Focus Media agrees to $3.7b PE-backed buyout

According to a regulatory filing, Focus Media's board has approved the deal and it will now be put to a shareholder vote.

Jason Jiang, Focus Media's chairman and CEO, together with The Carlyle Group, FountainVest Partners, CITIC Capital and China Everbright, will pay $27.50 per American depository share - each of which represents five ordinary shares - valuing the NASDAQ-listed company at $3.7 billion. The offer price represents a 17.6% premium to Focus Media's August 10 closing price, the last trading day before the take-private offer was submitted. The initial offer was for $27 per share.

CDH Investments was originally part of the consortium but dropped out earlier this month. Fosun International, currently Focus Media's largest shareholder after Jiang, with a 17.2% stake, will retain a position in the company after the transaction is completed. Jiang, Fosun and certain members of the company's senior management team between them own 36% of the outstanding shares.

The consortium has secured $1.525 billion in aggregate debt financing for the buyout. Bank of America, China Development Bank, China Minsheng Banking Corporation, Citibank, Citigroup Global Markets, Credit Suisse, DBS Bank, Deutsche Bank, ICBC International Capital, ICBC International Holdings and UBS have agreed to provide or underwrite the debt.

Founded in 2003, Focus Media operates an advertising network in various Chinese urban locations. The company uses audiovisual television displays that are placed primarily in high-traffic areas of commercial office buildings such as in lobbies and near elevators, as well as in large retail chain stores. Focus Media recorded net income of $200.9 million in 2011, up from $184.3 the previous year, while revenue rose 54% to $792.6 million.

Low valuations among small- to mid-cap US-listed Chinese companies, in part driven by a spate of accounting scandals in the past couple of years, have prompted chairmen and owners to consider privatizations, often with a view to re-listing on an Asian bourse. Private equity investors often participate as execution partners and capital providers.

A number of these companies have come under pressure from short-sellers probing for weaknesses in accounting and oversight. Muddy Waters has repeatedly accused Focus Media of overstating its assets and overpaying for acquisitions. The company denies the allegations.

Close to 50 take-private deals for US-listed Chinese companies have been announced since 2010, with private equity firms participating in more than one third. However, an announcement is no guarantee of a closure: only four of these PE-backed deals have been completed as of October, data from AVCJ Research and Roth Capital Partners show.

The independent committee established by Focus Media's board to assess the bid is being advised by J.P. Morgan, Kirkland & Ellis, Maples & Calder and Fangda Partners. Simpson Thacher are advising the company itself while Shearman & Sterling are providing legal counsel to J.P. Morgan.

Citigroup and Credit Suisse are lead financial advisors to the private equity consortium, with Deutsche Bank, ICBC International Capital, Merrill Lynch and UBS serving as financial advisors. Sullivan & Cromwell is lead counsel on the financing for the consortium, with Fried Frank, Conyers Dill & Pearman and Zhong Lun Law Firm acting as legal advisors on other elements of the deal.

Skadden Arps is advising Jiang, while the banks that have committed to underwriting the debt financing are receiving legal support from Clifford Chance, Walkers and Fangda Partners.

 

 

 

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• Topics
• Consumer
• Media
• Buyouts
• Greater China
• China
• buyout
• Consumer
• TMT
• The Carlyle Group
• Fountainvest Partners
• CITIC Capital
• Fosun Group