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PRIVATE EQUITY | Cesar Tordesillas, China
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Chinese advertising firm receives private-equity offer

Focus Media Holding Ltd received a bid from private-equity firms in what would be the country’s largest leveraged buyout.

 

The bidders made a “non-binding” offer of US$27 for each American depositary receipts, according to the Shanghai-based a Chinese advertising company.

The bidders and Focus Media chief executive officer Jason Nanchun Jiang, made the proposal that values the company at US$3.5 billion.

Focus Media’s ADR climbed 8.9 percent to US$25.45 on Monday after jumping 7.6 percent on Friday. The company has about 129.3 million ADRs outstanding.

Focus Media’s bullish options trading jumped to the highest level since November on Friday. More than 29,000 calls to buy the stock changed hands, five times the four-week average, compared with 7,635 for puts to sell.

Focus Media traded at US$25.50 on Nov. 18. last year, before Muddy Waters recommended betting against the stock. The stock plunged as much as 66 percent the next trading day after Block’s firm issued a strong sell recommendation. Muddy Waters in February issued a fifth report that said Focus Media overstated its ad network.

The bidders for Focus Media include Citic Capital, Washington-based Carlyle, FountainVest Partners, CDH Investments and China Everbright Ltd, the company said in the statement. Jiang is Focus Media’s biggest shareholder with a stake of about 18 percent, according to data compiled by Bloomberg.

“Focus Media is very dominant in the public-display advertising space in China and has geographically diversified itself throughout China’s big cities,” said Timothy Ghriskey, chief investment officer of Solaris Group LLC, a New York-based firm that sold its stake in the company a year ago. “The PE [private-equity] firms are seeing a bargain here.”

“The company’s board of directors has formed a committee of independent directors to consider the proposed transaction,” Focus Media said in the statement.

The investor group plans to use a combination of debt and equity to finance the purchase.

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