Combined entity to capitalize on rapid growth in China manufacturing
Hong Kong and Atlanta September 5, 2003 Enterprise software provider Ross Systems Inc. and integrated enterprise solution and software company CDC Software Holdings Inc, a wholly owned subsidiary of chinadotcom corp., announced today they have signed a definitive agreement whereby CDC Software will acquire Ross Systems in a merger valued at approximately US$68.9 million.
Under the terms of the merger agreement, stockholders of Ross Systems will receive $5.00 in cash and $14.00 worth of chinadotcom common shares for each share of Ross Systems common stock. chinadotcom shares will be valued at the higher of $8.50 per share or the average closing price of chinadotcom stock (not to exceed $10.50 per share) for the 10 trading days preceding the second trading day before the closing date, subject to certain exceptions.
It is expected that chinadotcom's total shares outstanding would undergo dilution ranging between 3.9 and 5.0 percent, assuming a combined use of newly issued and treasury shares, upon completion of the transaction.
Following the merger, Ross Systems said it would operate under chinadotcom's CDC Software unit.
chinadotcom said it believes the acquisition of Ross Systems, a profitable company with solid margins and recurring revenue streams, represents an attractive and earnings-accretive transaction. Ross Systems expects its results for the fiscal year ended June 30, 2003 will reflect revenues of US$48.1 million, an operating profit of US$4.8 million and a net profit of US$4.1 million.
Ross Systems, with a presence in the United States and Europe and 25 distributors worldwide, has a customer base of over 1,000 companies implementing its enterprise business solution, iRenaissance suite. The company said the suite is designed for process manufacturing that requires an application development environment.
"As China becomes an increasingly important manufacturing base for multinationals and domestic exporters since its accession into the [World Trade Organization], the combination of Ross Systems and CDC Software is a timely and exciting development for both companies," said Peter Yip, CEO of chinadotcom corp. "Ross Systems' vertical strength in process manufacturing and its enterprise solutions will allow us to provide effective software solutions in the fast growing manufacturing export space as well as broaden our software product offerings in the ERP (enterprise resource planning) and SCM (supply chain management) market sectors."
In addition, CDC Software has been a master distributor of Ross Systems' iRenaissance suite in the Greater China region. "Ross Systems is expected to achieve certain cost savings by outsourcing to our low cost software development center in Shanghai and developing synergies in various aspects including cross selling within the chinadotcom group of companies," Yip continued.
chinadotcom's CDC Software unit currently operates a CMM (Capability Maturity Model) Level 3 certified software development center in Shanghai, which offers its software development capabilities as an outsourcing conduit for low-cost, high-quality software development for internationally established software companies. It offers software solutions, both developed in-house and supplied by global vendors, to multinational and domestic customers located in China. Select customers include ACNeilsen, Hangzhou Bayer (formerly Aventis), Microsoft (China) Co. Ltd., Polyma Tech (Shanghai) Co., Ltd., Carrefour, Shenzhen Airlines, Legend Computer and Swire Beverages.
Through this merger, Ross Systems said it expects to have access to additional capital to pursue opportunities in the ERP and SCM markets, as well as the additional technical and distribution resources of CDC Software and other companies in the chinadotcom group in mainland China and internationally to expand on its strong position in providing integrated enterprise solutions to mid-tier manufacturers worldwide.
The Board of Directors of Ross Systems unanimously approved the merger, according to the company. Additionally, certain stockholders and officers of Ross Systems holding approximately 23 percent of the outstanding shares of Ross Systems common stock (after the conversion of preferred stock held by a Ross Systems stockholder) have agreed to vote their shares in favor of the transaction.
The transaction is expected to close no later than the first quarter of calendar year 2004 subject to approval by Ross Systems' stockholders, certain regulatory approvals and customary closing conditions. The financial impact on chinadotcom's earnings will be determined based on the timing of the closing of the transaction. Ross Systems and chinadotcom have agreed to use their reasonable best efforts to determine whether the stock exchange portion of the transaction can be tax free to Ross Systems stockholders, but there can be no assurance that such treatment can be obtained.