Xianghe's 'Hi-Power' is an algae-based beverage targeting health-conscious consumers in China's fast growing $25 billion beverage market
SHISHI, China, Dec. 2 /PRNewswire-Asia/ -- China Marine Food Group Ltd. (NYSE Amex: CMFO), a manufacturer of seafood-based snack foods and distributor of fresh and frozen marine catch, today announced the signing of a definitive loan and option agreement with Fujian based Xianghe Food Science and Technology ("Xianghe"), the manufacturer of the branded "Hi-Power" algae-based soft drinks in China. China Marine received an option to purchase 80% of the stock of Xianghe for $27.8 million in cash consideration with the closing expected after the satisfactory completion of customary due diligence and auditing within the next two months. In consideration for the option, China Marine agreed to loan Xianghe $26.4 million, which will become part of the consideration for the purchase price from Mr. Qiu Shang Jing, the founder and sole shareholder of Xianghe, in the event China Marine exercises the option. The loan will be secured with a pledge by the seller of all of the stock in Xianghe.
China Marine's transaction with Xianghe was made after management determined the company would be a strong complement to China Marine's existing health-conscious seafood-based products. Xianghe's flagship product, "Hi-Power" algae drink, was developed by the Yellow Sea Fisheries Research Institute Chinese Academy of Fishery Science in coordination with Xianghe's founder, Mr. Qiu Shang Jing. Hi-Power markets itself as a high-protein content drink, low in calories and fat, with benefits to the immune system, improved digestion and reductions in hyperglycemia and hypertension. Hi-Power's target market is focused on health-conscious consumers in China's fast-growing beverage market.
Similar to China Marine, Xianghe has developed a network of distributors in the Fujian, Zhejiang, Guangdong and Hunan provinces which sell Hi-Power to retail food stores, restaurant food supply dealers and the hospitality industry. Preliminary 2010 estimates of revenues from Xianghe are over $20 million with net profit margins anticipated at 20%. China Marine's estimate regarding Xianghe's performance is subject to the completion of due diligence and future development of the business. Through integrating the product into China Marine's distribution network and expanding distribution to untapped provinces in China, management expects revenues can accelerate significantly during 2010 and beyond.
Revenue contributions from Xianghe were exclusive of China Marine's previously stated 2010 guidance of $80 million in revenues and $18 million in net income.
As part of the acquisition, the parties intend that the managing director of Xianghe and all associated sales and marketing staff will join the China Marine team. Collectively, the team plans to meet the strategic goals of Hi-Power's marketing strategy and also collaborate with China Marine's Mingxiang(R)-branded seafood snack food sales team to leverage China Marine's current distribution in seven provinces throughout China.
"We believe Xianghe is at a key inflection point in its business evolution," began Pengfei Liu, Chairman and CEO of China Marine. "In addition to the potential earnings contribution from this contemplated acquisition, there are a number of synergies, including cross selling to our collective customer base, brand identity and distribution methodologies, which meet our acquisition criteria. Xianghe's location in our home province of Fujian is very near to our Shishi based headquarters which lends to their quick assimilation into our business operations and corporate culture. This beverage product line is ideally situated in one of the fastest growing categories in China's retail food and drink markets. The final consideration was that the company's use of algae as the base raw material in Hi-Power is consistent with healthy, marine-based food sources we currently use ourselves. We look forward to completing our due diligence and reviewing Xianghe's 2009 audit as we take the next steps in this contemplated acquisition. We are also confident that our investors will also find similar value in our decision and expansion of our product portfolio and that Xianghe's anticipated accumulated profits will equal our initial investment within four years," Liu concluded.
About China Marine
China Marine Food Group Ltd. processes and distributes seafood-based snack foods, and fresh and frozen marine catch to seven provinces in the PRC. Founded in 1994, China Marine has grown steadily and positioned its "Mingxiang" brand as a category leader in 2,200 retail sales points in the PRC. The Company has received "The Famous Brand" and "Green Food" awards. It is located in Fujian province, one of the largest coastal provinces in the PRC and a vital navigation hub between the East China Sea and the South China Sea. The Company is committed to the highest standard of quality control with the ISO9001, ISO14001, HACCP certification and EU export registration.
Forward Looking Statements
This release contains certain "forward-looking statements" relating to the business of China Marine Food Group Limited, its subsidiary companies and Xianghe Food Science and Technology, which can be identified by the use of forward-looking terminology such as "believes, estimates, expects, anticipates" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties, including all business uncertainties relating to product development, marketing, concentration in a single customer, raw material costs, market acceptance, future capital requirements, competition in general and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Certain of these risks and uncertainties are or will be described in greater detail in our filings with the Securities and Exchange Commission. China Marine Food Group Limited and Xianghe Food Science and Technology is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.
Company:
Marco Hon Wai Ku, CFO
Suite 815, 8th Floor
Ocean Centre, Harbour City
Kowloon, HONG KONG
Tel: +852-2111-8768 (HK)
Email: marco.ku@china-marine.cn
Web: http://www.china-marine.cn
Investor Relations:
John Mattio, SVP
HC International, New York
Tel: +1-203-616-5144 (U.S.)
Email: john.mattio@hcinternational.net
Web: http://www.hcinternational.net
