PE buyers in $3.7bn Focus Media buyout

The Carlyle Group, FountainVest Partners and CITIC Capital will take the US-listed Chinese company private in China’s largest ever leveraged buyout.

A private equity group of investors are set to close what will be the largest-ever leveraged buyout of a Chinese company.

A consortium of firms led by Carlyle, FountainVest and CITIC Capital has entered into a definitive agreement to acquire Shanghai-based digital media company Focus Media in a take-private transaction, according to a statement. China Everbright is also part of the consortium, although CDH Investments, which was previously rumoured to be a bidder, was not named in the statement.

JPMorgan Asia Pacific, Citigroup and Credit Suisse are among the financial advisors on the transaction.

The total deal value is expected to be $3.7 billion, with the group paying $5.50 per ordinary share or $27.50 per American depository share of the Nasdaq-listed company, according to the statement. This represents a premium of 17.6 percent over Focus's closing price of $23.38 per American depository share on 10 August 2012 – the day before the company announced its intention to go private.

The deal is expected to close during the second quarter of 2013 and is subject to the agreement of shareholders representing at least two-thirds of the company shares. Focus’ board of directors has already approved the transaction and recommended it to shareholders, while an independent committee has also unanimously recommended the offer.

Focus Media is one of many US-listed Chinese companies to be suffering from a low share price, largely due to previous accusations of fraud levelled at other such businesses.

Focus itself has been the subject of an investigation by US research firm Muddy Waters, which has released five reports on the business since 2011. In January, it accused Focus of impropriety and overstating its assets.

The US-based research firm reportedly released a statement in response to the proposed take-private deal, saying: “Based on our well-documented conclusions of fraud and self-dealing, investors are clearly better off with Focus Media no longer participating in US capital markets. We note that many pension funds and endowments will presumably be the new owners of this company when the deal closes.”

Focus denies any allegations of wrong-doing.