China’s
Emerging TV Advertising Network
November
2008
Filed
by China
Networks International Holdings Ltd.
Pursuant
to Rule 425
under the Securities Act of 1933
and
Deemed Filed Pursuant to Rule 14a-12 under the
Securities Act of 1934
Securities Act of 1934
Subject
Company: Alyst
Acquisition Corp.
SEC
File No.
001-33563
2
The
information contained in this
presentation is intended solely for the benefit of investors interested in
the
proposed acquisition of China Networks Media Ltd. (China Networks) by Alyst Acquisition Corp. (Alyst).
Except where otherwise indicated, the information in this presentation has been provided solely by China
Networks and Chardan Capital Markets.
proposed acquisition of China Networks Media Ltd. (China Networks) by Alyst Acquisition Corp. (Alyst).
Except where otherwise indicated, the information in this presentation has been provided solely by China
Networks and Chardan Capital Markets.
Alyst,
China
Networks and China Networks
International Holdings (CN International), and their respective
directors and executive officers, and Chardan Capital Markets and its partners and directorsmay be
deemed to be participants in the solicitation of proxies for the special meeting of Alyst stockholders to be
held to approve, among other things, the proposed business combination with China Networks. In
connection with the pending transaction, CN International will also file with the SEC a Registration
Statement on Form S-4. The stockholders of Alyst are urged to read the Registration Statement and the
preliminary proxy statement/prospectus, and the definitive proxy statement/prospectus when they are
available, as well as all other relevant documents filed or to be filed with the SEC, because they will contain
important information about China Networks, Alyst, and the proposed transaction. The final proxy
statement/prospectus will be mailed to stockholders of Alyst after the Registration Statement is declared
effective by the SEC. Stockholders will be able to obtain a copy of the definitive proxy
statement/prospectus and any other relevant filed documents at no charge from the U.S. Securities and
Exchange Commission’s website (www.sec.gov). These documents will also be available from Alyst at no
charge, once filed with the SEC, by directing a request to 233 East 69th Street, #6J, New York, NY 10021.
directors and executive officers, and Chardan Capital Markets and its partners and directorsmay be
deemed to be participants in the solicitation of proxies for the special meeting of Alyst stockholders to be
held to approve, among other things, the proposed business combination with China Networks. In
connection with the pending transaction, CN International will also file with the SEC a Registration
Statement on Form S-4. The stockholders of Alyst are urged to read the Registration Statement and the
preliminary proxy statement/prospectus, and the definitive proxy statement/prospectus when they are
available, as well as all other relevant documents filed or to be filed with the SEC, because they will contain
important information about China Networks, Alyst, and the proposed transaction. The final proxy
statement/prospectus will be mailed to stockholders of Alyst after the Registration Statement is declared
effective by the SEC. Stockholders will be able to obtain a copy of the definitive proxy
statement/prospectus and any other relevant filed documents at no charge from the U.S. Securities and
Exchange Commission’s website (www.sec.gov). These documents will also be available from Alyst at no
charge, once filed with the SEC, by directing a request to 233 East 69th Street, #6J, New York, NY 10021.
This
presentation contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are based on current expectations or
beliefs, including, but not limited to, statements concerning the company's operations and financial
performance and condition. For this purpose, statements that are not statements of historical fact may be
deemed to be forward-looking statements. The company cautions that these statements by their nature
involve risks and uncertainties, and actual results may differ materially depending on a variety of important
factors beyond the control of Alyst and China Networks.
Litigation Reform Act of 1995. These forward-looking statements are based on current expectations or
beliefs, including, but not limited to, statements concerning the company's operations and financial
performance and condition. For this purpose, statements that are not statements of historical fact may be
deemed to be forward-looking statements. The company cautions that these statements by their nature
involve risks and uncertainties, and actual results may differ materially depending on a variety of important
factors beyond the control of Alyst and China Networks.
Important
Notice
3
Who
We
Are
China
Networks is
a fast-growing TV
advertising network in China
advertising network in China
China
Networks
operates as the
exclusive advertising arm for TV
stations within its network
exclusive advertising arm for TV
stations within its network
4
The
Company
China
Networks
Founded
in October 2007
63
employees
Consolidated
stations as of November 2008:
I.
50%
of Yellow River
TV Station
II.
50%
of Kunming TV
Station
Audited
2007
Revenue
(100%
consolidation)
consolidation)
Net
Income
(50%
consolidation)
consolidation)
Audience
Coverage
(population)
Number
of
TV Channels
TV Channels
Programming
Hours per Day
Hours per Day
ARPA*
Yellow
River
$5.3mm
$1.7
mm
30
mm
1
20
$0.18
Kunming
$15.4mm
$5.0
mm
6.2
mm
6
130
$2.48
TOTAL
$20.7
mm
$6.7
mm
36.2
mm
7
150
NA
Source:
Yellow River and Kunming
Stations
*
Average revenue per audience
coverage
5
Growth Strategy
1.
Improve
core profitability – Organic Growth
Increase
revenue ~20+% per annum
through: ad sales effectiveness, network leveraged pricing, assisting the
TV
stations on improving their programming acquisition strategy
stations on improving their programming acquisition strategy
Reduce
costs of ad delivery through
storage/transmission technologies and economies of scale, holding net
margins at 68 – 70%
margins at 68 – 70%
2.
Extend
offering in network – Organic Growth
Expand
full-service offering to
include media planning and creative services
Leverage
buying power by advising
network stations on their programming acquisition
Develop
new channel offerings in
partnership with partners, e.g. Home Shopping
3.
Expand
network – M&A Growth
Acquire
additional TV advertising
network stakes: pipeline of >10 deals already prioritized from field of
>350
potential broadcaster partners
potential broadcaster partners
Opportunity
to build affiliate
network with agency deals to sell partial ad inventory
Revenue
100%
consolidation
EBITDA
50%
consolidation
consolidation
Net
Income
50%
consolidation
consolidation
ARPA
Audience
coverage
coverage
(population)
No.
of
Channels
Channels
Company
A
$7.5
mm
$3.0
mm
$3.0
mm
$0.53
10
mm
4
Profile
of
TypicalAdd-on
Acquisition
6
The
Company
Current
Network:
Kunming
TV
Yellow
River
ARPA:
$2.48
Channels:
6 TV
Coverage:
6.2 mm
2007
Revenue: $15.4
mm*
2007
Net Income:
$5.0 mm*
Near-term
Potential Add-on Acquisitions:
ARPA
range: $0.53 to
$9.5 each
Coverage
range: 2 mm
– 10 mm each
Revenue
range: $5 mm
- $17 mm each*
Net
Income range: $2
mm - $7 mm each*
ARPA:
$0.18
Channels:
1 TV, 1
Radio
Coverage:
30 mm
2007
Revenue: $5.3
mm*
2007
Net Income:
$1.7 mm*
*
Under US GAAP, China Networks
consolidates 100% of all income
statement items less 50% minority interest which reduces net income
by that amount and does not impact the revenue line.
statement items less 50% minority interest which reduces net income
by that amount and does not impact the revenue line.
7
Business
Opportunity
Chinese
TV industry is
decentralized and
highly
fragmented
296
broadcasters operating over
2,983 channels,
reaching 96% of the
population through terrestrial
and cable1
and cable1
National
and Provincial
SARFT2
who own all assets currently are
keen to see performance and
monetization
monetization
Huge
growth in advertising
spending
Advertising
growth set to continue
at 17.33% per annum3
China
will become the 4th
largest advertising economy in the
world in 2010 worth $24bn4
TV
advertising is largest (~40%) and
fastest growing medium in the market4
Deregulation
just beginning
Industry
has been highly regulated
which has limited private investment and virtually precluded
foreign investment to date
foreign investment to date
Deregulation
(in advertising
initially) creates significant opportunities for companies that can improve
the profitability and efficiency of broadcasters
the profitability and efficiency of broadcasters
China
Network’s model builds and
innovates on tested JV models
1
National Statistics Bureau 2006
2
China’s
media regulator: State
Administration for Radio Film & Television
3
China Advertising Industry Forecast Report, 2007-2010
4
Advertising Expenditure
Forecasts, ZenithOptimedia, March 2008
8
China
Advertising Growth
China
Total Annual
Advertising Revenue
Highlights
China
is currently the 5th largest
market in the world in 2008,
projected to become the 4 th by 2010
projected to become the 4 th by 2010
Greatest
growth rates projected in
second and third-tier cities from
2005
2005
Source:
Advertising
Expenditure
Forecasts,
ZenithOptimedia, March 2008
ZenithOptimedia, March 2008
Spend
per Capita
US$
Spend
per GDP
%
2007
China Annual
Advertising Spending
Despite rapid
growth,
Chinese advertising market is still small by
international standards relative to the size of the economy
international standards relative to the size of the economy
China’s
per capita advertising
expenditure was $11.30 compared to
$589.60 in US in 2007
$589.60 in US in 2007
China’s
advertising expenditure only
represented 0.2% of GDP
compared to 1.3% in US in 2007
compared to 1.3% in US in 2007
8,114
9,063
10,586
12,694
15,023
18,867
21,186
24,266
0
5,000
10,000
15,000
20,000
25,000
30,000
2003
2004
2005
2006
2007
2008E
2009E
2010E
(US$
million)
11.3
50.5
198.0
327.0
382.3
589.6
1.3%
1.1%
0.2%
0.5%
0.8%
1.0%
0
250
500
750
1,000
China
Brazil
South
Korea
Japan
United
Kingdom
United
States
0.0%
0.4%
0.8%
1.2%
1.6%
9
China
Advertising Growth
China
Annual Advertising
Spending
US$
Million
Highlights
TV
advertising is the fastest
growing advertising category
growing advertising category
Despite
rapid growth, the
Chinese advertising market
is still small by international
standards
Chinese advertising market
is still small by international
standards
TV
Advertising accounts for
over 39.3% of total market
share of advertising in 2007
over 39.3% of total market
share of advertising in 2007
2nd
and 3rd
tier market
shows large growth potential
shows large growth potential
Target
regions’ ratio of TV
and radio ad income to total
GDP is lower than the
national average
and radio ad income to total
GDP is lower than the
national average
Source:
ZenithOptimedia
Advertising Expenditure Forecasts, March 2008
10
Mr.
Li
Shuangqing: Chairman and CEO
2007
to present, Co-Chaiman and CEO
of China Networks Media Limited
2006
to 2007, Chairman of Shandong
Huashi Media & Technology, a leading Electronic Program Guide provider
in China
in China
2001
to 2006, General Manager of
Huicong Advertising, a leading Chinese internet and TV advertising company
1997
to 2001, Director of
Advertising Department of Qilu TV Station
1980
to 1997, management and TV
production roles with Shandong and Qilu TV Stations
Graduated
from Guanghua School of
Management, Peking University, Executive MBA program
Mr.
Zhou
Chuansheng: VP Sales/Marketing
2007
to present, VP Sales/Marketing
of China Networks Media Limited
2006
to 2007, General Manager of
Shandong Huashi Media & Technology, a leading Electronic Program Guide
provider in China
provider in China
2003
to 2006, General Manager of
Jinan Huamei Media Advertising
2001
to 2003, General Manager of
Zhengzhou Branch of Huamei Media Advertising
CN
Management Team
11
Ms.
Guan
Yong: VP Business Development
2007
to present, VP Business
Development of China Networks Media Limited
2006
to 2007, Director of Greater
China Sales Department, Zhuhai Cosmedia, branch of Hongkong Cosmedia
Holding Ltd., a London AIM listed company, focusing on developing and implementing a multi-platform
advertising and distribution network in mainland China and Hong Kong
Holding Ltd., a London AIM listed company, focusing on developing and implementing a multi-platform
advertising and distribution network in mainland China and Hong Kong
2004
to 2006, Director of
Advertising Department of Economy & Life Channel in Henan TV Station
2000
to 2004, Key Account Manager,
Huicong Advertising
1995
to 2000, Manager of East China
region of Shandong Qilu TV Station Advertising Department
1988
to 1995, Shandong Linyi TV
Station
Mr.
Liu Rui:
Head of Media Planning
2007
to present, Head of Media
Planning of China Networks Media Limited
2006 to
present, Director
of Strategy, at Daqi (www.daqi.com) web 2.0 site
2002
to 2006, Vice President of
Huamei Meidia, subsidiary of Huicong Advertising, specializing in advertising
sales and planning
sales and planning
1998
to 2002, Sichuan Gaoyang
Advertising, media buying and data analysis for SCTV, CDTV & CQTV
1996
to 1998, Institute of Classics,
Sichuan University, engaged in editing classical literature
CN
Management Team
12
Capitalization
Tables
Primary
Share Basis Pre Business
Combination
Fully
Diluted Post Business
Combination
¹
Includes
as-converted preferred
shareholders
²
Upon
cash conversion of all
outstanding warrants less $24,922,100 to be paid to holders of pre-
business combination China Networks capital stock
business combination China Networks capital stock
13
Equity
Earn-out Targets
Owners
of China Networks, on an
all-or-none basis each year, will be issued
shares of common stock upon achieving net income¹ in the following amounts
for each year from 2009 to 2011:²
shares of common stock upon achieving net income¹ in the following amounts
for each year from 2009 to 2011:²
¹Net
Income means the net income of
the China Networks Surviving Corporation and its subsidiaries as determined
in
accordance with U.S. generally accepted accounting principles (“GAAP”), excluding equity-based compensation charges,
extraordinary one-time charges and charges related to the Business Combination or impairment of goodwill.
accordance with U.S. generally accepted accounting principles (“GAAP”), excluding equity-based compensation charges,
extraordinary one-time charges and charges related to the Business Combination or impairment of goodwill.
²Owners
of China Networks will also
receive additional cash consideration of $3 million per annum for achieving
net
income
targets of $15 million and $25 million in years 2009 and 2010, respectively.
targets of $15 million and $25 million in years 2009 and 2010, respectively.
14
Comparable
Analysis
Source:
Capital IQ as of August 14,
2008
$
in millions
15
Takeaway
Points
China’s First TV Advertising Network
China’s First TV Advertising Network
Profitable
established business with significant scale
China
Network’s
initial acquisitions provide a historically stable profit base with a large
platform of
established audiences in each market.
established audiences in each market.
Rapidly
growing market
China’s
advertising
market was already large ($15bn) in 2007 and growing rapidly (17.33% CAGR)
and will become the 4th largest in the world in 2010, with TV advertising consisting of 40% share.1
and will become the 4th largest in the world in 2010, with TV advertising consisting of 40% share.1
Unique
and
advantageous structural position
By
securing
exclusive contracts to provide advertising in multiple territories in
partnership with
SARFT, China Network enters the market with a unique and sustainable competitive advantage, and
a highly scalable business model.
SARFT, China Network enters the market with a unique and sustainable competitive advantage, and
a highly scalable business model.
Strong
growth prospects
In
addition to
expanding the core ad-sales business through operational improvements and
market
development, and growing the network through acquiring stakes in additional territories, China
Network has a rich set of growth options including building an affiliate network of partner-channels
and additional content provision.
development, and growing the network through acquiring stakes in additional territories, China
Network has a rich set of growth options including building an affiliate network of partner-channels
and additional content provision.
Seasoned
management team
China
Network has
attracted a highly-experienced team with solid experience and proven track
record in the TV and advertising industry in China and internationally, as well as established
relationships with national and local governments.
record in the TV and advertising industry in China and internationally, as well as established
relationships with national and local governments.
1
Advertising
Expenditure
Forecasts, ZenithOptimedia, March 2008
16
Appendix
17
December
31,
2007
December
31,
2006
December
31,
2005
USD
USD
USD
Assets
Current
Assets:
-
Cash
$
116,055
$
450,501
$
493,544
Accounts
Receivables,
Net
1,677,703
1,978,314
1,788,481
Receivables
from Television
Stations
1,963,941
-
-
Other
Receivables
17,684
-
-
Total
Current
Assets
3,775,383
2,428,815
2,282,025
TOTAL
ASSETS
$3,775,383
$2,428,815
$2,282,025
Liabilities
and Invested
Equities
Current
Liabilities:
-
Accounts
Payables
-
$
24,257
$
23,691
Accrued
Expenses
410,376
54,147
60,524
Due
to Television
Station
-
27,089
1,165,403
Customer
Deposits
2,584,941
2,071,783
892,332
Total
Liabilities
2,995,317
2,177,276
2,141,950
Total
Equity
780,066
251,539
140,075
TOTAL
LIABILITIES
AND EQUITY
$3,775,383
$
2,428,815
$2,282,025
KUNMING
AND YELLOW RIVER:
COMBINED BALANCE SHEETS
FOR
THE YEARS ENDED DECEMBER
31, 2007, 2006 AND 2005
Audited
Financials
Balance Sheet
Balance Sheet
18
Audited
Financials
Income Statement
Income Statement
Year
ended
December
31,
2007
Year
ended
December
31,
2006
Year
ended
December
31,
2005
USD
USD
USD
Revenue
$
20,684,055
$
16,350,638
$15,528,457
Sales
Tax
(1,696,906)
(
1,199,132)
(
1,122,206)
Cost
of
Revenue
(3,960,725)
(
3,757,422)
(1,925,034)
Gross
Profit
15,026,424
11,394,084
12,481,217
Other
Income
28,802
102,261
10,337
Sales,
General and
Administrative
Expenses
(
1,712,931)
(
1,607,264)
(1
,376,299)
Income
before
Taxes
13,342,295
9,889,081
11
,115,255
Income
Taxes
-
-
-
Net
Income
$
13,342,295
$
9,889,081
$
11,115,255
KUNMING
AND YELLOW RIVER:
COMBINED STATEMENT OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER
31, 2007, 2006 AND 2005
19
(11,115,255)
(9,889,081)
(13,342,295)
Cash
flows
from financing activities:
Distribution
to
Television Stations
11,416,211
9,734,574
12,479,322
Net
cash
provided by operating
activities
activities
Dec
31st
2007
USD
Dec
31st
2006
USD
Dec
31st
2005
USD
Cash
flows
from operating activities:
Net
income
$
13,342,295
$
9,889,081
$
11,115,255
Changes
in
assets and liabilities:
Accounts
receivables,
Net
300,611
(189,833)
(1,743,722)
Receivable
from Television
Station
(1,963,941)
-
-
Other
Receivables
(17,684)
-
-
Accounts
payables
(24,257)
566
690,459
Accrued
expenses
356,229
(6,377)
59,883
Due
to Television
Station
(27,089)
(1,138,314)
751,765
Customer
Deposits
513,158
1,179,451
542,571
Net
cash used
in financing activities
(13,342,295)
(9,889,081)
(11,115,255)
Effect
of
foreign exchange rate
changes
changes
528,527
111,464
140,075
Net
(decrease) /
increase
in
cash
(334,446)
(43,043)
441,031
Cash,
beginning of
period
450,501
493,544
52,513
Cash,
end of
period
$
116,055
$ 450,501
$
493,544
Audited
Financials
Statement of Cash Flows
Statement of Cash Flows
KUNMING
AND YELLOW RIVER:
COMBINED STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER
31, 2007, 2006 AND 2005
20
Kunming
TV
Station
Founded
March 1985
Coverage:
6.2
million population in 5 areas, 8 counties and Kunming itself
Kunming
City TV –
General Channel ranked in the Top 3 audience rating stations in Kunming city
in
2006
6
TV channels:
Terrestrial
and
Cable: General Channel, Movies Channel
Cable
Only:
Entertainment Channel, Living Channel, Economic Channel and News Channel
More
than 130 hours/day of
programming including drama, documentary, news, and entertainment of which
7
hours/day
produced in-house
produced in-house
KMTV
studio
facilities include office space of more than 33,000 square meters,
including
one large broadcast
studio of
1,000 square meters and 9 mid- and small-sized studios
1,000 square meters and 9 mid- and small-sized studios
Advertisers
include:
Proctor
&
Gamble
Samsung
McDonald’s
Corp.
KFC
Audi
Chery
Automotive
Company
Details
Kunming
21
Top
10 TV
Channels by Average Rating in Kunming (4+, whole day,
2006)
Ranking
Channel
Rating(%
Share(%
1
CCTV
General
Channel
2.2
14.9
2
Yunnan
TV
City Channel(TV2)
1.8
12.2
3
Kunming
TV General
Channel
1.5
9.8
4
Kunming
TV Movies
Channel
0.8
5.6
5
CCTV-6
0.8
5.1
6
Yunnan
TV
Movies Channel(TV5)
0.8
5.0
7
CCTV-5
0.6
4.1
8
CCTV-3
0.6
4.0
9
CCTV-8
0.6
4.0
10
Yunnan
TV
Satellite Channel(TV1)
0.4
2.8
Data
Source:
CSM Media Research 2007,
China
TV
Rating Yearbook 2007
Kunming
TV Station
Company
Details
Kunming
Station Ratings
22
China
Yellow River TV
Station
Founded
in July 1991, and has been
broadcasting both domestically and internationally for 16
years
years
1
Domestic TV channel: Yellow River
Minsheng Channel
Coverage:
Shanxi Province, 30
million population
Broadcasting
Time: 20 hours per day,
including 2.5 hours self-produced programs, 17.5 hours
purchased programs
purchased programs
1
Radio Station: Art &
Entertainment Radio
Coverage:
Shanxi Province, 20
million population
2
International Channels: (not for
profit)
SCOLA
Channel: Satellite TV, 24 hour
broadcasting 3 channels
International
Channel: cooperation
with ECHO Star, Chinese language and culture learning channel,
50,000 subscribers
50,000 subscribers
Advertisers
include:
China
Mobile
HPGC
Arche
Company
Detail
Yellow
River
23
Chinese
4
level TV System
Source:
Chinese Media University
Publishing
House, Report on the development of Chinese City
TV station, 2007; Skillnet MI, 2008
House, Report on the development of Chinese City
TV station, 2007; Skillnet MI, 2008
24
TV
Station
Revenue Structure
In
USD
bn
Ad
Revenue
CATV
Subscription
Fee
Fee
Other
Operating
Revenue*
Revenue*
Total
Operating
Revenue
Revenue
Central
Level
1.63
(21.8%)
0.43
0.09
2.15
Provincial
Level
3.56
(47.6%)
0.65
1.74
5.95
City
Level
1.77
(23.7%)
0.49
1.02
3.28
Country
Level
0.52
(6.95%)
0.97
0.36
1.85
Total
7.48
2.54
3.2
13.22
*Other
operating revenue:
such as events sponsoring
such as events sponsoring
Source:
SARFT statistic 2007,
Skillnet MI, 2008
25
Contact
Alyst
Acquisition
Corp.
Chardan
Capital
Markets, LLC
Address:
233 East 69th
Street
#6J
New
York, NY 10021
Contact
Person:
Michael E. Weksel
Tel: 1
646 290 6104
Fax: 1
212 918 1598
E-mail: mweksel@alyst.net
Address:
17 State Street · Suite 1600
New
York, NY 10004
Contact
Person:
George Kaufman
Tel: 1
646 465 9015
Fax: 1
646 465 9039
E-mail: gkaufman@chardancapitalmarkets.com