Gems TV Holdings announced today that it will cease operations in the US. The group has also entered into a non-binding term sheet to acquire 37.8% shareholding interest in Multimedia Commerce Group Inc. for US$60 million ($84 million).

The proposed transaction is subject to the approval of shareholders.

MMCG is a private corporation based in the US. MMCG operates a shopping network under the trade name Jewelry Television (JTV®) and retails jewellery, gemstones and related products via its television network and internet sites. JTV is a direct competitor of the group in the US.

Upon completion of the proposed Investment, both Gems TV and JTV will no longer be in competition with each other and instead will work together to achieve better margins and greater revenue. JTV’s dominant position in the world’s largest jewellery market would be further strengthened, allowing it to assume a larger share of the US jewellery market.

Under the agreement, Gems TV shall subscribe for 10 million shares in the capital of MMCG amounting to 37.8% stake in MMCG for a consideration consisting of cash, inventories and other assets and intangibles, of US$60 million ($84 million). The said consideration was arrived between Gems TV and MMCG on a “willing-buyer and willing-seller” basis at US$6 per MMCG share (subject to adjustments).

JTV plans to incorporate Gems TV’s popular reverse-auction program with its existing fixed- price selling programs, the combination of which will create a powerful sales platform positioned for growth in the US market.

Gems TV to cease US Operations
Since its entry into the US in November 2006, Gems TV has struggled to achieve the necessary operational and economic scale that would enable it to thrive in that market. The Group’s margins and profitability have been under constant pressure from the extremely challenging and unpredictable economic environment.

Jason Choo, Chairman of Gems TV, says, “We are putting a stop to the operational cash drain in the US which is clearly a disappointing outcome. However, if the Proposed Investment completes, it will allow us to immediately increase our proportionate share of the US jewelry market. Both parties believe that a significant portion of our revenue will migrate to MMCG once we cease broadcasting and MMCG is in an ideal position to leverage off that additional revenue.”

The cessation of the group’s US operations is not contingent on the completion of the proposed investment. Gems TV will cease its US operations regardless of whether or not the proposed Investment takes place.