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French ad firm plans takeover in China push

IPO

JCDecaux, the world's second-largest outdoor advertiser, plans to take over Growth Enterprise Market-listed MediaNation as a platform to enter the mainland market.

JCDecaux Pearl & Dean, a subsidiary of the French-based outdoor advertising giant, is to buy 79.67 per cent of MediaNation's shares from SMI Investors and Warburg Pincus Ventures for $405.19 million, or 28.2 cents per share.

Under listing rules, JCDecaux must also make an unconditional general offer for the rest of the shares held by public investors. The remaining 366.63 million shares will cost it an additional $103.39 million.

The offer price represents a premium of 38.91 per cent to the close of 20.3 cents before the company suspended trading on March 17.

The acquisition is conditional on the completion of due diligence by JCDecaux on outdoor advertiser MediaNation from today until April 12, which can be extended to April 15, according to an announcement through the Growth Enterprise Market.

'[JCDecaux] anticipates high future growth in the outdoor advertising market' in the mainland, MediaNation said in the announcement.

'Through the combined resources, it is the intention of JCDecaux to grow its presence in the outdoor advertising market' in the mainland.

CLSA and Anglo Chinese Corporate Finance are the advisers to the deal.

MediaNation, which will resume trading today, has seen its shares rise 53.79 per cent this year.

'It is a perfect and logical fit,' said a source close to the deal.

'MediaNation is leading the market in China's transport sector and street furniture. It is a platform for JCDecaux to enter China.'

JCDecaux Pearl & Dean is the advertising agent for MTR Corp and Hong Kong International Airport.

The company's French parent recorded a net profit of Euro78.1 million ($786.95 million) last year, on sales of Euro1.63 billion, including 6 per cent generated in Asia.

It also has exclusive street furniture advertising rights in Macau.

MediaNation went public on the second board in 2002 with an initial public offering price of $2.60 per share and competed with peers such as RoadShow Holdings, Clear Media and Media Partners International.

However, the company then struggled due to its undersubscribed offering, a failed merger and a big management reshuffle.

MediaNation said last week that it had returned to profit last year with net earnings of $2.52 million following sales of $439.6 million.

MediaNation's long-term advertising rights for the underground railway system in Beijing and two of three rail lines in Shanghai proved an attractive element for JCDecaux.

'MediaNation was not worth buying two years ago,' the source said.

'But it is now a crack company with the Olympics in 2008 and the launch of 20 new metro lines in the next five to 10 years.'

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