Shanghai Century buys Kelun Pharmaceutical

Shanghai Century Acquisition Corp has entered into a definitive agreement to acquire 100% of the shares of privately-held Sichuan Kelun Pharmaceutical, China's largest producer of intravenous solution products. As initial consideration for the deal, Shanghai will issue 20 million new ordinary shares to the 18 individuals who currently hold all Kelun stock.

In 2006, Kelun and its subsidiaries had combined revenues of approximately 1.38 billion renminbi ($176.7 million) and net profits of 113.0 million renminbi. Based on the $7.74 average closing price of Shanghai's shares for the last 30 days ending May 25, 2007, and a 2006 year-end exchange rate of $1.00 to 7.8087 renminbi, this initial consideration represents a price-to-earnings ratio 10.7 times Kelun's trailing combined 2006 earnings.

An additional consideration will be paid to Kelun shareholders if the combined business entity reaches certain future annual net profit targets, in each case on an all or nothing basis. If the combined business achieves the net profit target of 180.0 million renminbi in 2007, Shanghai will issue an additional five million new shares, while a further two million will be issued in respect of each of 2008 and 2009 if the combined firm achieves the net profit targets of 260.0 million renminbi and 370 million renminbi in 2008 and 2009, respectively. In determining whether these targets are reached, net profits will be calculated by excluding the effects of certain accounting items described in the share purchase deal.