LJ International Announces Receipt of "Going Private" Proposal

Aug 13, 2012, 10:46 ET from LJ International Inc.

HONG KONG, Aug. 13, 2012 /PRNewswire-Asia/ -- LJ International Inc. (NASDAQ: JADE) ("LJI" or "the Company"), a leading colored gemstone and diamond jeweler with retail and wholesale businesses, today announced that its Board of Directors has received a preliminary, non-binding proposal letter dated August 13, 2012 from Mr. Yu Chuan Yih, Chairman of the Board of Directors, President and Chief Executive Officer of the Company, and Urban Prosperity Holding Limited, an affiliate of FountainVest Partners, ("FountainVest", together with Mr. Yih, the "Consortium Members"), to acquire all of the outstanding ordinary shares of the Company not currently owned by Mr. Yih at a proposed price of $2.00 per ordinary share, in cash, subject to certain conditions. Mr. Yih currently beneficially owns, in the aggregate, approximately 11% of the Company's outstanding ordinary shares.

According to the proposal letter, the Consortium Members will form an acquisition vehicle for the purpose of pursuing the transaction and the acquisition is intended to be financed by equity capital from the Consortium Members (and, if applicable, debt financing). A copy of the proposal letter is attached hereto as Exhibit A.

The Board of Directors intends to form a special committee of disinterested directors to consider the proposal. There can be no assurance that any definitive offer will be made, that any agreement will be executed or that this or any other transaction will be approved or consummated.

About LJ International Inc.

LJ International Inc. (LJI) (NASDAQ: JADE) is engaged in the designing, branding, marketing and distribution of its full range of jewelry. It has built its global business on a vertical integration strategy, and an unwavering commitment to quality and service. Through its China-based ENZO retail chain stores, LJI is now a major presence in China's fast-growing retail jewelry market. As a wholesaler, it distributes to fine jewelers, department stores, national jewelry chains and electronic and specialty retailers throughout North America and Western Europe. Its product lines incorporate all major categories, including earrings, necklaces, pendants, rings and bracelets. For more information about the Company, visit the Company's website at www.ljintl.com.

Cautionary Note Regarding Forward-Looking Statements: This press release may contain "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects" and similar references to future periods. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Potential risks and uncertainties include, but are not limited to, those relating to whether any definitive offer will be made, whether any agreement will be executed or whether this or any other transaction will be approved or consummated. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. We caution you therefore against relying on any of these forward-looking statements. Factors that could cause actual results to differ materially from such statements, as well as additional risk factors, are detailed in the Company's most recent filings with the Securities and Exchange Commission. Any forward-looking statement made by us in this press release speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking information contained in this press release or with respect to the announcements described herein, except as may be required by law.

Investor Relations contact:

LJ International Inc.

Fleishman-Hillard Inc.

Ringo Ng

E : ir@ljintl.com

Chief Financial Officer

T : 852-2530 0228

E : ir@ljintl.com

August 13, 2012 The Board of Directors LJ International Inc. Unit #12, 12/F, Block A Focal Industrial Centre 21 Manlok Street Hung Hom, Kowloon, Hong Kong

Dear Sirs:

Mr. Yu Chuan Yih (the "Chairman") and Urban Prosperity Holding Limited, an affiliate of FountainVest Partners, ("FountainVest"), are pleased to submit this preliminary non-binding proposal to acquire LJ International Inc. (the "Company") in a going private transaction (the "Acquisition").

We believe that our proposal provides superior value to the Company's shareholders. Our proposal represents a premium of 24.2% to the Company's closing price on August 10, 2012 and a premium of 29.0% to the volume-weighted average closing price during the last 60 trading days.

1.  Consortium. The Chairman and FountainVest (the "Sponsor" and together with the Chairman, the "Consortium Members"), have entered into a consortium agreement dated as of the date hereof, pursuant to which we will form an acquisition company for the purpose of implementing the Acquisition, and have agreed to work with each other exclusively in pursuing the Acquisition. Please also note that the Chairman is currently only interested in pursuing the Acquisition and has no interest in selling his shares in any other transaction involving the Company.

2.  Purchase Price. The consideration payable for each publicly held share of outstanding common stock of the Company (other than those ordinary shares held by the Chairman that may be rolled over in connection with the Acquisition) will be $2.00 per share in cash. 

3.  Funding. It is intended that the Acquisition will be funded by equity capital from the Consortium Members, but the Consortium Members may explore potential debt financing as appropriate. The proposal is not contingent on debt financing. The consortium agreement sets forth the current terms under which the equity funding and the possible debt financing will occur. We expect definitive commitments for the required equity fundingand debt financing, if any, subject to terms and conditions set forth therein, to be in place when the Definitive Agreements (as defined below) are signed.

4.  Due Diligence.  We have engaged Fried, Frank, Harris, Shriver & Jacobson LLP as our international legal counsel, King & Wood Mallesons as PRC legal counsel and Conyers, Dill & Pearman as British Virgin Islands legal counsel. We believe that we will be in a position to complete customary legal, financial and accounting due diligence for the Acquisition in a timely manner and in parallel with discussions on the Definitive Agreements.

5.  Definitive Agreements. We are prepared to promptly negotiate and finalize definitive agreements (the "Definitive Agreements") providing for the Acquisition and related transactions. These Definitive Agreements will provide for representations, warranties, covenants and conditions which are typical, customary and appropriate for transactions of this type.

6.  Process.  We recognize that the Company's Board of Directors (the "Board") will evaluate the Acquisition independently before it can make its determination to endorse it. Given the involvement of Mr. Yih in the Acquisition, we appreciate that the independent members of the Board will proceed to consider the proposed Acquisition and that Mr. Yih will recuse himself from participating in any Board deliberations and decisions related to the Acquisition.

7.  Confidentiality. The Chairman will, as required by law, promptly file an amendment to his Schedule 13D to disclose this letter and his agreement with FountainVest. However, we are sure you will agree with us that it is in all of our interests to ensure that we proceed in a confidential manner, unless otherwise required by law, until we have executed the Definitive Agreements or terminated our discussions.

8.  About FountainVest.  FountainVest Partners is a leading China-focused private equity firm, with over $2 billion under management. FountainVest's investments are long term oriented, and targets high growth industry leaders in China in the consumer, media and technology, environmental and renewable resources and healthcare sectors. FountainVest works closely with management teams to create value in the areas of strategy, operations, finance, industry consolidation and governance.

9.  No Binding Commitment.  This letter constitutes only a preliminary indication of our interest, and does not constitute any binding commitment with respect to the Acquisition. A binding commitment will result only from the execution of Definitive Agreements, and then will be on terms and conditions provided in such documentation.

In closing, we would like to express our commitment to working together to bring this Acquisition to a successful and timely conclusion. Should you have any questions regarding this proposal, please do not hesitate to contact us. We look forward to hearing from you.



By:  ______________________________________



SOURCE LJ International Inc.