Silver Lake says ‘yes’ to Allyes

In 2007, Focus Media acquired a 100% equity stake in Allyes for a reported $70 million in cash, $155 million in Focus Media ordinary shares and an additional $75 million payment in Focus Media ordinary shares pending first-year performance.

That news preceded Chinese web portal Sina’s December 2008 announcement  to acquire Focus Media’s out-of-home assets for approximately $1.7 billion, including its LCD display network, poster frame network and in-store network, which represented about 52% of Focus’ revenue for the first three quarters of 2008. That arrangement would have been a revolutionary cross-media deal, combining an out-of-home giant with a digital one, but the deal collapsed in September 2009 when the Chinese Ministry of Commerce’s Anti-Monopoly Bureau withheld its blessing of the merger, for undisclosed reasons.

Months prior, reports had already surfaced that the Sina/Focus deal was in trouble, with Focus’s disappointing 1Q09 performance pegged as one of the culprits. As a result, Focus may have been glad to regroup, and Silver Lake entered the picture at the right time. In fact, Focus Media’s Chairman CEO Jason Jiang said in a statement that, “post [the Silver Lake] transaction, Focus Media will be more focused on our core businesses, striving to continuously enhance… our LCD display network, poster frame network, in-store network and movie theater network.”

For Silver Lake, Allyes is a wise control target. It doesn’t have the big-name punch that led to the demise of takeover offers such as Coca-Cola’s bid for PRC drinks major Huiyuan or Charles River Laboratories’ acquisition of pharma play Wuxi. And, Allyes’ position as a media intermediary and technology provider rather than a content developer gives it an easier time in the regulation arena.

Silver Lake’s Managing Director Eric Chen told AVCJ that the firm will keep Allyes’ operations and management intact. “We will continue to work with the existing management team lead by CEO David Zhu, as the team has done an excellent job growing Allyes’ business throughout the economic cycle … the challenge is how to capture Allyes’ future growth opportunity. While the market is young, fragmented and increasingly competitive, it is evolving and the implementation of modern technology has catalyzed the process,” he said. “Our plan is to … expand Allyes’ current offerings while also seeking transformational opportunities for the business, including strategic partnerships.”

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• Topics
• Greater China
• Technology
• Media
• Buyouts