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CDC Corporation Announces That It Intends To Take Steps To Strengthen Corporate Governance At Majority-Held CDC Software

Stocks in this article: CDCS CHINA

CDC Corporation (NASDAQ: CHINA), a leading China-based value-added operator of, and growth investor in, hybrid (SaaS/On-Premise) enterprise software, IT Services, and New Media assets, today announced it intends to take steps to strengthen corporate governance at its majority held, publicly-traded subsidiary, CDC Software (NASDAQ: CDCS). As of May 18, 2011, CDC Corporation owned approximately 87% of the outstanding capital of CDC Software. Specifically, CDC Corporation has agreed to effectively eliminate the A/B dual class share structure at CDC Software by converting its class B shares into class A shares. CDC Corporation currently owns class B shares, which hold 10-1 voting rights as compared to the class A shares, which consist of the public float. The single class structure will give every shareholder equal rights.

In addition, CDC Software intends to take steps to institute a semi-annual dividend policy. CDC Corporation intends to use a portion of the proceeds from any dividend to pay down the intercompany loan owed to CDC Software.

CDC Software currently intends that the dividend policy will commence in the second half of 2011 subject to its receipt of requisite approvals and certain conditions, and will provide more information as it progresses with these plans.

“We are very pleased that CDC Corporation is taking these actions to unlock shareholder value,” said John Clough, Chairman of CDC Software. “We believe that these steps will help strengthen corporate governance at CDC Software by treating all shareholders with the same rights and reducing, or eventually eliminating, the intercompany debt between CDC Software and CDC Corporation. Based on feedback from our shareholders, we believe these are two major overhangs on our stock price. As such, we believe these actions will reward our shareholder base and ultimately help CDC Software stock trade closer to, or in-line with, our industry peer group rather than the significant discount it now exhibits.”

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