Chinese Focus on Net ad firm


China's largest out-of-home advertising group, Focus Media Holding Ltd., said that it will buy Internet advertising company Allyes AdNetwork for up to $300 million in an effort to expand its presence in one of the fastest-growing ad markets in the world.

Nasdaq-listed Focus, which operates flatscreen TVs that display advertisements in convenience stores, offices and apartment building lobbies, said that it will pay Allyes in cash and stock.

"This acquisition is strategically important to Focus Media," Shanghai-headquartered Focus chairman Jason Jiang said. "It extends our media platform to one of the fastest-growing media segments in China, the Internet, reaching high-end urban consumers."

Focus will pay $70 million in cash for Allyes along with $155 million in new shares, the company said.

Focus will pay as much as $75 million more in stock if Allyes meets certain earnings targets through March 31, 2009.

China is set to replace Japan as the world's second-largest advertising market after the U.S. by 2010, data from media monitoring company A.C. Nielsen shows.

Apart from Focus and Allyes, another beneficiary of the deal is U.S. venture capital company IDG VC, which is a major investor in both Chinese firms.

In January, Focus, China's third-largest advertising company by ad revenue, denied local media reports that it would acquire Allyes.

Last year, Focus bought five new businesses with cash raised from the sale of four million shares.

Its sales have more than tripled in the last year and its stock price on the Nasdaq has risen fivefold since listing in July 2005.

Allyes has decided to call off plans to list on the Nasdaq market after Focus Media said it planned buy the firm.

Reuters contributed to this report.