TIDMGMC
RNS Number : 2953D
Global Market Group Ltd
27 March 2014
Global Market Group Limited
("Global Market", the "Company" or "GMC")
Strategic Investment
Global Market Group Limited ("Global Market" or the "Company")
(AIM: GMC), the AIM quoted business-to-business ("B2B") e-commerce
service provider, is pleased to announce that it has entered into
an agreement (the "Agreement") with Guangzhou Daily Newspaper
Business Co., Limited ("Guangzhou Daily"), under which Guangzhou
Daily will acquire an initial 10.5% equity interest in Guangzhou
Longfei Software Technology Co., ("Guangzhou Longfei") a
wholly-owned subsidiary of GMC in the PRC. Guangzhou Longfei was
established by GMC in November 2012 to operate FeiFei, an online
consumer retail extension of GMC's core B2B operations which GMC
originally announced in February 2013 as the M2C China Project.
FeiFei has been undergoing successful market trials since
November 2013. Guangzhou Daily will invest RMB40 million in cash
(approximately US$6.5 million) into Guangzhou Longfei in
consideration for the equity holding. In addition to its monetary
investment Guangzhou Daily will also provide marketing and
advertising resources valued at a further RMB40 million for the
promotion of FeiFei. The Agreement also dictates that GMC will make
a RMB40 million cash investment into Guangzhou Longfei. This is a
strategic investment, and the new investment funds of RMB80 million
and RMB40 million in advertising resources will be used for the
further development and marketing of FeiFei. Guangzhou Daily is a
wholly-owned subsidiary of China's largest newspaper and online
media group Guangdong Guangzhou Daily Media Co., Ltd ("Guangzhou
Daily Group").
The Agreement includes an upward and downward price adjustment
mechanism linked to Guangzhou Longfei's sales in the period from 1
April 2014 to 31 March 2015 (the "Performance Period"). On the
basis of the cash consideration alone, the investment by Guangzhou
Daily has been undertaken at a pre-money valuation of Guangzhou
Longfei of RMB300million. On completion this will equate to
Guangzhou Daily having a 10.5% interest in the enlarged share
capital of Guangzhou Longfei. Should sales in the Performance
Period be below RMB 100 million the valuation will be adjusted
downwards by a ratio of 2 RMB for every 1 RMB of sales, to a
minimum valuation of RMB 200 million which would equate to 14.3% of
Guangzhou Longfei's equity. Should Guangzhou Longfei's sales exceed
RMB 200 million, an upward adjustment of the valuation will be made
applying the same ratio up to RMB 400 million which would equate to
Guangzhou Daily's interest in Guangzhou Longfei being 8.3%.
The advertising and marketing resources will comprise, but not
be restricted to, advertising space across Guangzhou Daily's wide
range of print and online publications.
GMC established FeiFei as a natural extension of its core B2B
business, www.globalmarket.com, which is an online platform linking
quality-audited Chinese manufacturers, now numbering more than
30,000, with international buyers across a range of sectors. Using
resources already developed and proven from the operations of the
core business, FeiFei represents a logical next step to provide
retail consumers with direct-ordering access to items produced by
the manufacturers, using a separate portal, www.feifei.com.
Initially, FeiFei is only focused on selling household goods, a
sector which easily lends itself to online sales and a vertical
that GMC has serviced from the beginning with its core B2B
business. Also initially, at least, all promotion of FeiFei will
remain focussed on Guangdong, the home province of both GMC and the
Guangzhou Daily.
Since its soft launch during the final quarter of 2013, FeiFei
has managed to attract good quality manufacturers offering a range
of stock keeping units that include home appliances, kitchenware,
furniture, home decoration products, home textiles and personal
care items.
The business model established by GMC for FeiFei means that
manufacturers will bear all of the costs occurred ahead of sales to
consumers, including product shipping to and storage in warehouses
maintained by FeiFei, logistics and the creation of promotional
material used on www.feifei.com. At the same time, the costs of
sales fulfilment, shipping to buyers and charges associated with
online sales will be passed on to consumers. FeiFei will be
responsible for managing the supply chain, product quality testing,
developing the platform, promotional marketing for the portal, and
after-sales services, for which it will charge a service commission
based on the retail selling price.
To date, GMC has invested around US$5 million in development and
promotional funding, and FeiFei has established an operating and
sales team of around 100 people, headed by Simon Chuen. Mr Chuen
joined FeiFei in May 2013 with strong commercial, marketing, and
supply chain experience gained over more than 30 years in the
retail and FMCG sectors in Greater China.
The Agreement also includes the appointment of a new director to
the board of Guangzhou Longfei as nominated by Guangzhou Daily. As
a result, Ms Wenhua Zhao, who is a Board Director and General
Manager of Guangzhou Daily, has been appointed with immediate
effect. Ms Wenhua Zhao holds a PhD in management.
Ms Zhao said: "It's great for Guangzhou Daily to become a
strategic partner of Global Market Group by investing in FeiFei,
which we believe is a unique M2C business. As a large media
organisation in China, Guangzhou Daily plans to use its media
resources to spread awareness of FeiFei among consumers in
China."
Recognising the position of Guangdong as China's number one
province for consumer spending, GMC intends to establish solid
supplier and consumer bases for FeiFei there before expanding more
widely across China. The Company anticipates that by focussing
initially on its home province in this way, it will gain valuable
early experience of operating costs, logistical controls and
consumer behaviour, among other key elements, before using that
solid base as a platform for geographic expansion and the
introduction of a wider range of product lines. GMC also
anticipates that the growth and success of FeiFei will bring
positive benefits to its core B2B/M2B business by attracting
quality manufacturers.
Guangzhou Daily Group is listed on the Shenzhen Stock Exchange
with a current market capitalisation of RMB 11.68 billion
(approximately US$1.9 billion). Guangzhou Daily Group's stable of
more than 15 newspapers and magazines includes one of the largest
and most commercially successful in China, Guangzhou Daily.
Alongside its media interests, Guangzhou Daily Group is also
engaged in advertising and marketing activities across Southern
China and more widely, including ownership of advertising agencies,
advertising production and design businesses, and audio-visual
production. Guangzhou Daily Group also owns a leading Chinese media
portal, www.dayoo.com, and has holdings in the hotel and leisure
industries, among other interests.
GMC Chairman and Chief Executive Officer David Ling said: "We
are delighted to have agreed this new investment with such a
well-positioned nationwide media group, and look forward to the
strengthened development of FeiFei. The arrival of Guangzhou Daily
creates powerful marketing and advertising synergies we believe
will enable us to establish a new revenue stream and accelerate
long-term organic growth as a natural extension of our core
business activities."
GMC anticipates announcing its financial results for the year to
31 December 2013 during May 2014.
About Global Market Group Limited
Global Market generates revenues by operating the online portal
www.globalmarket.com that connects high-quality manufacturers in
China with buyers from all over the world. GMC Manufacturers listed
on the portal with "GMC" logoundergo independent quality audits
conducted by Germany's respected TUV Rhineland group ("TUV") to
gain Global Manufacturer Certificate (or "GMC") certification,
assuring international buyers they have met demanding and
independently-assessed certification standards, thus reducing risk,
building trust, and providing a convenient and inexpensive route
for manufacturers to access an international buying audience.
Manufacturers pay to use the web portal, and international buyers
are offered free access.
Mr Simon Chuen has been appointed as Chairman of Guangzhou
Longfei. Mr Chuen was previously Chief Executive Officer at
Wellcome Taiwan, a leading supermarket chain in Taiwan under Dairy
Farm Group. Dairy Farm Group is a Pan-Asian retailer. Dairy Farm
Group operates supermarkets, hypermarkets, health and beauty
stores, convenience stores, home furnishings stores and restaurants
under well-known local brands. Dairy Farm is a member of the
Jardine Matheson Group. He has also been Country President at The
Home Depot China and Executive Vice President at B&Q China, and
worked for Wal-Mart China as the Senior Merchandise Director for
over nine years, helping Wal-Mart to set up its retail operations
in China.
For further information, please visit www.globalmarket.com or
contact:
David Ling/ Cheandy Hu/ Mophy Fan Global Market Group Limited:
+86 (20) 8600 2299
Philip Secrett/ Maureen Tai/ Jen Clarke Grant Thornton UK LLP,
Nominated Adviser: +44 (0)20 7383 5100
Richard Baty/ Paul Gillam Westhouse Securities Limited, Broker:
+44 (0)20 7601 6100
Allan Piper/ Jiang Lei First City Public Relations: +852 2854
2666
This information is provided by RNS
The company news service from the London Stock Exchange
END
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