Chinese ad company Focus Media, which came under fire from short
seller Muddy Waters before it was delisted from Nasdaq, is
relisting in China in an over $7 billion transaction, nearly
doubling the payoff from Carlyle Group and other investors that
took it private two years ago.
Focus Media is planning to list in Shenzhen, whose stock market
has nearly tripled in the past year, through a backdoor listing
that values it at 45.70 billion yuan ($7.38 billion). Carlyle as
well as other private-equity firms and some Chinese companies and
Focus Media Founder Jason Jiang, took Focus Media private in a
$3.87 billion buyout in May 2013. At the time, the take-private
deal was the biggest leveraged buyout of a Chinese company.
Focus Media's relisting, when it happens after Chinese
regulatory approvals, will make it the first of a string of Chinese
tech and media firms that have planned or are planning to delist
from the U.S. with the intention of going public back home, where
valuations are higher.
The Chinese operator of liquid crystal display ads in elevators
and supermarkets is effectively listing through the back door, or
through a reverse merger, in which a private company merges with a
publicly traded firm to gain access to capital markets.
In Focus Media's case, that company is Jiangsu Hongda New
Material Co., a maker of the silicone rubber used to make rubber
gloves, among other things.
The Shenzhen-listed company, which has a market value of just
$623 million, said in a filing to the Shenzhen stock exchange
Wednesday it is buying out Focus Media through a mix of shares,
cash and assets.
The buyout plan comes a month after Focus Media's
investors—private-equity firm Carlyle, Hong Kong-based Fountain
Vest Partners, China's Citic Capital Partners, and mainland
companies Fosun International and China Everbright Investment
Management—sold part of their stake to 36 Chinese investors in a
transaction that also valued the Chinese ad company at about 45
billion yuan.
The new Focus Media, or Jiangsu Hongda, will have Mr. Jiang as
its single-largest shareholder, owning 24.7%, while Carlyle and the
rest of the original consortium will have around 34%.
Like many other Chinese companies listed in the U.S. before
Alibaba Group Holding Ltd.'s record-breaking $25 billion listing
late last year, Focus Media shares had been hit by allegations of
accounting fraud. Focus Media denied the allegations by Muddy
Waters.
Jiangsu Hongda in its Wednesday filing said it plans to raise up
to 5 billion yuan to finance the deal through a private placement,
in which its stock is sold to no more than 10 investors. The deal
is pending the approval of China's Securities Regulatory
Commission.
Jiangsu Hongda shares were suspended from trading on Dec. 10 and
will resume trading no later than June 9 with Focus Media as part
of its operations, according to an earlier filing to the Shenzhen
exchange on May 20 that had no financial details.
Chinese brokerages Huatai United Securities and Southwest
Securities are advising Jiangsu Hongda on the deal.
According to the filing, Focus Media had assets of 8.85 billion
yuan at the end of 2014 and its net profit rose to 2.42 billion
yuan last year from 1.34 billion yuan in 2012.
Yifan Xie and Prudence Ho
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