China LotSynergy to acquire interest in lottery group

13 September 2007

HONG KONG -- (PRESS RELEASE) -- China LotSynergy Holdings Limited ('CLS') (HKEx: 8161) today announced that on 10 September 2007, the CLS Group has, through entering into a number of agreements, agreed to acquire an aggregate of 80% equity interests in Guangzhou San Huan Yong Xin Technology Limited Company ('GZSH') and the Lottnal Holdings Limited ('LHL') Group (together the CMIL Group). The aggregate consideration of the acquisition amounts to HK$224 million which will be satisfied as to (i) HK$156.8 million by cash; and as to (ii) HK$67.2 million by the issue of an aggregate of 67.2 million new Shares at an issue price of HK$1.00 per Share.

The CLS Board believes that the acquisition of the CMIL Group will enable the Group to build on its foundation to expand into the traditional computer lottery related businesses in the PRC.

The CMIL Group is principally engaged in the research and development, manufacturing and the supply of computer lottery system and equipment in the PRC. It is also involved in the provision of maintenance services. GZSH and the LHL Group are technology corporations in the Guangdong Province and possess a number of important intellectual properties rights relating to lottery equipment.

Currently, GZSH is one of the three largest suppliers in the PRC which specialises in the provision of lottery system and equipment to the provincial welfare lottery issuing authorities. GZSH has supplied more than 7,000 lottery terminals to Guangdong Welfare Lottery Issuing Centre in the Guangdong Province, which is one of the most developed markets for lottery in the PRC. It is also entitled to a share of revenue derived from the sales of lottery in the province.

The LHL Group is a well-known group in China which is principally engaged in the research and development and manufacturing of lottery ticket scanners. Since its establishment, it has supplied more than 40,000 units of lottery ticket scanners to its customers in both the PRC and overseas.

At present, the CMIL Group is actively developing business in overseas markets. It is also a supplier of lottery terminal to the Keno project carried out by an associated company of the CLS Group.

The CLS Board believes that the acquisition is consistent with the CLS Group's long-term development strategy. The acquisition will not only create synergistic benefits to the existing business of the CLS Group, but will also allow the CLS Group to expand into other related business areas. The CLS Board believes that the acquisitions will strengthen the CLS Group's overall capability and will position the CLS Group well for its development in the industry.

The completion of the acquisition is subject to customary closing conditions, including, but not limited to, satisfactory completion of due diligence, CLS shareholders approving the transaction and the Stock Exchange of Hong Kong approval on the listing of new shares.


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