RHM.L Regulatory News (RHM)

16 November 2010

RedHot Media International Limited

("RedHot" or the "Company")

Proposed disposal

Proposed acquisition of majority stake in PUC Founder (MSC) Berhad

The Board of RedHot announces that on 16 November 2010 the Company entered into a conditional Sale of Shares Agreement ("SSA") with PUC Founder (MSC) Berhad ("Founder") for the proposed disposal of the entire issued share capital of RedHot Media Group Sdn Bhd ("RMG"), Red Media Asia Limited ("Red Media") and Ausscar Group Sdn Bhd ("Ausscar"), all of which are wholly owned operating subsidiaries of RedHot, (the "Proposed Disposal") to Founder. The total consideration payable on the Proposed Disposal is RM95,000,000 (equivalent to GBP18.8m) to be satisfied through the issuance of a total of 950,000,000 new ordinary shares in Founder at an issue price of RM0.10 (the "Consideration Shares").

The Proposed Disposal remains subject to and conditional upon, inter alia,no material adverse findings on completion of due diligence and obtaining regulatory approvals both in the UK and Malaysia, including approval by Bursa Malaysia Securities Berhad ("Bursa Securities"), the stock exchange of Malaysia.

Founder is listed on the ACE market of Bursa Malaysia Securities Berhad and is principally engaged in the following two broad strategic business units: i) Biometrics Division - devices and applications incorporating fingerprint verification technology for commercial usage in areas such as user verification for security control, physical access control and time attendance technology; and ii) Electronic Publishing System and Management Information System Division - information technology solutions provider of electronic publishing systems and management information systems to the Chinese language publishing industry. Following completion of the Proposed Disposal, the business activities of Founder shall continue alongside RedHot's existing business.

For the year ended 31 December 2009, Founder generated revenues of RM13.9m (equivalent to GBP2.8m) and a profit before tax of RM1.2m (equivalent to GBP0.24m). Net assets of Founder as at 31 December 2009 were RM10.3m (equivalent to GBP2.04m). The market capitalisation of Founder at the date of this announcement is RM9.07 million (equivalent to GBP1.80m) based on the 5-Market Day volume weighted average share price up to 15 November 2010 of RM0.109 per Founder share.

The Board of RedHot believes the Proposed Disposal and issue of for the Consideration Shares will benefit the Company in its business expansion and growth in the long term thereby creating increased shareholder value. The Board of RedHot believes that the Proposed Disposal will be advantageous to the Company in the following principle ways:-

·; enhanced financial performance by way of an enlarged asset base and profit contributions from the consolidation of Founder's assets and earnings;

·; being an Asian-based business, the Company will have a better opportunity to access the local Malaysian capital markets where the investor community as a whole has a better understanding and awareness of the existing RedHot business. This should provide increased prospective opportunities for new investment into RedHot's business from Asian-based investors which in turn the Board believes should provide greater opportunities for the realisation of shareholder value;

·; enable strategic leverage on Founder's significant shareholder base and business network in China which includes a Peking University-backed conglomerate operating in Greater China with business investments worldwide ("Founder Group") and a reported revenue of USD6.5billion and USD6billion in net assets in 2008;

·; recognised business affiliation through Founder Group's strong branding and reputation throughout China;

·; potential of advertising income as a result of Founder Group's positioning as the second largest IT manufacturer and one of the largest healthcare and pharmaceutical enterprises in China;

·; media network penetration via Founder Group's established business network as a supplier of Chinese printing and publishing systems which account for 85% of China's domestic market, and 90% of the international market; and

·; other business opportunities for the growth and development of the Company's AxChange business via Founder's businesses in IT manufacturing, IT service, data operations and healthcare & pharmaceuticals.

Pursuant to Rule 15 of the AIM Rules for Companies, the Proposed Disposal will be conditional on approval by shareholders of RedHot in a general meeting to be convened. Accordingly, the Company will despatch in due course a circular to shareholders of RedHot convening a general meeting of the Company (the "Circular"). The Circular will contain further details of the background to and reasons for the Proposed Disposal and will set out in further detail why the Board of RedHot considers the proposals to be in the best interests of shareholders of RedHot as a whole. It is anticipated that the Circular will be posted to shareholders by the end of January 2011 and further announcements will be made in that regard.

In conjunction with the Proposed Disposal, RedHot will also enter into the following proposed settlements as follows:

·; proposed settlement with Kumpulan Modal Perdana Sdn Bhd ("KMP") of 1,000,000 class A redeemable convertible cumulative preference shares of RM0.10 each ("RCCPS A") in RH Media Group Sdn Bhd ("RH Media") held by KMP via the allotment of 104,938,200 of the Consideration Shares to KMP ("Proposed Settlement of RCCPS A"). This is in accordance with the terms of a subscription agreement entered into between KMP, RH Media and the Company for KMP's investment of USD1,000,000 in RH Media;

·; proposed settlement with the investors who hold 2,000,000 class A redeemable convertible preference shares of RM1.00 each ("RCPS") in RMG via the allotment of 40,000,000 of the Consideration Shares to the investors ("Proposed Settlement of RCPS"). This is in accordance with the terms of the subscription agreement entered into between the investors and RMG on 30 June 2010 for the investment of RM2,000,000 in RMG; and

·; proposed settlement with the introducers (consisting of 3 parties who assisted the Company in sourcing a suitable target company listed on ACE Market of Bursa Malaysia Securities Berhad and who provided advisory services in relation to the Proposed Disposal) who shall be paid in full upon completion of the Proposed Disposal by way of shares in Founder of an aggregate amount of RM9,500,000 (equivalent to GBP1.88 million) calculated based on the issue price of the shares of Founder as may be issued to RHI pursuant to the Proposed Disposal ("Proposed Settlement of Introducer Fees").

The Proposed Settlement of RCCPS A, Proposed Settlement of RCPS and Proposed Settlement of Introducer Fees shall be completed upon the Proposed Disposal becoming unconditional.

The balance of the 710,061,800 Consideration Shares being issued pursuant to the Proposed Disposal would be allotted to RedHot. Upon completion of the Proposed Disposal and the issue of the Consideration Shares as detailed above, RedHot would hold 710,061,800 shares in Founder representing 67.95% of the equity interest in Founder, out of which the intention is for RedHot to reserve 80,000,000 shares in Founder (representing 7.66% of the equity interest in Founder) for an offer for sale to the public ("Vendor Offer for Sale"). The intention of the Board of RedHot would be for the proceeds from any Vendor Offer for Sale to be distributed, as a cash dividend, to shareholders of RedHot. This Vendor Offer for Sale would enable Founder to satisfy the public shareholding spread requirement of the Bursa Securities and enable the continued listing of Founder on the ACE Market of Bursa Malaysia.

Under the terms of the SSA, the Board of RedHot shall have the right to appoint any number of directors to the Board of Founder upon completion of the Proposed Disposal.

A full copy of the announcement released by Founder at 6:20pm Malaysian time (10:20am UK time) on 16 November 2010 is available from www.bursamalaysia.com and can be found here:

http://www.rns-pdf.londonstockexchange.com/rns/2638W_-2010-11-16.pdf

Further announcements will be made by RedHot in due course.

For further information please contact:

Exchange rate: £1 = RM5.04 (as at 15 November 2010)