Knobias Clip Report (01-29-2008)
Submitted By Knobias ClipReport
BroadWebAsia Ups the Ante for Linktone
BroadWebAsia, Inc. (”BWA”) disclosed in a Tuesday press release that it has presented a formal proposal for the investment in, and restructuring of, Linktone Ltd. (NASDAQ: LTON), which it believes offers superior value to a previously announced agreement recently entered into between Linktone and PT Media Nusantara Citra (”MNC”).
Under terms of the proposed transaction, BWA will purchase at least 60% of Linktone’s outstanding shares. The transaction will take place via a combination of a tender offer for approximately 25% of the total shares outstanding, or 6 million existing American Depositary Shares, at a price of $4.18 per ADS, and a commitment to purchase another $10 million of ADS’s on the open market for up to the same price.
Linktone had initially reached an agreement with MNC back in November, under which MNC would purchase at least 51% of Linktone’s outstanding shares. At the time, MNC offered $3.80 per ADS, representing a 53.8% premium over Linktone’s closing price of $2.47 on November 27, 2007. The transaction is scheduled to close sometime during the current quarter.
The BWA offer of $4.18 represents a 10% premium over the $3.80 price offered from MNC. According to TheFlyOnTheWall, Linktone called an unscheduled shareholder meeting in China shortly after BWA made its offer public.
Linktone is a provider of interactive media and entertainment products and services to consumers in China. Linktone is currently an exclusive advertising agent and main content provider for Qinghai Satellite Television, which is a satellite TV channel that reaches 24 provinces in China with 276 million viewers. BroadWebAsia is an internet company focused on Chinese online communities and digital advertising. The firm was started and is backed by internet entrepreneur and MySpace Founder Brad Greenspan.
In addition to the tender offer, BWA has proposed to contribute certain BWA media assets and strategic partnership arrangements to Linktone that it believes will diversify Linktone’s current business, increase revenue streams and generate incremental cash flow.
As part of the deal, BWA also would be issued 15 million new Linktone ADS’s in exchange for BWA’s contribution of the assets of the ‘BWA Entertainment Group’ for which Linktone could use to build a wireless internet entertainment portal, and $10 million to help decrease sales and marketing costs for Linktone. In addition, BWA would enter into two separate 5-year commercial agreements, one that would allow the Linktone Advertising Group the right to sell up to 25% of BWA’s web inventory, and the other to allow Linktone to be the exclusive Mobile Content Partner for BWA Network’s web properties. Also, BWA would purchase at least $3 million in mobile and television advertising across the Linktone Advertising Service Group over a period of 36 months.
Lastly, but of no less significance, is the inclusion of management changes as well. Brad Greenspan would take over as Chairman of Linktone along with the election of four additional directors, all of whom proposed by BWA.
Linktone’s shares posted modest gains during the session, reaching a high of $3.47, up a little over 8% or 26 cents from Monday’s close of $3.21. The conservative reaction to the news could indicate there may be some skepticism from current/potential shareholders whether the proposal will be accepted.
Greenspan stated in Tuesday’s release, “We believe that the BWA proposal offers Linktone shareholders an opportunity to enhance the value of their shares by introducing the necessary ingredients to develop and execute an effective business plan for Linktone in 2008 and beyond. BWA’s management team has a proven track record in the media, mobile and internet industries. We would provide the strategic leadership and counsel to the Linktone management team to develop and implement an effective restructuring plan.”
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