannot be revoked, unless the net profit (before
or after adjustment for non-recurring gains and losses, whichever
is less) in relation to the Target Businesses is less than
RMB150 million in 2015, i.e. 75% of
the profit target of year 2015, or AM Advertising fails to renew at
least 80% of the concession right contracts of certain airport
after expiration, or AirMedia fails to complete the restructuring
by June 30, 2016. Under the
aforementioned circumstances, the Buyer may elect to require the
Seller to repurchase 75% equity interest of AM Advertising after
receiving the notice from the Buyer for an amount equal to the
Consideration plus a capital usage fee and less any compensation
that the Buyer may have received from the other shareholders.
After the completion of the Transaction, all parties agree to
cooperate with each other and endeavor to sell restructured AM
Advertising to companies listed on the A-share market of the stock
exchanges or New Third Board in China or through the independent initial
public offering on China's stock
exchanges or New Third Board in the future.
The Company may apply the Consideration to dividend payments,
and to support its fast growing new business of in-flight and
on-train Wi-Fi services.
"We believe the terms of the Transaction with Longde Wenchuang
are preferable compared with the terms we received or discussed
with other potential buyers as we will receive the Consideration
all in cash, in a much faster and predictable manner. In addition,
the Transaction does not require the scrutiny and approval of
government regulators, which will be an imperative procedure if we
choose to conduct the transaction with a company listed in
China. Furthermore, we will have the opportunity to continue
to capitalize on the sale of the remaining 25% of equity interest
of AM Advertising at an even more favorable valuation if and when
Longde Wenchuang sells the equity interest it purchased to other
companies or list AM Advertising on China's stock exchanges or New Third Board in
the future," remarked Herman Guo, chairman and chief executive
officer of AirMedia. "The Targeted Businesses generated net
profit of approximately RMB134
million (US$21.59 million) in
2014 on a pro forma basis. We are confident that AM
Advertising will be able to achieve the profit target in the
earnout. After the completion of the Transaction, we can focus on
our emerging in-flight and on-train Wi-Fi business, which, we
believe, has a brilliant future for the Company."
Closing of the Transaction requires necessary approvals,
including shareholder approval by AirMedia's shareholders.
There is no assurance that all the necessary approvals will be
obtained within the expected time period, or at all.
About AirMedia Group Inc.
AirMedia Group Inc. (Nasdaq: AMCN) is a leading operator of
out-of-home advertising platforms in China targeting mid-to-high-end consumers, as
well as a first-mover in the in-flight and on-train Wi-Fi market.
AirMedia operates the largest digital media network in China dedicated to air travel advertising.
AirMedia operates digital frames in most of the 30 largest airports
in China. In addition, AirMedia
sells advertisements on the routes operated by seven airlines,
including the four largest airlines in China. In selected major airports, AirMedia
also operates traditional media platforms, such as billboards and
light boxes, and other digital media, such as mega-size LED
screens.
In addition, AirMedia has obtained exclusive contractual
concession rights until the end of 2020 to develop and operate
outdoor advertising platforms at Sinopec's service stations located
throughout China.
AirMedia, which is in the process of transforming into a leading
in-flight and on-train Wi-Fi operator in China, has obtained
concession rights to install and operate Wi-Fi systems on the
airplanes operated by Hainan Airlines Group and on the trains
operated by several main railway bureaus in China, including Beijing Railway Bureau,
Shanghai Railway Bureau and Guangzhou Railway (Group)
Corporation.
For more information about AirMedia, please visit
http://www.airmedia.net.cn.
About Beijing Longde Wenchuang Fund Management Co.,
Ltd.
Beijing Longde Wenchuang Fund Management Co.,
Ltd. ("Longde Wenchuang Fund") is a private equity fund
founded by Beijing Culture & Technology Financing Guarantee
Co., Ltd, an affiliate of Beijing Culture Investment Development
Group, together with other noted investment organizations, which
focuses on investments in outstanding companies in culture and
technology industries.
Safe Harbor Statement
This announcement contains forward-looking statements. These
statements are made under the "safe harbor" provisions of the U.S.
Private Securities Litigation Reform Act of 1995. These
forward-looking statements can be identified by terminology such as
"will," "expect," "anticipate," "future," "intend," "plan,"
"believe," "estimate," "confident" and similar statements. Among
other things, the Business Outlook section and the quotations from
management in this announcement, as well as AirMedia Group Inc.'s
strategic and operational plans, contain forward-looking
statements. AirMedia may also make written or oral forward-looking
statements in its reports to the U.S. Securities and Exchange
Commission, in its annual report to shareholders, in press releases
and other written materials and in oral statements made by its
officers, directors or employees to third parties. Statements that
are not historical facts, including statements about AirMedia's
beliefs and expectations, are forward-looking statements.
Forward-looking statements involve inherent risks and
uncertainties. A number of important factors could cause actual
results to differ materially from those contained in any
forward-looking statement. Potential risks and uncertainties
include, but are not limited to: if advertisers or the viewing
public do not accept, or lose interest in, AirMedia's air travel
advertising network, AirMedia may be unable to generate sufficient
cash flow from its operating activities and its prospects and
results of operations could be negatively affected; AirMedia
derives most of its revenues from the provision of air travel
advertising services, and any slowdown in the air travel
advertising industry in China may
materially and adversely affect its revenues and results of
operations; AirMedia's strategy of expanding its advertising
network by building new air travel media platforms and expanding
into traditional media in airports may not succeed, and its failure
to do so could materially reduce the attractiveness of its network
and harm its business, reputation and results of operations; if
AirMedia does not succeed in its expansion into gas station,
in-flight internet services and in-air multimedia platform or other
outdoors media advertising, its future results of operations and
growth prospects may be materially and adversely affected; if
AirMedia's customers reduce their advertising spending or are
unable to pay AirMedia in full, in part or at all for a period of
time due to an economic downturn in China and/or elsewhere or for any other
reason, AirMedia's revenues and results of operations may be
materially and adversely affected; AirMedia faces risks related to
health epidemics, which could materially and adversely affect air
travel and result in reduced demand for its advertising services or
disrupt its operations; if AirMedia is unable to retain
existing concession rights contracts or obtain new concession
rights contracts on commercially advantageous terms that allow it
to operate its advertising platforms, AirMedia may be unable to
maintain or expand its network coverage and its business and
prospects may be harmed; a significant portion of AirMedia's
revenues has been derived from the six largest airports and four
largest airlines in China, and if
any of these airports or airlines experiences a material business
disruption, AirMedia's ability to generate revenues and its results
of operations would be materially and adversely affected;
AirMedia's limited operating history makes it difficult to evaluate
its future prospects and results of operations; and other risks
outlined in AirMedia's filings with the U.S. Securities and
Exchange Commission. AirMedia does not undertake any obligation to
update any forward-looking statement, except as required under
applicable law.
Investor Contact:
Raymond Huang
Senior Director of Investor Relations
AirMedia Group Inc.
Tel: +86-10-8460-8678
Email: ir@airmedia.net.cn
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SOURCE AirMedia Group Inc.