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Tom Group makes offer on online unit

By Wang Xing (China Daily)
Updated: 2007-03-13 10:37

Hong Kong-based Tom Group said yesterday it will offer up to HK$1.57 billion to buy out its listed Internet unit Tom Online, boosting its share price by nearly one-third after a week-long suspension of trade.

Under the terms of the deal, Tom Group, controlled by Hong Kong tycoon Li Ka-shing, would buy out Tom Online at HK$1.52 for the unit's Hong Kong-listed shares and at HK$121.60 for each American Depositary Share, according to a joint statement from the companies submitted to the Hong Kong stock exchange yesterday.

The buyout price represents a premium of 33 percent to Tom Online's closing price on March 2, when trading in shares of Tom Online and Tom Group were suspended in Hong Kong and on the NASDAQ. It also represents a premium of 1.5 percent to the company's initial public offering (IPO) price in 2004.

Shares in Tom Online surged 29.95 percent and closed at HK$1.47 yesterday in Hong Kong, while shares in Tom Group rose 5.38 percent.

Tom Group held 2.8 billion shares, or 65.73 percent of the issued capital of Tom Online. The group was expected to hold about 90 percent of Tom Online's shares after the buyout.

The buyout will be undertaken using loans from financial institutions and Tom Online will be delisted from both the NASDAQ and the Hong Kong stock exchange after the buyout, although no timeframe was given.

"Tom is of the view that the short- and medium-term volatility and potentially uncertain financial performance of Tom Online make it poorly suited to remain a publicly listed entity," the two companies said in the statement.

Shares in Tom Online have fallen 42 percent since July, when wireless operators China Mobile and China Unicom imposed new restrictions on the marketing of mobile value-added services.

The regulation has had an impact on the business of other listed Chinese mobile value-added service providers, including Linkone, Hurray! and KongZhong.

"I think Tom Group's buyout of Tom Online was a prelude to the company's large-scale restructure," said Wang Ran, chief executive officer of China eCapital Corporation.

Wang said Tom Group may be divided into two corporations in the future. One would focus on e-commerce, based on Tom Online's cooperation with eBay. The other is a new media company that combines television, Internet and mobile phone services.

"After the restructuring, Tom Online may seek another IPO for its new business arm," Wang said.

Tom Online was listed on the NASDAQ and Hong Kong's Growth Enterprise Market as Tom Group's Web unit in 2004.