SOURCE: The Hartcourt Companies, Inc.
Jul 10, 2007 05:27 ET
Hartcourt Announces Signing Memorandum of Understanding to Acquire 100% Equity Interests in Chongqing Zhengda Education Group and Chongqing Zhengda Hengling Co., Ltd
SHANGHAI, CHINA--(Marketwire - July 10, 2007) - The Hartcourt Companies, Inc. (OTCBB: HRCT) (FRANKFURT: 900009) today announced that it ("the Company") has entered into a Memorandum of Understanding ("MOU") with Chongqing Zhengda Software Group Co., Ltd ("ZDSG") to acquire a 100% equity interests in its two subsidiaries: Chongqing Zhengda Education Group ("ZDEG") and Chongqing Zhengda Hengling Co., Ltd ("ZDHL").
The proposed consideration to be paid by the Company for the acquisition is about 415 million restricted shares of our common stock. ZDSG has agreed to guarantee the total profit after tax of ZDEG and ZDHL of not less than RMB 25 million (US$ 3.29 million), RMB 35 million (US$ 4.6 million) and RMB 50 million (US$ 6.58 million) each year for the three years following closing (2007-2009). The Company and ZDSG agreed that the above-mentioned restricted shares shall be released to the vendors in three equal installments in three years on the condition of the above mentioned profits realized accordingly.
As a part of the deal, the Company also agreed to raise US$4 million cash to finance the expansion plan of ZDEG and ZDHL as well as the equity buyout from their minority shareholders. Several Asia based institutional investors have signed term sheets, with a view to providing such funds as equity investors of the Company, subject to the final completion of the acquisition deal.
ZDEG is the sponsor of Chongqing Zhengda Software Polytechnic College (CZSPC), which has over 7,000 students in campus and ZDHL is a software outsourcing service company which uses the talents (faculties and students) of CZSPC to provide software outsourcing services to multinationals in China and internationally. After the completion of the acquisition, ZDSG will become the controlling shareholder of the Company with at least 50% equity interests in the Company.
Victor Zhou, CEO of the Company, commented, "The acquisition is part of ongoing strategy to build up the operating assets of the Company in vocational education business. I believe the merger and acquisition will considerably change the Company both in business and its earnings in coming years. Given the size and substantiality of the deal, we have sent a big due diligence team to Chongqing and started to prepare a proxy statement, which will be sent out to fellow shareholders."
"With the solid and substantial cash profits to be generated by ZDEG and ZDHL, we believe Hartcourt can provide huge value to current shareholders, but also make it easier to raise more funds to do further acquisitions," added Dr. Yungeng Hu, President and CFO of the Company.
About Hartcourt
Hartcourt's achievements and operations can be found on its web site: www.hartcourt.com
About Chongqing Zhengda Software Polytechnic College
More information can be found on its web site: www.zdsoft.com.cn
About Chongqing Zhengda Software Group
More information can be found on its web site: www.zdsoft.cn
Forward-looking statements
The statements made in this press release, which are not historical facts, contain certain forward-looking statements concerning potential developments affecting the business, prospects, financial condition and other aspects of the company to which this release pertains. Forward-looking statements are identified by words such as "expects," "believes," "anticipates," and words of similar import. The actual results of the specific items described in this release, and the company's operations generally, may differ materially from what is projected in such forward-looking statements. Although such statements are based upon the best judgments of management of the company as of the date of this release, significant deviations in magnitude, timing and other factors may result from business risks and uncertainties including, without limitation, the company's dependence on third parties, general market and economic conditions, technical factors, the availability of outside capital, receipt of revenues and other factors, including those risks identified in the company's filings with the U.S. Securities and Exchange Commission, many of which are beyond the control of the company. The company disclaims any obligation to update information contained in any forward-looking statement.
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