Friday, 29 October 2010, 08:21 HKT/SGT

HONG KONG, Oct 29, 2010 - (ACN Newswire) - CCT Telecom Holdings Limited (00138.HK) and its 50.49% owned subsidiary CCT Tech International Limited (00261.HK) jointly announced that on 13 October 2010, CCT Telecom's listed subsidiary, CCT Tech, signed an S&P Agreement to acquire a medical device business for a consideration of US$100 million (equivalent to approximately HK$780 million). The Target Company of the medical device business is MIV Scientific Holdings Ltd. which owns certain international Patents (for which patent applications have been filed but none of which have been issued or granted yet) relating to major target markets of the Target Group including the PRC and Europe. The Patents relate to cardio vascular medical devices and coronary stents. The Target Group will engage in the medical device business. A placing of shares of CCT Tech is proposed to raise US$30 million to fund the transactions. The long stop date of the transactions is 31 December 2010.

Immediately after the capital reorganization of CCT Tech becoming effective, the placing and the completion but before conversion of the redeemable convertible preference shares ("Redeemable CPS"), the shareholding of CCT Telecom in CCT Tech will be reduced from 50.49% to 42.12%. Immediately after full conversion of the Redeemable CPS, CCT Telecom will retain a 29.21% stake in CCT Tech.

The stent system developed by the Target Company is hydroxyapatite and nonpolymer-based drug-eluting cobalt-chromium stent system (the "Specified Product"). Based on articles and research reports in scientific journals, the stent system developed by the Target Group is considered to be an advanced technology for the drug-eluting coronary delivery system, and based on four years of human clinical trial results, has been proved to be feasible and safe. The Target Company has conducted animal and human tests of the Specified Product in the United States, Brazil and European Union and such tests show satisfactory results. The Target Company is in the process of applying for CE Marking for the Specified Product, which is expected to be granted to the Target Company within one year from the Completion Date.

Once the CE Marking is obtained and once the relevant manufacture and operation permits and export certificate in the PRC are obtained, the Target Group can manufacture the Specified Product in the PRC for export sale to those countries which accept the CE Marking certification, including the European Union. The PRC has strictly stipulated the entrance system of medical device and pharmaceutical products. The transactions enable the CCT Tech Group to enter into the medical and healthcare market smoothly and obtain qualification of production and sale for cardio vascular medical device. After Completion, the Target Group will apply for the relevant manufacture and operation permits in the PRC for manufacturing of medical device products in the PRC. The Target Group will also conduct animal and human tests on the Specified Product in the PRC for the purpose of applying for the registration and approval from The State Food and Drug Administration (the "SFDA") of the PRC. Once the SFDA registration and approval in respect of the Specified Product is obtained and once the relevant manufacture and operation permits are obtained, the Target Group will be permitted to manufacture and sell the Specified Product in the PRC. The Target Group will also manufacture other medical device products such as coronary and peripheral vascular dilatation balloon and catheters in the PRC, subject to obtaining the SFDA approval on the relevant products.

Coronary artery disease is a progressive condition that leads to the obstruction of the blood vessels providing blood flow to the heart muscle. Due to overall global aging population, unhealthy habits (such as over-nutrition, eating junk food and smoking (especially for the Chinese people)) and inheritance factors (such as diabetes and hypertension), heart disease has become one of the leading causes of death in the world. The global coronary stent market is huge and its growth prospects are good, especially in the PRC. There are a number of factors contributing to the rapid growth in the healthcare industry in the PRC. In recent years, the PRC's healthcare system has been undergoing fundamental changes as a result of the PRC government's new healthcare reform initiative and concurrent significant expansion of financial support for the healthcare system. Under this initiative, the PRC government plans to inject enormous amount of government spending to improve accessibility and affordability of healthcare.

In view of the existing telecom business remaining uncertain, CCT Tech takes initiative to identify business opportunities in the other business sectors in order to diversify and broaden its revenue sources and improve its profitability.

The Transactions will enable the CCT Tech Group to enter into the medical and healthcare industry which the CCT Tech Directors believe has huge potential and good future prospects. The CCT Tech Directors consider that the Transactions will substantially enhance the assets, revenue and profitability of the CCT Tech Group.

The Target Group will employ the existing Key Management at the employment terms to be agreed by CCT Tech to continue to manage the Medical Device Business. CCT Tech has also agreed to provide incentives to the Key Management. The Key Management are persons with high calibre and possess extensive knowledge and experience in vascular stent products and other medical devices. The brief biographies of the Key Management are as follows:

Mr. Chris Chen, is and will continue to be the chief executive officer of the Target Group. He joined the Target Group in 2005 as an industry veteran and is involved in its strategic planning, financing, marketing, product development, establishing network with R&D strategic partners, as well as building a strong intellectual property portfolio worldwide.

Mr. Ty Tiefeng Hu ("Mr. Hu"), is the founder of InnoMed Scientific Incorporation Limited ("InnoMed") and its Chinese subsidiaries, Shanghai Ying Zhong and Shanghai Ying Sheng, which will form part of the Target Group, upon completion of the Transactions. Mr. Hu is and will continue to be the chief executive officer of the InnoMed Group in Shanghai, after Completion. Mr. Hu has broad academic and industrial experience in the Medical Device Business. He has been the President and General Manger of Vascore Medical (Suzhou) Co., Ltd., the Research & Development Director of Cordis Corporation, a Johnson & Johnson company, and the Coronary Drug-Eluting Stent Program Manager at Guidant Corporation (now Abbott Vascular). He has managed numerous technology and product development programs, and has also been a staff of the Standing Committee of the National People's Congress of the PRC. Mr. Hu received his medical education from China Medical University and graduated in 1986. He also obtained a master's degree in health management at Yale University in 1992. Mr. Hu further completed a post-doctoral training on medical oncology at Yale Medical School and worked at the Cancer Institute of New Jersey before joining the medical device industry in 1996.

Mr. Charley Chen, Director of Operation, graduated from Kunming University of Science and Technology and obtained a bachelor's degree in Mechanical Engineering. He has worked with Baiyin Corporation, a state-owned enterprise and Vascore Medical (Suzhou) Co., Ltd., a foreign-owned medical device company, and was mainly responsible for product research and development and production. Mr. Chen is the first batch of engineer in the PRC working on minimally-invasive endovascular therapy.

Dr. Tang Yee, Director of Research and Development. Dr. Tang has obtained doctorate in macromolecule materials and biological materials from the University of Toronto, Canada and post-doctoral training in molecule materials from the Massachusetts Institute of Technology. She has participated in the research and development of the drug stent and absorbable stent at Guidant Corporation (now Abbott Vascular). She has also worked in the development of drug balloon and peripheral absorbable stent.

Prof. Randy Lee, Scientific Advisor. Prof. Lee is a professor in Cardiology in the University of California, San Francisco, USA and he is an expert in the research of cardio disease and tissue engineering. He is also a clinical doctor and providing medical service. Prof. Lee has been the person in charge of the research group in Bioengineering in the University of California, San Francisco and Berkeley, USA, and has developed several commercial products from research and development. Prof. Lee is also a director of certain enterprises. He is the founder and an executive director of LyChron, a medical device company in the USA.

Dr. Farrell Mendelsohn, Medical Advisor. Dr. Mendelsohn graduated from Johns Hopkins University in the USA with a doctorate in Medicine. He has also received clinical residency training at the Harvard University and cardiology Fellowship at Duke University specialised in interventional therapy. Dr. Mendelsohn is currently working as the head of the medical centre for cardiovascular regeneration therapy at the University Medical Center at Princeton Baptist Medical Centre, Brimingham, Alabama, USA. Dr. Mendelsohn is one of the leading interventional cardiologists, specialising in interventional therapy for vascular diseases.

Dr. Brad Hubbard, Preclinical Advisor. Dr. Hubbard graduated from the University of Missouri with a doctorate in veterinary medicine. He has held senior positions in various renowned medical device companies, including Johnson & Johnson, Guidant and LyChron. Dr. Hubbard is internationally respected preclinical expert with extensive experience in the field of cardiovascular stent.

In order to reorganize CCT Tech, the CCT Tech Board proposes to put forward the proposal to the CCT Tech Shareholders to effect the Capital Reorganisation which is conditional upon, among others, the CCT Tech Shareholders' approval of the proposed Capital Reorganisation (including the Resolution), the S&P Agreement and the Transactions at the CCT Tech SGM.

The CCT Tech Board proposes that upon the Capital Reorganisation becoming effective, the board lot size of the CCT Tech Ordinary Shares for trading on the Stock Exchange will be changed from 80,000 CCT Tech Existing Shares to 20,000 CCT Tech Ordinary Shares.

The S&P Agreement for acquiring the medical device business was reached amongst the Vendor, the Target Company and CCT Tech, which involves the acquisition by CCT Tech of the Sale Shares from the Vendor and the subscription of the Subscription Shares. Completion of the S&P Agreement is conditional upon, among others, completion of the Placing, and the CCT Tech Shareholders' approval of the Capital Reorganisation, the S&P Agreement and the Transactions. Following Completion, CCT Tech (or its designated nominee(s)) will beneficially own the then entire issued share capital of the Target Company as enlarged by the Subscription Shares.

The Consideration of US$100 million (equivalent to approximately HK$780 million) comprises the Subscription Consideration of US$20 million (equivalent to approximately HK$156 million) and the Purchase Consideration of US$80 million (equivalent to approximately HK$624 million). The Subscription Consideration will be payable by CCT Tech in cash to the Target Company by installments. The Purchase Consideration will be satisfied by CCT Tech by way of the allotment and issue of the Redeemable CPS credited as fully paid upon issue at the issue price of HK$0.18 each, to the owner of InnoMed and the Vendor, upon the occurrence of certain events, which include a profit guarantee of an audited annual consolidated net profit after tax of the Target Group of at least HK$70 million for any financial year ending on or before 31 December 2012. The Redeemable CPS are convertible into the CCT Tech Ordinary Shares initially at the Conversion Ratio on a one to one basis (subject to adjustment as a result of any consolidation or sub-division of the CCT Tech Ordinary Shares but not otherwise).

InnoMed holds 100% equity interest in Shanghai Ying Zhong and has also executed the Shanghai Ying Sheng Equity Transfer Agreement with Mr. Hu to acquire 100% equity interest in Shanghai Ying Sheng from Mr. Hu.

The Redeemable CPS are subject to the Lock-up Undertakings and the Charge during certain lock-up periods. Each of the InnoMed Owner and the Vendor agrees and undertakes to charge their Redeemable CPS upon issue, in favour of CCT Tech, under the InnoMed Owner CPS Charge and the Vendor CPS Charge respectively to secure the obligations of the Vendor and the Target Company under the S&P Agreement, including the Put Option.

In consideration of the sum of HK$1.00 payable by CCT Tech to the Vendor, subject to Completion, the Vendor grants the Put Option to CCT Tech, which gives the right to CCT Tech to require the Vendor to acquire all but not part of the Sale Shares and the Subscription Shares from CCT Tech at the Option Price. The term of the Put Option will commence on the Completion Date and ending on 31 August 2013 and the Put Option will become exercisable by CCT Tech during the period from 1 April 2013 to 25 July 2013 in the event that the profit guarantee is not fulfilled by the Target Group.

On 19 October 2010, the Placing Agreement was entered into between CCT Tech and the Placing Agent, pursuant to which the Placing Agent has agreed, subject to the terms and conditions of the Placing Agreement, to procure, on a best-effort basis, independent placees to subscribe for the Placing Shares at the Placing Price. The Placing Shares will be allotted and issued pursuant to the general mandate granted to the CCT Tech Directors at the annual general meeting of CCT Tech held on 31 May 2010. The Placing will raise funds of at least approximately HK$234 million (equivalent to US$30 million), before Placing fees, to CCT Tech. The funds raised will be used to finance the Subscription Consideration of US$20 million (equivalent to approximately HK$156 million), the expenses related to the Transactions of approximately HK$10 million (including Placing fees), the working capital and for general corporate purposes in respect of the CCT Tech Group and the Telecom Product Business, in the amount of approximately HK$68 million. The Placing is conditional, among others, the listing approval from the Stock Exchange on the Placing Shares.

A circular of CCT Tech containing, among other information, (i) further details of the Capital Reorganisation and the Resolution; (ii) further details of the Placing Agreement and the Placing; (iii) further details of the S&P Agreement and the Transactions; (iv) the Valuation Report on the Target Group; and (v) a notice of the CCT Tech SGM will be despatched to the CCT Tech Shareholders in accordance with the requirements of the Listing Rules on or before 30 November 2010.

A circular of CCT Telecom containing, among other information, (i) further details of the Placing Agreement and the Placing; (ii) further details of the S&P Agreement and the Transactions; (iii) the Valuation Report on the Target Group; and (iv) a notice of the CCT Telecom SGM will be despatched to the CCT Telecom Shareholders in accordance with the requirements of the Listing Rules on or before 30 November 2010.

In respect of the Transactions, Samsung Securities (Asia) Limited has been appointed as the financial adviser of CCT Telecom and CCT Tech.

At the request of CCT Tech and CCT Telecom, trading in the CCT Tech Existing Shares and the CCT Telecom Shares was suspended with effect from 9:30 a.m. on 14 October 2010 pending the release of an announcement jointly made by CCT Tech and CCT Telecom. Applications have been made by CCT Tech and CCT Telecom for the resumption of trading of the CCT Tech Existing Shares and the CCT Telecom Shares respectively on the Stock Exchange with effect from 9:30 a.m. on 29 October 2010.

Contact:

JOVIAN Financial Communications Ltd
Angel Yeung
Tel: +852 2581 0168
Fax: +852 2854 2012
Email: angel@joviancomm.com

Topic: Merger & Acquisition
Source: CCT Telecom Holdings Limited
Sectors: Daily Finance, BioTech
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