Focus to spin out Internet ad company?

Published on: 2015-02-05

According to this press release:

Focus Media Holding Limited (Nasdaq: FMCN), China's leading multi-platform digital media company, today announced its wholly owned subsidiary Allyes Online Media Holding Ltd. ("Allyes"), a company that operates its internet advertising business, has submitted on a confidential basis to the U.S. Securities and Exchange Commission (the "SEC") a draft registration statement for a proposed initial public offering (or "IPO") of American depositary shares (or "ADSs") representing ordinary shares of Allyes. The purpose of the IPO, if completed, is to provide Allyes with greater flexibility in developing its leadership in the internet advertising market in China.

The IPO is expected to commence as market conditions permit, and is subject to Allyes' filing publicly with the SEC a registration statement on Form F-1 in compliance with the U.S. Securities Act of 1933, as amended (or the "Securities Act"), and the SEC's declaring such registration statement effective. The number and dollar amount of ADSs proposed to be offered and sold have not yet been determined.

Our take:

Focus has seen its outdoor digital signage business grow steadily, and while we initially suspected that the addition of mobile and Internet advertising services to their portfolio would lead to synergistic growth, government regulation in China has prevented that from coming to pass somewhat. Consequently, there has been speculation that Focus's Internet business might be holding back their stock price.  By spinning out a  separate entity, Focus will not only be able to separate the finances of the two units (thus allowing their core business's stock to go up, presumably), but they may also be able to attract investment targeted specifically at their Internet unit.

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