Saturday, May 27, 2006

Global Sources invests almost $10mn for 10% of HC International

Global Sources took a big step yesterday into the Chinese Mainland with the announcement of the acquisition of 10% of HC International (nee Huicong and formerly SinoBnet) with an option to pick up 35% within 12 months which, by Hong Kong securities regulations, would trigger a general offer. By our calculations (and the figure is not explicit in the various figures revealed in the press release), this investment has cost the company $9.8 million, valuing HC today at a hair under $100 million today. If some undisclosed financial measures are reached, the Global Sources offer will increase in value by 40%.

Global Sources Chairman and CEO Merle A. Hinrichs is quoted as saying, “The partnership between HC International and Global Sources transforms the China B2B landscape and enables the launch of many new online verticals, magazines and trade shows for the fastest growing industries in China, the world’s fastest growing economy. We have found in HC International the perfect partner to complement our current offerings, especially given HC International’s strong vertical search technology. Together, we aim to provide the most comprehensive, professional and successful B2B services in China.

HC has had a number of suitors in recent years but none has obviously found the right formula to close a deal with founder and CEO Guo Fansheng.

As far as we can recall, this is Global Sources' first acquisition in at least a decade and the first media-related one since they picked up World Executive Digest in the Philippines (now Chief Executive China magazine) many years ago. The 10% will come from one of HC International's main investors, IDG Technology Venture Investment.

HC is listed in Hong Kong while Global Sources is, of course, listed on NASDAQ.

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