SHENZHEN, China, April 10 /Xinhua-PRNewswire/ -- China Security & Surveillance Technology, Inc. ("China Security") (OTC Bulletin Board: CSCT), a leading provider of digital surveillance technology in the PRC, today announced its intention to acquire two Chinese security and surveillance companies and one large warehouse facility and enter into a long-term exclusive partnership agreement.
Intended Acquisitions
Letters of intent have recently been signed with Changzhou Mingking Electronics Inc. Ltd. ("Mingking"), Hangzhou Tsingvision Intelligence System Co. Ltd. ("Tsing") and Shenzhen Wandaiheng Industry Ltd. ("Wandai"). The cash consideration for the three intended acquisitions total USD$32.3 million with additional consideration to be paid in equity. The number of China Security's shares to be included in the equity portions of the purchase price for Mingking and Tsing acquisitions will be subject to the achievement of certain net income performance targets over a two year period. China Security expects to finance the cash portion of the purchase price with the net proceeds from its $60 million convertible notes purchase agreement. The Mingking and Tsing acquisitions are expected to be accretive to earnings upon closing and are expected to provide strong support to the Company's city-wide projects. All three acquisitions are expected to close in the second quarter of fiscal 2007. The Company will host a press conference on Tuesday, April 10, 2007 in Shenzhen to announce the Mingking and Tsing acquisitions. Consummation of each acquisition is subject to customary closing conditions, including governmental approval.
Mr. Guo Shen Tu, Chief Executive Officer of China Security commented, "These transactions will enhance our competitive position, strengthen our product portfolio and improve our operating platform. Each of these businesses is highly regarded in the industry and should allow us to secure additional business in the area of IT security and electronic security system installations."
Mr. Tu continued, "We will take the appropriate steps to combine each new business into our operating platform and believe there is an opportunity to reduce costs and gain greater economies of scale. We also plan to retain all key members of each management team in order to ensure a smooth transition and integration. The incentive terms for each transaction will help ensure that each group works in a cohesive manner to increase our market position over the long term and maximize our overall performance."
Mingking is China's top manufacturer of high speed dome cameras, which can view 360 degrees, pan, zoom and tilt all at high speed. The functional capabilities of Mingking's cameras will enhance the deployment of China Security's city-wide surveillance projects. Mingking has been named a top 50 enterprise in the security industry by the China Security and Protection Industry Association (CSPIA).
Tsing is China's leading developer and solution provider of intelligence management platforms for network video. The intelligence management platform has been deployed for several city-wide projects and has been highly effective in managing the surveillance network. Based upon H.264 compression technology and J2EE platform technology, the platform ensures high performance levels and network reliability.
Wandai owns an 80,000 square meter Industrial Park in Shenzhen. China Security will eventually consolidate all existing and potentially acquired entities into a single location in Shenzhen in order to benefit from greater economies of scale. In addition, there will be an opportunity to attract other vertical suppliers to relocate into China Security's industrial park thereby reducing transportation costs and other tangible benefits. The increased capacity will facilitate potential OEM opportunities for other global security and surveillance vendors.
The three acquisitions are subject to entry into definitive purchase agreements, final due diligence and the receipt of governmental approvals. In connection with the Mingking and Tsing acquisitions, the financial statements of the target companies are being converted to US GAAP. Further details relating to the acquisitions, including audited numbers for the target companies, will be disclosed at or around the time of the closing of the acquisition of the target companies.
Long-Term Exclusive Partnership
China Security and its wholly owned subsidiary, Golden Group Holdings (Shenzhen) Limited ("Golden"), signed a Letter of Intent to establish a long-term exclusive partnership agreement with Shenzhen Chuangguan Intelligent Network Technology Co. Ltd. ("Chuangguan"). The Company expects a formalized agreement to be signed in the second quarter and will file an 8k in conjunction with a formalized agreement.
Chuangguan, a leading systems integrator, has been awarded several key certificates including the Certificate of Confidential Computer Information System Integration, which is required for high security government installations. Under the terms of this Letter of Intent, Golden will provide various services to Chuangguan, including training services, provision of technology licenses, equipment, consultations, workforces and other related services. Chuangguan will subcontract all its work to Golden or its designees to the extent permitted by the PRC laws and regulations either at the face value of the contract or at the face value of the contact minus the costs or expenses incurred by Chuangguan. Chuangguan agrees to add Golden's name into its marketing materials and any of its marketing and business development activities will be conducted either in the name of both Chuangguan and Golden or through a joint venture established by the parties. Golden has agreed to pay Chuangguan a combination of cash and restricted common stock for entering into the Exclusive Cooperation Agreement. The term of the Exclusive Cooperation Agreement will be 20 years which can be automatically renewable for another 20 years unless terminated by Golden.
Mr. Tu concluded, "The security market in China is extremely fragmented with over 15,000 vendors in the market. We intend to maintain our leadership position by consolidating the market with recognized, leading brands that have established, profitable businesses, and that provide us the opportunity to secure additional business with existing government and private company clients, and develop new revenue opportunities through our enhanced product offering."
About China Security & Surveillance Technology, Inc.
Based in Shenzhen, China, China Security manufactures, distributes, installs and maintains security and surveillance systems throughout the PRC. China Security has manufacturing facilities located in China and a R&D facility which maintains an exclusive collaboration agreement with Beijing University. China Security has built a diversified customer base through its extensive sales and service network that includes numerous points of presence throughout the PRC. To learn more about the Company visit http://www.csstf.com.
Safe Harbor Statement
Statements during the conference presentation may include information about the Company's plans, growth and strategies, which may include "forward-looking statements" within the context of the federal securities laws. Statements regarding the Company's future events, developments and future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. The Company's actual results may differ materially from those suggested as a result of various factors. Interested parties should refer to the disclosure concerning the operational and business concerns of the Company set forth in the Company's filings with the Securities and Exchange Commission.
