Focus Media set for $7b reverse merger in Shenzhen - update

Jiangsu Hongda, a silicone rubber manufacturer, will buy 100% of Focus Media through an asset swap, a share issue and cash. The plan was revealed last month. 

According to the latest filing, Jiangsu Hongda will exchange assets worth RMB880 million with Focus Media. It will also pay RMB4.93 billion in cash to Focus Media China Holdings (FMCH), an offshore shareholding entity. The listed company will issue 544 million shares at RMB7.33 apiece in exchange for Focus Media shares held by other stakeholders excluding FMCH, for a total consideration of RMB39.9 billion.

Jiangsu Hongda will finance the deal through a RMB5 billion private placement to no more than 10 qualified investors. The issue price will be no less than RMB9.08 per share.

Last month, a group of Focus Media's offshore shareholders, including The Carlyle Group, FountainVest Partners, Fosun International, CITIC Capital Partners, China Everbright and Primavera Capital, sold part of their stake to 36 domestic insitutional investors in a transaction that valued Focus Media at about RMB45 billion.

At present, CITIC holds a 8.77% stake in the business, while Carlyle and FountainVest have 7.54% each. Fosun and China Everbright own 7.77% and 1.29%, respectively. Primavera has a 0.65% interest.

An investment entity - Media Management Hong Kong - will become the controlling shareholder once teh company re-lists. Jason Jiang, Focus Media's CEO, is the ultimate controller of this entity. The plan still requires approval from the China Securities Regulatory Commission.

Focus Media, which went public 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.

Jiang, Carlyle, FountainVest, CITIC, 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 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.

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.

In 2014, Focus Media posted revenue of RMB7.5 billion, an increase of 12% from RMB6.7 billion from 2013, while net income came to RMB2.4 billion, compared to RMB2 billion in 2013.

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• Topics
• Greater China
• Media
• Exits
• Buyouts
• China
• M&A
• Media
• TMT
• buyout
• Exit
• The Carlyle Group
• Fountainvest Partners
• CITIC Capital
• China Everbright