Focus Media grabs slice of silver screen adverts with ACL purchase
Focus Media, one of China's leading outdoor advertising companies, is seeking to grab the attention of cinemagoers with the purchase of start-up company Appreciate Capital Ltd (ACL).
Nasdaq-listed Focus Media paid an initial deposit of US$2.8 million for 70 per cent of ACL, with further payments to depend on the unit's performance over the next three years.
ACL, which leases three minutes of screen time before each movie then sells the time slots to advertisers, is less than a year old.
'It is hard to pinpoint an exact number [for future payments], as the company is so young but it won't be a large amount,' said Focus Media chief financial officer Daniel Wu. 'The price is set to be single-digit price-earnings multiple.'
ACL has focused its business on affluent cities such as Beijing, Shanghai and Shenzhen. The 120 movie theatres it covers represent about 85 per cent of the theatre ticket revenue in China.
'The acquisition fits well with our current strategy which is to catch the eye of urban consumers for advertising,' said Mr Wu.
Moviegoers in China were usually young and belonged to the middle to high-income groups, which makes them highly appealing to many advertisers, he said.
Focus Media has more than 2,000 international and domestic advertisers as customers.
ACL is the latest in a string of purchases that helped Focus Media double revenue in the second quarter to US$50.7 million and boost earnings about 280 per cent compared with a year earlier to US$16.7 million.
Acquisitions are also helping Focus Media expand beyond its network of LCD advertising panels, familiar in office lift lobbies across China. Revenue from the office building network accounted for 62 per cent of total second-quarter revenue compared with 92 per cent a year earlier.
Focus Media in January bought smaller rival Target Media which had about 25,000 LCD advertising panels for US$325 million in January. The combined network now has 70,000 panels in office buildings and a further 35,000 in supermarkets and convenience stores.
Framedia, acquired in October last year, brought in 82,000 poster frames in resident buildings while the March purchase of Dotad has added advertising over mobile telephones.
Focus Media shares, which were listed in Nasdaq in July last year at US$17, closed at US$59.82 on Friday.
