China 3C Group Acquires Logistics Firm

Chinese consumer electronics distributor China 3C Group has signed a definitive agreement to acquire 100% of Jinhua Baofa Logistic Ltd., a logistic company in eastern China, through its subsidiaries Zhejiang Yong Xin Digital Technology Co., Ltd. and Yiwu Yong Xin Communication.

The total amount of consideration payable for this transaction is CNY120 million, with consideration to be paid all in cash. The company expects to complete the transaction by March 31, 2009.

Zhenggang Wang, CEO of China 3C Group, stated, "We are extremely excited about the acquisition of Jinhua and believe this acquisition can increase the competitiveness of China 3C group within the existing regions we conduct business and potentially beyond. China 3C's logistical network will be more complete through the combination of Jinhua's transportation network with China 3C's existing distribution network. The addition of Jinhua can result in faster, safer and more reliable logistic services as well as provide China 3C with annual logistic expense savings. While Jinhua has a strong presence in Eastern China, we also believe that it can assist 3C in developing a logistics platform that can allow us to expand into other major geographic regions in China. We are pleased to acquire a business with gross margins that are roughly double that of our current operations and believe that Jinhua can add at least USD10 million in revenue and USD2 million in net income to our business annually going forward."

Jinhua Baofa Logistic Ltd, founded in 2001, is a transportation logistics company in eastern China and has been a long time transportation provider for China 3C Group. Jinhua has been in operation since 2001 and employs approximately 350 people. Jinhua has around 280 customers and operates a fleet of more than 70 trucks and transports freight including electronics, machinery, equipment, metal products, chemical material, garments and handicraft goods, in more than 20 cities in Eastern China. Its transportation service covers many of the most developed cities in the eastern China region such as Shanghai, Hangzhou and Nanjing. Hongfei Guo, CEO of Jinhua, will continue to manage the business following the closing of this acquisition.

For the nine months ended September 30, 2008, Jinhua had sales of CNY54.2 million, net income of CNY11.7 million and gross margin of 32.2%. In 2007, Jinhua had revenue of approximately CNY19.7 million, net income of approximately CNY2.1 million, and gross margin of 28.4%. This acquisition is expected to be useful immediately upon closing.

China 3C is a leading wholesale distributor and retailer of 3C merchandise: computers, communication products and consumer electronics.

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