China Digital Communication Group Executes Agreement to Acquire Shenzhen Zhuo Tong

February 15, 2006 by Jeff Shepard

China Digital Communication Group, one of the fastest-growing battery components manufacturers in China, has agreed to acquire UPE (Far East) Limited, which operates through its wholly owned subsidiary company, Shenzhen Zhuo Tong Power Supply Industry Co., Ltd.

Zhuo Tong is one of the leading power suppliers to the domestic market (China) and is a pioneer of third generation (3G) power supply technologies and equipment. In 2005, Zhuo Tong had unaudited revenues of $5.4 million, and unaudited net income of $1.85 million. The purchase is subject to various conditions, including the completion of an audit of Zhuo Tong's financial statements, the completion of financial due diligence on UPE and Zhuo Tong by China Digital and the receipt of customary consents, approvals and opinions.

China Digital will acquire 100% of UPE in an all-stock transaction valued at about $11.1 million. China Digital will issue 18.5 million shares to the shareholders of UPE in exchange for all the shares UPE. The shareholders of UPE will own about 25% of China Digital.

Changchun Zheng, chief executive officer and chairman of China Digital, said, "The acquisition of Zhuo Tong is a pivotal step in transforming China Digital from a mobile phone components manufacturer into a 3G technology and equipment system provider. Zhuo Tong leads the 3G power supply market in China with an impressive customer base and technological intellectual property, and will be immediately accretive to our earnings. The combination of Zhuo Tong and our battery shell manufacturing subsidiary, Shenzhen E'Jenie, provides a synergistic platform to drive aggressive future growth."

Zhuo Tong provides power supply technology and equipment to China's "Big Four" — China Mobile, China Unicom, China Telecom, and China Netcom. Zhuo Tong serves large-scale commercial and industrial telecommunication operators; electrical power supply system providers, electricity utilities and other ancillary service providers. Zhuo Tong is ISO9001 quality control certified; holds a license for producing telecommunication equipment and components in China; and is a member of the Chinese Power Source Academic Society.

Shenzhen Zhuo Tong partners include Germany Phoenix Electric Co. and American Luminous Network Co. Shenzhen Zhuo Tong's major customers are communication equipment producers for the information technology, power, and radio and television broadcast industries. About China Digital Communication Group

China Digital Communication Group, through its Shenzhen E'Jenie subsidiary, is a rapidly growing manufacturer of battery shells and related technology for use in electronic products, primarily mobile phones. Since December 2003, the Company has adopted the approach of using licenses, joint ventures, mergers and acquisitions to bring battery and telecom equipment makers in China to markets overseas. The company's products power digital cameras, camera phones, personal digital assitants and laptop computers in East Asia and beyond.