China’s Universal Travel to Buy 4 More Agencies

Chinese travel company Universal Travel Group (NYSE:UTA) continues its vertical integration, announcing letters of intent to acquire four travel agency businesses in China —Tianjin Hongxun Aviation Agency Co., Ltd. (“Tianjin Hongxun), Shanxi Jinyang Travel Agency Co., Ltd. (“Shanxi Jinyang”), Kunming Business Travel Agency Co., Ltd. (“Kunming Business Travel”) and Shandong Century Aviation Development Co., Ltd. (“Shandong Century”). The total purchase price is $19.5 million. The combined unaudited 2009 revenue and net income for the four travel agencies were $23 million and $3 million, respectively.

“We are continuing to capitalize on the fast-growing China travel market through organic growth and strategic acquisitions,” said Jiangping Jiang, chairwoman and CEO. “After the acquisition of these four travel agencies, we will have expanded our geographic coverage to 10 provinces in mainland China and the variety of services we offer our clients. We are confident these acquisitions, once complete, will have a positive impact on our top and bottom line in 2010.”

Universal Travel Group, headquartered in Shenzhen, China, sells package tours, air ticketing, and hotel reservation services via the Internet and customer service representatives. It also operates TRIPEASY Kiosks, which are placed in shopping malls, office buildings, residential apartment buildings, and tourist sites. These kiosks are designed for travel booking with credit and bank cards, and serve as an advertising platform for Universal Travel Group.

Universal Travel Group recently expanded its business into Western China, opening a second home base in the Chongqing Delta region, as well as other attractive, under-penetrated tier-two travel markets throughout the country.

Growth by Acquisition

One of the four acquisitions, Shanxi Jinyang, was founded in 1988 in Taiyuan and is one of Shanxi Province’s largest travel agencies in volume and revenues, providing comprehensive travel services. Unaudited 2009 revenue and net income were $5.6 million and $0.4 million, respectively. Universal said it plans to acquire Shanxi Jinyang for $2.3 million, 90% in cash and 10% in UTA’s common stock.

Tianjin Hongxun, founded in 1999 in Tianjin, is a leading airline ticket agency in its region, with supplementary hotel, train and car reservation services. Tianjin Hongxun has a customer database of approximately 400,000 individual tourists and businesses and an average daily volume of 100,000 inbound calls and over 2,000 tickets issued. Unaudited 2009 revenue and net income were $3.7 million and $0.9 million, respectively. The purchase price is $5.9 million, 65% in cash and 35% in shares of UTA common stock.

Kunming Business Travel, a golf tour specialist, was founded in 1993 in Kunming, Yunnan Province,  and is a leading golf travel service agency in its region, with partnerships with seven golf clubs. It provides reservations, event planning, hosting business trips and golf competitions. Unaudited 2009 revenue and net income were $9.4 million and $0.9 million, respectively. The purchase price is $5.7 million, 90% cash and 10% in UTA common stock.

Shandong Century, founded in 1996, has the largest electronic ticket reservation platform and is the largest airline ticket agency in the Shandong Province. Its major niches include air ticketing, hotel reservation, train ticketing, group tours and business cargo services. Shandong Century has a call center with 100 customer service representatives and an average daily volume of 2,500 ticket reservations. Unaudited 2009 revenue and net income were $4.4 million and $0.8 million, respectively. The purchase price is $5.6 million, 65% in cash and 35% in UTA common stock.

For more information, visit http://us.cnutg.com.