Entertainment group Galleon Holdings is paying up to £8 million for fast-growing specialist Chinese media concern Yunbo.

AIM-quoted Galleon is paying an initial £1.5 million cash to acquire Yunbo, a wireless short-messaging service (SMS) and multi-media messaging service provider, which holds nationwide SMS billing codes for major groups China Mobile and China Unicom and earned £470,000 last year. The British company, which lost £392,000 on £4.5 million turnover in the year to September, is to pay another £500,000 cash in May and a further sum in shares equivalent to between four and seven times Yunbo’s 2008 earnings above £1.5 million, up to a maximum shares and cash payment of £8 million.

Galleon’s chief executive Stephen Green explains the deal is aimed to spearhead the London-based company’s drive into China’s interactive mobile entertainment market. He says it flows directly from October’s £1.5-to-£2 million paper purchase of Hong Kong-based Phoenix Investment Global, which he calls the ‘quasi gatekeeper’ to key Chinese media concerns such as Hunan ETV.

‘The Phoenix guys have been teeing this one up for us’, says Green, who claims the projected multiple represents a significant discount to similar sector deals. He points out that mobile service providers in China hold on to clients’ payments for 90 days or more and charge 15 to 20 per cent of billings.

Yunbo is expanding into selling content, such as dating game shows, to mobile phone users and one of the two vendors of Yunbo, Lushy Assets Ltd, has a licence to operate in every Chinese province. Green says Phoenix also has a ‘cash-generative and profitable’ deal with TV3, Malaysia’s largest TV station and is working on co-production deals elsewhere in the region.

Floated at a mere 1p in 2001, Galleon’s shares hit 34.75p last October and now trade at 28p, up 0.25p today, valuing the company at £28 million. If these Chinese deals live up to expectations, they could make further progress, stockmarket conditions permitting.

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Galleon Holdings	AIM	£17.05m	15.50p	0.00p
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