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Sunwave Purchases 51% Stake in Eshine

Securities Times, 2/12/10

Chinese communications equipment manufacturer Sunwave Communications (002115.SZ) has announced it will purchase a 50.5% stake in Guangzhou-based wireless network software and service company Eshine Electronic Technology, Co. for RMB 30.69 mln, after which it will invest an additional RMB 5 mln in the company. Through its stock purchase and subsequent investment, Sunwave will hold a 51% stake in Eshine, carrying a current face value of RMB 28.1 mln. The remaining 49% of stock will stay with its original owners. Sunwave has also drafted an agreement with existing Eshine stockholders for compensation conditions tied to the company's performance over the coming three years.

Of the additional RMB 5 mln that Sunwave will invest in Eshine, RMB 30,600 will go to increase the company's registered capital; the remaining RMB 4.96 mln will be counted as reserved capital funds. Under the two companies' compensation and investment agreement, the costs for Sunwave's 51% stake in Eshine will be between RMB 35.69 and RMB 90 mln.

Guangzhou Eshine Electronic Technology, Co. was founded on April 11, 2005, with a registered capital of RMB 3 mln. The company focuses on providing network testing, evaluation, and optimization services and solutions for mobile communications networks. Eshine had operating revenues of RMB 40.37 mln in 2009, with net profits of RMB 7.1 mln.

In a performance report released today, Sunwave reported total 2009 operating revenues of RMB 823 mln, up 84.57% over the previous year, and net profits of RMB 76.1 mln, up 34.61% over 2008. Sunwave had total 2009 assets of RMB 1.45 bln, up 88.47%, and a debt-to-equity ratio of 51.61%.

Keywords: M&A Eshine Sunwave wireless 002115.SZ wireless coverage

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