Because of the Chinese government’s decision to reject the merger, the proposed purchase of the Digital Out-of-Home assets of Focus Media Holdings, Ltd. by Sina Corporation has been scrapped. Sina operates China’s largest web portal.
In statement released Monday, Sina CEO Charles Chao said, “The delayed consummation of the transaction has negatively impacted the business operations of both sides.”
According to the Wall Street Journal, the deal was set to expire if the Chinese Ministry of Commerce did not approve it by Wednesday, September 30.
Both Sina and Focus Media are based in Shanghai. When the deal was announced in December 2008, it was valued at USD 1.1 billion. According to Bloomberg News, Sina has posted profit declines for the past two quarters and Focus Media has reported three straight quarterly losses.
Under the terms of the proposed deal, Sina had planned to issue 47 million new shares of stock to acquire Focus Media’s network of Digital Out-of-Home screens. Focus Media’s advertising-based network is comprised of more than 120,000 flat-panel screens which can be seen in stores, office buildings and other public venues in more then 90 Chinese cities.
Bloomberg News reports that Sina’s U.S. depositary receipts have climbed 45% since the company announced its plans to buy the Digital Out-of-Home division of Focus Media.
The Wall Street Journal reports that, instead of the Sina/Focus Media merger, “a group of investors led by Sina’s chief executive will invest $180 million for about a 10% equity stake in Sina. . . . The company said it will use the new funds to finance future acquisitions and for general corporate purposes.”
The Journal further reports that “Sina’s plans to acquire Focus Media’s assets was viewed as a risky move to expand into offline advertising.”