Private equity group targets Focus Media

Published:  14 Aug at 10 AM

A private equity group has offered to buy Chinese advertising firm Focus Media. The consortium has said that it is willing to pay $27 per share for the company which was recently embroiled in accusations of accounting fraud. The offer means that the group, which includes Focus Media’s chief executive, has valued the advertiser at around $3.5 billion.

Allegations of accounting fraud was levelled at Focus Media in November last year by Muddy Waters, the research group, which also said the firm had been guilty of overpaying for acquisitions. Although the allegations were strongly denied nearly 40 per cent was wiped off the value of Focus Medias stock at the time.

The company specialises in providing commercial spaces and offices across China with display advertising screens. The company currently operates 170,000 displays in 90,500 commercial buildings.

Since publishing its best results in 2007, Focus Media shares have lost much of their value plunging from a peak of $66 per share to today’s price of around $26 per share.

Focus Media reported that for the second quarter of the year its net profits jumped 85 per cent to $37.9 million. Macquarie Securities analyst, Jiong Shao, said he was convinced that the company’s stock had been undervalued adding that Focus Media was capable earning a great deal of money, was able to buy back shares and was also in a position to pay dividends.