China's largest outdoor media group, Focus Media, yesterday said
it will acquire Internet advertising service company Allyes
Information Technology for US$300 million in cash and stock in an
effort to forge an empire covering outdoor, indoor, mobile and
Internet advertising.
Under the terms of the deal, which is expected to come through
this month, Focus Media will pay US$70 million in cash and US$155
million in stock to Allyes.
Allyes, which was established in 1998, will also receive an
additional payment of up to US$75 million in stock if it meets
certain earnings targets from this April to March 2008.
Allyes's CEO David Zhu has signed an employment agreement with
Focus Media and will remain in his position.
"This acquisition is strategically important to Focus Media. It
extends our lifestyle media platform to one of the fastest-growing
media segments in China - the Internet - reaching the high-end
urban consumers," said Focus's CEO Jason Jiang, who was reported to
have owned shares in Allyes.
Focus Media, which runs flat-screen TVs displaying ads in
stores, offices and apartment buildings, has been expanding since
last year through several acquisitions to run ads in elevators and
cinemas and on outdoor electronic billboards and cellphones.
Wang Ran, CEO of China eCapital Corporation, said Focus Media's
aggressive acquisitions stem from the company's increasing concern
over its over-reliance on a single revenue source.
Focus Media's latest report, released on Monday, said commercial
locations contributed 63 percent of the company's revenue in 2006
while revenue from in-store network, in-elevator and cellphone
advertising accounted for 12.7 percent, 19.1 and 4.6 percent
respectively.
"Focus Media has to go beyond its reliance on 'outdoor
electronic billboards'," said Wang. "Focus's other revenue
generators would not be able to sustain the huge company if one day
the growth of China's outdoor advertising market slows down."
Although many applauded the high-profile deal between Focus
Media and Allyes, the acquisition smashed Allyes's earlier efforts
to seek an independent initial public offering in NASDAQ.
Experts believe the sluggish performance of Double Click in
NASDAQ, with a similar business model as Allyes, and the robust
performance of Focus Media triggered the deal.
Apart from the two parties, another beneficiary of the deal is
venture capital company IDG VC, which is the major investor for
both Focus Media and Allyes.
It was reported earlier that IDG earned $65 million from
Allyes's deal with Focus Media, 40 times of what it had invested in
Allyes.
(China Daily March 2, 2007)