Focus Media to relist in Shenzhen via reverse merger
Chinese outdoor advertising business Focus Media, which was taken private two years ago by a consortium of PE investors in conjunction with company management, will re-list in Shenzhen through a reverse merger.
Jiangsu Hongda New Material, a Shenzhen-listed silicone rubber manufacturer, said in a filing that it had reached a preliminary agreement to acquire 100% of Focus Media through an asset exchange, a share issue and cash. Jiangsu Hongda's market capitalization was RMB3.86 billion ($633 million) before it was suspended from trading on December 10 last year. It will resume trading no later than June 9.
Founded in 1992, Jiangsu Hongda makes silicone rubber widely used in construction material and automobiles. The firm went public in 2008. Its revenue fell 3.64% to RMB773 million ($125 million) last year, while net profit came to RMB12 million in 2014, compared to a net loss of RMB876 million in 2013.
Focus Media, which listed in the US in 2005, was one of several Chinese companies that came under pressure after being accused of fraud by short-sellers. The company denied allegations that it overstated its assets and overpaid for acquisitions.
Focus Media's CEO Jason Jiang, The Carlyle Group, FountainVest Partners, CITIC Capital Partners, CDH Investments and China Everbright submitted a take-private bid in August 2012 that valued the company at $3.5 billion. The board accepted a $3.7 billion offer that December, by which point CDH had dropped out and existing investor Fosun International had agreed to roll over its stake into the transaction.
The consortium secured $1.5 billion in aggregate debt financing for the buyout - which was completed in May 2013 - and is said to have completed a $500 million dividend recap last September. The firm reportedly considered an IPO in Hong Kong.
According to The Wall Street Journal, Jiang holds a 30.9% stake in Focus Media, while Carlyle and FountainVest have 19.7% each. Fosun and CITIC Capital held 17.4% and 9.8%, respectively.
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 and other venues.
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