GEOSENTRIC OYJ STOCK EXCHANGE RELEASE January 11th, 2011 at 9.00
GEOSENTRIC DIVESTS ITS TWIG MOBILE HANDSET BUSINESS THROUGH MBO AND NOMINATES WINSTON GUILLORY AS COMPANY’S MANAGING DIRECTOR
As announced by GeoSentric Oyj (“GeoSentric” or “Company”) on June 30, 2010, the Company’s Annual General Meeting held on June 30, 2010 authorized the Board of Directors to commence negotiations for divesting the Company’s mobile handset businessin order that the group can focus its resources on its GyPSii mobile social networking business. The TWIG business has been loss making and cash flow negative for at least the last 18 months and the investment required to improve its performance would be substantial. The Company has concluded that this potential investment is not the best use of its resources and that the TWIG business is better off outside of the GeoSentric group in the hands of its specialist management team.
The Company has reviewed a number of alternatives to get the best available deal terms. Due to the niche positioning of the TWIG business, interest from external purchasers has been limited. The Company has therefore negotiated the divestiture of the TWIG business with the current TWIG management team, and has now concluded an agreement on the terms and conditions of the purchase. The actual purchaser will be a newly established company, Twig Com Oy, majority held by the MBO team (“Twig Com”).
The parties have agreed that the purchase price is a nominal EUR 1.00. However, as a part of the consideration and an integral part of the transaction, Twig Com assumes all liabilities and obligations with regards to the transferring business, including in relation to its employees and assets. Together with the liabilities that Twig Com assumes, the book value of the transaction for GeoSentric is approximately 0.3M€, being the net book value of transferred assets and liabilities.
Accordingly, the parties have on 10th January 2011 signed a business purchase agreement for the sale and purchase of TWIG mobile handset business on the following main terms:
· The purchase transaction is for a nominal consideration of EUR 1.00, is effective as of 31 December 2010 and comprises of all TWIG mobile handset related inventories, fixed assets, manufacturing rights, trademarks, agreements and employees
· The net book value of the TWIG inventory being transferred is approximately EUR 225,000
· All relevant GeoSentric IPR’s and third party IPR’s are licensed royalty free in perpetuity to Twig Com to enable continued production and support of the TWIG products
· Twig Com has assumed all GeoSentric’s liabilities, obligations and other responsibilities related to the TWIG mobile handset business including all product warranty responsibilities
· 14 TWIG employees are transferring their employment from GeoSentric to Twig Com including the MBO leadership team of Jukka Nieminen, Tomi Raita and Jouko Laine
· Twig Com has assumed all TWIG trade payables and receivables as of 31 December 2010 and has taken over the TWIG factory and office lease
The TWIG divestiture will have significant impact on the Company’s financial performance in the short term as the TWIG business has been the main revenue generating business of the Company. It is estimated that the revenue for the FY2011 will be significantly lower than in the previous year, however, the cash flow effect is estimated to be approximately €1m positive for the FY2011.
Going forward, GeoSentric will continue implementing its GyPSii driven strategy and solely focus on the GyPSii product line and offerings to monetize business opportunities especially in China. The Company has continued to drive positive growth in its user numbers in China and is now starting to generate revenue growth from mobile advertising to these users in China. It expects these positive trends to continue throughout 2011 with revenue growth coming from mobile advertising and from its new eLingdi “check in” client.
In pursuance of the signing of the business purchase agreement Mr. Tomi Raita has resigned from the position of the Company’s Managing Director, and the Board of Directors has nominated board member Winston Guillory as GeoSentric’s new Managing Director.
Before becoming board member and group CEO of GeoSentric, Winston was NAVTEQ's Senior Vice President of Consumer and Enterprise Sales and led companies in the Americas and EMEA. Prior to joining NAVTEQ, as Senior Vice President for the Intermec Global Sales organization, Winston led a 300 person sales team. His deep industry and product knowledge stems from over 20 years of sales leadership experience in the technology arena.
GeoSentric Oyj
For more information, please contact: investors@gypsii.com
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