-- Amends Earn-Out Share Targets --
-- Provides Business Outlook for Remainder of 2008 --
-- Conference Call Scheduled for Tuesday, November 11, 2008 --
BEIJING, Nov. 10 /Xinhua-PRNewswire-FirstCall/ -- ChinaGrowth North Acquisition Corporation ("CGNAC"; OTC Bulletin Board: CGNYF) today announced that the company has amended its initial share purchase agreement with UIB Group Limited and filed a Form 6-K with the Securities and Exchange Commission containing its proxy statement regarding the transaction. Following completion of the transaction, UIB will become a wholly owned subsidiary of ChinaGrowth North Acquisition Corporation.
AMENDED TRANSACTION SUMMARY
In a May 28, 2008 press release, CGNAC announced that it had agreed to acquire UIB for an initial aggregate purchase price of $53.2 million, which included 6,365,001 ordinary shares of CGNAC stock and $2 million in cash, excluding additional contingent shares. Pursuant to an amended Share Purchase Agreement, dated October 30, 2008, CGNAC will place 2,000,000 shares of the 6,365,001 shares noted above in escrow to be released to UIB shareholders only if, on a consolidated basis, the surviving company achieves or exceeds both after-tax net profits in the following fiscal years:
Fiscal Year Ending December 31 After Tax Net Profits
2008 US$12,000,000
2009 US$18,000,000
In addition, management of ChinaGrowth North has agreed to put 562,500 or 50% of their promote shares into escrow. The escrowed promote shares will only be released if 2009 net income is at least $26 million. Otherwise, such shares will be forfeited.
Furthermore, as part of the Amended Share Purchase Agreement, the shareholders of UIB and their designees will be issued, on an all or none basis, ordinary shares of CGNAC on an annual basis, if, on a consolidated basis, the surviving company achieves or exceeds after-tax net profits in the following fiscal years of:
Fiscal Year Ending After Tax Net Total Additional Ordinary
December 31 Profits Shares Issuable to Sellers*
2009 US$26,000,000 4,000,000
2010 US$43,000,000 3,000,000
2011 US$75,000,000 3,000,000
2012 US$116,000,000 3,000,000
2013 US$180,000,000 4,000,000
*These amounts do not cumulate
The after-tax net profits will be determined following the completion of an audit in accordance with United States generally accepted accounting principles (GAAP), excluding after-tax profits from any acquisitions subsequent to the closing of the transaction which will have a dilutive effect on EPS.
The total post-transaction primary shares outstanding (exclusive of 2,562,500 shares held in escrow pending achieving certain net income targets in 2008 and 2009) will be approximately 10,087,501 and total warrants outstanding will be approximately 5,890,000. CGNAC will have approximately $40 million in cash subsequent to the close of the acquisition (assuming no redemptions).
The transaction is subject to customary closing conditions, including completion of the US GAAP audit, completion of all necessary documentation and approval of the shareholders of ChinaGrowth North Acquisition Corporation.
Xuesong Song, Chairman of ChinaGrowth North Acquisition Corporation stated, "We are extremely excited to announce today’s proxy filing as we move towards a completion of this deal. Given the difficult market environment, we believe that the hard work of the ChinaGrowth North and UIB Group Limited teams to amend the terms of the transaction to tie a greater portion of the purchase price to performance has provided shareholders with an exciting investment opportunity in the fast-growing field of insurance intermediary in China."
BUSINESS OUTLOOK
For the fiscal year ending December 31, 2008, total net revenues are expected to more than double from $17.1 million to approximately $43 million while the net income is expected to be approximately US$12 million, compared with approximately US$3.9 million of net income for the fiscal year ended December 31, 2007.
Mr. Song commented, "We continue to see very strong demand for UIB’s various educational insurance products in China. Educational institutions participating in UIB’s School Liability Insurance have grown from 117,000 in 2007 to approximately 233,000 through October of 2008, representing approximately 100 million students in China. We continue to believe that the education sector provides tremendous future growth potential for UIB."
CONFERENCE CALL INFORMATION
CGNAC and UIB will host a conference call to discuss the transaction on Tuesday, November 11, 2008 at 11:00 am ET. Investors may listen to the call via telephone by dialing 1-800-762-9058 or 1-480-248-5085, for international callers. A telephone replay will be available shortly after the call and can be accessed by dialing 1-800-406-7325, or 1-303-590-3030 for international callers; passcode: 3941921. The replay will be available until midnight on November 25, 2008.
ABOUT CHINAGROWTH NORTH ACQUISITION CORPORATION
ABOUT UIB
INVESTOR RELATIONS CONTACT
At CGNAC in Beijing:
Michael W. Zhang
Chief Financial Officer and Director
Email: mzhang@chum.com.cn
At ICR, Inc. in the US:
Brian Prenoveau, CFA or Bill Zima
Tel: +1-203-682-8200
RISKS AND UNCERTAINTIES; FORWARD LOOKING STATEMENTS
The transaction described herein is subject to a number of risks and uncertainties, including, but not limited to, the satisfaction of certain conditions to the closing of the proposed merger, including the risk that stockholder approval might not be obtained in a timely manner or at all.
This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements related to the benefits of the transaction, the future financial performance of the surviving entity, the growth of the market for insurance in China, pending and future acquisitions by the surviving entity.
These forward-looking statements are based on information available to ChinaGrowth North and UIB as of the date of this release and current expectations, forecasts and assumptions and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing ChinaGrowth North’s or UIB’s views as of any subsequent date and neither undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made.
Information concerning additional factors that could cause results to differ materially from those projected in the forward-looking statements is contained in ChinaGrowth North’s Annual Report on Form 20-F as filed with the Securities and Exchange Commission (the "SEC") on May 9, 2008 (the "Annual Report"), Current Reports on Form 6-K, and other of ChinaGrowth North’s SEC filings.
