Focus Media mops up market share with CGen acquisition

Focus Media Holding, the mainland's largest outdoor media firm, moved to cement its domestic market dominance last week by acquiring in-store advertising network rival CGen Digital Media in a deal that could be worth US$350 million.

Shanghai-based CGen aborted a planned listing in the United States when it agreed to be purchased by Nasdaq-listed Focus Media for US$168 million in cash, and another US$181.6 million in cash and stock if it met certain earnings targets during the next two years.

'With its cash and liquidity, Focus Media has nothing to lose in buying CGen, which is at a lower price-earning ratio,' said Vincent Chan, former North Asia head at venture capital firm Jafco Asia, which was an early investor in CGen.

Focus Media valued CGen at 17.5 times its expected earnings next year. Focus Media, also based in Shanghai, is trading at about 27 times its expected earnings for next year, according to Morgan Stanley.

'The acquisition will result in fewer competitors for Focus Media. There is no way Focus Media would have let one more of its competitors get listed in the US. AirMedia and VisionChina have already listed on Nasdaq,' Mr Chan said.

CGen, which screens flat-panel television advertisements in hypermarkets on the mainland, filed its listing documents with the US Securities and Exchange Commission on November 14 and raised up to US$138 million. It was to be listed on Nasdaq last week until Focus Media presented its acquisition package.