CHINA> National
China's buys ad firm for $1 billion
Updated: 2008-12-23 11:03

BEIJING -- Sina Corp., a major Chinese Web portal, is venturing outside the Internet with a $1 billion-plus acquisition of most of a leading advertising firm, Focus Media.

The deal announced late Monday calls for Sina to acquire most of Focus Media, which has advertising space in office buildings, malls and airports. Its network includes banks of television screens in office building lobbies and poster frames in elevators.

The deal is a departure from Sina's online business, which has 280 million registered users, in an effort to expand its advertising business.

"We believe that this business combination will significantly extend our media reach and influence, reinforcing our position as a partner of choice in new-media advertising in China," CEO Charles Chao said in a statement.

The "out-of-home" networks Sina is acquiring allow advertisers to buy time on television monitors in public places or to put their posters in frames inside elevators.

The businesses being acquired up by Sina make up more than half of Focus Media's revenue and nearly three-quarters of its profit. Focus Media is keeping an Internet advertising division, a movie-theater advertising network and some billboards.

The Shanghai-based companies are both traded in the US on the Nasdaq stock market.

The deal calls for Sina, which is one of China's most recognized Internet brands and counts 280 million registered users, to pay for the acquisition with 47 million newly issued shares. Before the deal was announced, the purchase price was about $1.4 billion, based on Sina's shares closing price of $29.24 on Friday.

Shares of both companies dived on fears that Sina is piling too much on top of its core business, and that Focus Media is hacking off too much in an attempt to reverse a steep stock-price slide.

On Monday, Sina shares fell $4.99, or 17 percent, to close at $24.25, giving the acquisition a roughly $1.1 billion price tag.

Focus Media shares fell $1.78, or 16 percent, to $9.20. Focus Media's stock price has lost more than 80 percent of its value over the past year. The stock hit its 52-week high of $59.37 on January 3 and has been sliding steadily on fears about the company's viability.