Sina to cooperate with Focus Media
Sina Corp, China‘s largest portal website announced last month that it would make a deal with Focus Media, which is allowed to be one of China’s biggest advertising conglomerates.
The digital advertising business in the deal may be worth over $1.3 billion, with Sina acquiring Focus Media’s business in office buildings, elevators and supermarkets. The deal contributed 52% of Focus Media’s total revenue and 72% of its profits in the first nine month of 2008.
In order to fund the deal, Sina will issue 47 million new shares to Focus Media, which, calculated by its closing price of $29.24 on Dec 19, would be worth $1.37 billion.
Having been given the nod by both boards of directors is expected to be finished by the first six months of this year.
Online advertising is more important to Sina than to Sohu.com and Tencent, which accounted for 73% of Sina’s total revenue in the third quarter of last year.
According to analysts, the achievements make Sina capable to expand its business beyond the Internet and give it a better position to withstand the current crisis and a slowdown in advertisement spending after the Beijing Olympic Games.
Focus Media is China’s largest publicly traded advertising company, running an advertising network in locations such as elevators, office buildings, supermarkets and cinemas.
The company planned earlier last year to list its mobile advertising business Focus Wireless and online advertising arm Allyes, respectively.
But based on the report of CCTV (China Central Television) in March of 2008, Focus Media was accused of illegally sending junk short message as well as the unfolding financial crisis, foiled both efforts. Its share price had slumped more than 80% last year.
Sina will get an advantage of scale with the acquisition in the global crisis, said Edward Yu, president research firm Analysys International.
Since the online population in China will continue to grow, China’s online advertising business will not have significant slowdown in the coming years, he added.
It was said that Focus Media is planning to cooperate with Google Inc.
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