Focus Media

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Stock Opinion: Grow

Summary

Focus Media Holdings is China’s largest interactive digital media networks, operating

* More than 84,000 screens showing advertisements in office buildings and the outdoors * More than 41,000 screens in retail outlets
* More than 120000 poster frames in elevators.

Its success is due to many factors, mainly the economic growth in china, the success of its new LCD display network, and its ability to integrate the companies its acquired in the previous years.

Investment Highlights

It’s being privatized

Carlyle Group has offered to buy Focus Media Holdings at $27.50 American Depositary Share. Compared to the companies closing price in August, that represents a premium of 15%. It followed a wave of Chinese companies that were pulling out of American stock exchanges. Focus Media Holdings had first announced, in August of 2012, that its chairman and private equity firms wanted to buy back its U.S traded shares and privatize the advertisement company. Their plan to become privatized was valued at around 3.5 billion dollars. A company spokesperson supported this move by stating that, the company “has been seriously undervalued on U.S. stock markets.” It hopes that becoming privatized would promote its long term strategic development.

Investment Risks

May not be privatized as expected

In order for the company to be privatized At least two thirds of Focus Media shareholders must approve the deal. If they do not, then no deal is made. Fortunately, as of now, Fosun International Ltd and Jason Nanchun Jiang (Chief executive of the company) both back the deal. Together they own about 35.5 percent of Focus Media. Another threat is that there may not be enough financial resources to privatize the Chinese company. Usually, offshore holding companies will finance it but in this case, due to the threat of non-payment, many are holding off. This risk isn’t as big as it seems as Chinese banks, backed by Bank of...
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