Boston, MA 05/19/2014 (wallstreetpr) – Charm Communications Inc. (ADR) (NASDAQ: CHRM) is surging in early trading session after announcing it had entered into a merger agreement with Engadin Parent Limited. Under the terms of the agreement, Parent will acquire Charm Communications for $4.70 in cash per each depositary share or $2.35 per Class A ordinary share and $2.35 per class B ordinary share.
Terms of the Merger
Engadin purchase price represents a 14.3% premium over Charm Communications Inc. (ADR) (NASDAQ: CHRM)’s 30 day average price of $4.11 per ADS. Full closure of the transaction will see Parent being officially owned by He Dang. Charm board of directors has already voted unanimously on the merger agreement and is consequently asking the company’s shareholders to, unanimously vote in favor of the merger.
The merger agreement is expected to fully close before the end of the third quarter awaiting majority shareholder approval and customary closing conditions. For the transaction to go through, it will need two thirds approval from Charm Communications Inc. (ADR) (NASDAQ: CHRM)’s shareholders. When completed, Charm Communications will become a privately owned company with its ADS’s consequently being delisted from NASDAQ global market.
A special committee had been appointed to analyze the transaction before the company’s board of directors made its final verdict. The special committee was made of independent directors unrelated to Parent, or any of the management members. The merger transaction comes amidst ongoing reposition efforts aimed at strategically positioning the company in line with other industry players.
Turnover up on Increased Advertising Clients
Charm Communication’s total turnover for the fourth quarter was up by 25.7% mainly as a result of an increase in the number of advertising clients as well as increased spending from current advertising clients especially on non-CCTV media platforms. Revenue extraction rate, on the other hand, surged to 8% from 7.4% due to an increase in CCTV rebate rate in 2013 compared to 2012.
Selling and marketing expenses increased by 11.4% on a quarter over quarter primarily as a result of an increase in marketing events and an increase in business travel. Charm Communications Inc. (ADR) (NASDAQ: CHRM) closed the fourth quarter with net cash flow from operations of $27.6 million. The company has noted a number of loss making projects that are to be eliminated in the subsequent quarters.
