Focus Media accepts buyout plan to delist

The board of the Chinese digital advertising company Focus Media Holding Ltd, a long-time target of short-sellers, accepted a buyout plan on Wednesday from private equity firms to make the company private.

If completed, the transaction - valued at $3.7 billion, or $27.50 per American depositary share - will be the biggest such deal in China.

The transaction is now expected to close in the second quarter of 2013, the company said. But it's subject to various conditions, including approval from at least two-thirds of shareholders.

The Nasdaq-listed company, which operates display advertising screens in offices and commercial spaces in China, has been the target of accusations by Muddy Waters LLC, a short-selling firm, that it overstates its assets.

However, the accusations failed to deter a consortium - led by China's top private equity firms such as FountainVest Partners Co Ltd and the US buyout firm Carlyle Group LP - to take the company private.

The proposed takeover bid is a 17.6 percent premium over the company's closing price on Aug 10, the last trading day before the deal was announced, Focus Media said in a statement.

The offer is also 15 percent above Tuesday's closing price - the day before the board approved the plan - when shares closed up 6.7 percent at $25.52 per American depositary share

The Chinese conglomerate Fosun International Ltd, which together with Focus Media CEO Jiang Nanchun owns an about 35.5 percent stake in the company, backed the deal and will become part of the consortium taking over the company once the transaction is complete.

Focus Media owns about 170,000 flat-panel displays in about 90,500 commercial buildings in more than 90 cities in China.

Muddy Waters accused the company of overstating the number of TV screens it owns, and of overpaying for acquisitions to mask its losses.

Focus Media lashed back at the allegations, but a Muddy Waters report issued in November last year helped depress the value of the company's shares by nearly 40 percent.

After the takeover bid was announced, Muddy Waters said it believes investors are "clearly better off with Focus Media no longer participating in US capital markets".

"We note that many pension funds and endowments will presumably be the new owners of this company when the deal closes," Bloomberg News cited an announcement from Muddy Waters as saying.

"Should Focus be unable to meet its sizable debt obligations, we encourage regulators and fund investors to ask hard questions about the rationale and due diligence process underlying this purchase," Muddy Waters said.