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SYSCAN Technology Acquires Prepaid Card Business in China

January 25, 2011 - Hong Kong

SYSCAN Technology Holdings Limited ("SYSCAN Technology"/ the "Group") (SEHK: 8083) issued a circular today relating to the Sale and Purchase Agreement and Placing Agreement involving the acquisition of the entire equity interest in Country Praise Enterprises Limited ("Country Praise"). Country Praise and its subsidiaries are engaged in prepaid card operations, including issuance of the cards in Mainland China and set up sales offices in nine major cities, including Beijing, Shanghai, Shenzhen and Chengdu. Following the acquisition, SYSCAN Technology will be able to tap the prepaid card market in Mainland China, and capture enormous opportunities in the fast growing electronic payment service industry and domestic consumption demands in Mainland China, leveraging its self-developed 2D barcode technology.

According to the Sale and Purchase Agreement, the initial consideration of the acquisition is HK$150,000,000, consisting of a Cash Consideration of HK$80,000,000 and HK$70,000,000 payable by way of issue and allotment of the Consideration Shares. Total consideration can be adjusted according to the sale of prepaid cards of Country Praise, transaction amounts executed and net profit. One of the scenarios is that if the consolidated net profit of Country Praise in FY2011 is less than RMB 35,000,000 but its consolidated net profit for FY2012 is not less than RMB 70,000,000, the consideration shall be adjusted based on the average of the consolidated net profit of Country Praise for the said two financial years multiplied by a price-earning multiple of 12, provided that the maximum consideration adjusted shall not be more than HK$850,000,000. The consideration shall be satisfied by a combination of cash, Consideration Shares and Convertible Bonds.

Besides, the Group has conditionally agreed to place, through the placing agent, up to 625,000,000 Placing Shares at a price of HK$0.32 per Placing Share on a best effort basis. Assuming all shares are successfully placed, the net proceeds from the Placing will be HK$191,000,000, which is intended to finance the acquisition and also used as general working capital for the future development of the prepaid card business.

Newly acquired prepaid card business targets domestic consumption market
Country Praise is engaged in the pre-paid card business in China. The prepaid cards issued by Country Praise are widely used in shopping malls, supermarkets, restaurants and bars, entertainment, leisure and fitness facilities. It markets and distributes the prepaid cards through its nine sales offices in Beijing, Shenyang, Hangzhou, Shanghai, Shenzhen, Haikou, Chengdu, Wuhan and Changsha. Country Praise established a joint venture with China Comfort International Travel Services Co., Ltd., one of the leading travel agencies in China, in July 2010 for the distribution of prepaid cards and online distribution of tickets to popular tourist attractions, air tickets and other travel related services.

Since August 2008, Country Praise has issued over 240,000 prepaid cards and there are more than 4,500 stores throughout China accepting its prepaid cards for payment of goods and services from cardholders. The prepaid card operation's electronic data processing and clearing system function is processed by a nationwide network operated by China Unionpay and Shanghai Unionpay Data Services Co., Ltd., subsidiaries of China Unionpay.

Strong growth potential for prepaid card business in China

Currently,the prepaid card business in Mainland China is becoming increasingly mature. The cards are widely accepted in department stores, supermarkets as well as by the food & beverage, telecommunication, entertainment and medical industries. The convenienceoffered in terms of conducting transactions and promoting discounts make them a handy everyday electronic payment tool. The "2009 China Pre-paid Cards Industry Report" released during the first Prepaid Card Forum held in Mainland China in June 2010stated that, as at the end of 2009, the monetary amount of prepaid cards used in the country reached RMB 1,092.5 billion and number of transactions topped 1.75 billion, involving approximately RMB 39.7 billion in capital.

Mr. Cheung Wai, Chairmanand Executive Director of SYSCAN Technology, said, "The 2D barcode technology developed by SYSCAN Technology can be used as an effective identification device for electronic payment as it can transfer and record data effectively, reliably and safely.The acquisition marries the Group's 2D barcode technology with Country Praise's prepaid card business network to generate strong synergies. In particular, Country Praise's prepaid cards are mainly used for the payment of consumer goods and services.With the increasing consumption power from the mainland Chinese under the thriving economy, the Group will capitalize on the enormous opportunities that the electronic payment service sector and domestic consumption market offer in a bid to take itsbusiness to new heights."

Joining of Financial and Banking Experts

Upon completion of the acquisition, the Group will appoint Mr. Guan Gui Sen and Dr. Lei Chun Xiong as Executive Directors. Both graduated from the Graduate School of the People's Bank of China. Mr. Guan is the Chairman of Shangyin and a Director of China Union Loyalty, and was formerly a Director of China Union Pay Data Services Co., Ltd. He has over 20 years of experience in finance, property development and investment inMainland China. Dr. Lei has over 20 years of experience in the banking and electronic payment sectors. He was one of the founders of China Unionpay and currently a member of senior management of China Unionpay and Director of its subsidiaries. Dr. Lei's doctoral supervisor was Mr. Liu Hong Ru, known as "The Father of Securities in China" and the first Chairman of China Securities Regulator Commission.

Mr. Cheung Wai, added, "I am delighted that Mr. Guan Gui Sen and Dr. Lei Chun Xiong will join the Board of Directors of SYSCAN Technology. I hope that their expertise, depth of experience and extensive interpersonal connections in Mainland China's financial institutions and electronic payment sectors will boost the penetration of the Group's prepaid card business in the country, broaden applications of the cards and ultimately bring greater income and profit contributions to the Group."

The Group will hold a special general meeting on 10 February 2011 in relation to aforementionedSale and Purchase Agreement and Placing Agreement.

About SYSCAN Technology

Established in 1996, SYSCAN Technology Holdings Limited is a leading 2D barcode technology, product and solutions provider in China. The Group is dedicated to developing barcode and laser reader equipment in different fields of business. It has adopted 2D barcode technology in bank card, ID card identification device, as well as sourcing and tracking system for food and medical products. Please visit

Source: SYSCAN Technology


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