(11 October 2008 6:00 pm)

MUMBAI: Kit digital which provides IPTV enablement technology and video-centric interactive marketing solutions, has acquired Visual Connection, a digital media and IPTV solutions provider for media outlets in Europe and the Middle East.

Through its headquarters in the Czech Republic and sales offices in Slovakia, London, and Dubai, Visual Connection offers content digitisation, localisation and IP-based editing, storage, video players, and content streaming, as well as set up of digital network operations centers (NOCs) for television broadcasters, government entities, healthcare providers and telecommunications companies.

Kit digital and Visual Connection will market their combined product suite as a corporate presenter at next week's television trade event Mipcom in Cannes, France from 13-17 October 2008.

Kit digital acquired Visual Connection for $2.5 million, paid in cash at the time of the closing. Subject to performance thresholds, Kit will pay an additional $7.5 million in Kit digital common shares or cash (or a combination thereof), at KIT’s sole election, over a 24-month period. The performance benchmarks comprise certain net revenues and EBITDA targets for Visual Connection, as well as the retention of
certain key personnel.

Visual Connection generated an estimated $13 million in revenues and more than $1.0 million in EBITDA during the year ended 31 August, 2008. Looking forward, management estimates the operations of Visual Connection will contribute revenue and EBITDA of more than $4 million and $275,000 respectively, in the fourth quarter of 2008, exclusive of any operational or cost-savings synergies.

Prior to this acquisition, Kit was on pace to reach positive operating EBITDA position on a standalone during the course of the current fourth quarter. As a result of the acquisition (without factoring in the benefit of any revenue or cost synergies), management believes the combination of Visual and Kit is immediately operating EBITDA-positive, generating more than $40 million in revenues on an annualized
basis.

With now more than 400 clients across 25 countries, the regional revenue breakdown for the combined company is estimated to be 55 per cent in Europe, Middle East and Africa; 37 per cent in the Asia/Pacific and eight per cent in the Americas. The company expects to have at least a $5 million net cash position pro forma of the Visual Connection acquisition.

Benefits of the acquisition of Visual Connection include:

• Complementary combined product suite; i.e., extension of Kit digital’s capabilitiesfrom its existing Kit VX IPTV software platform to content delivery network (CDN) and NOC
set-up and maintenance capabilities

• Substantial cross-selling opportunities in the context of a go-to-market plan focused on emerging markets

• Solidified market share leadership across Continental and Eastern Europe

• Seasoned management team with similar hard-driving, entrepreneurial culture

• Equity-focused, performance-based deal structure, aligning interests of Visual Connection management and KIT digital.

Says Kit digital chairman and CEO Kaleil Isaza Tuzman, “This is a game-changing acquisition for us. We now have greater geographic and financial scale, and the companies’ complementary product lines open up markets for each other. In particular, Visual Connection puts us in a position to better leverage client opportunities in emerging markets.”

Kit digital president Gavin Campion adds, “We believe this combination makes Kit digital the largest company to date in the IP-based video platform marketplace, as measured by revenues, operating cash flow, geographic penetration, and product suite capabilities. This acquisition completes our 2008 strategic plan, and now our focus turns to operational and technical integration, cross-selling, and penetrating new client segments.”

Visual Connection CEO Tomas Petru and Visual Connection chief engineer Jakub Vanek have joined Kit digital in senior management positions. According to Petru, “As Visual began to expand beyond on its Central European base, we recognized the advantages of partnering with a global player like KIT digital and how it could accelerate this process. We were immediately attracted to KIT’s focus on international growth, financial discipline, and desire to take advantage of today’s challenging markets by consolidating leadership in our space.

" While some other companies in our industry are struggling to cohere a market strategy or becoming casualties of Wall Street, Kit knows what it wants and has the wherewithal to get there. We are convinced we joined the winning team.”