Fried, Frank, Harris, Shriver & Jacobson, Simpson Thacher & Bartlett, Skadden, Arps, Slate, Meagher & Flom, Sullivan & Cromwell, Zhong Lun Law Firm and Conyers Dill & Pearman are acting on the proposed $3.5 billion management buyout of U.S.-listed Chinese display advertising company Focus Media Holding (Focus Media). The delisting, if successful, will be the biggest buyout of a US-listed Chinese company ever.
A consortium, which includes U.S. private equity firm the Carlyle Group, CITIC Capital Partners, CDH Investments, China Everbright Ltd, FountainVest Partners and Focus Media's chairman Jason Nanchun Jiang has proposed an offer to Focus Media. It has offered $27 in cash per American depositary share, valuing the shares at a 15 percent premium over the last trading price. The stock had risen about 13 percent in the last two trading days prior to the announcement. Jiang is the largest shareholder, with 18 percent of shares outstanding. The second-largest shareholder is Shanghai-based Fosun International that owns 17 percent.
Focus Media’s board has formed a committee of independent directors to consider the offer. Fosun said in a statement that it believes the proposal represents an attractive option, adding that it does not anticipate supporting any competing proposals which do not include Jiang as a participant.
The consortium offer is the latest, and biggest by some distance, in a string of attempted management-led buyouts by U.S.-listed Chinese companies, whose reputation among U.S. investors has suffered after a series of alleged accounting scandals.
The company is also currently raising a $1.5 billion leveraged loan to back the buyout, banking sources told Reuters. Though the loan is in early stages and terms are still being finalised, Citigroup, Credit Suisse and the DBS Bank said that they are confident in underwriting the loan financing.
"We think the (Focus Media) stock has been undervalued trading at high single-digit PE when the earnings growth is expected to be above 20 to 25 percent," Macquarie Securities analyst Jiong Shao told Reuters."Focus Media has a great business, generates tonnes of cash, pays dividend, and buys back its shares."
Advising Focus Media is a Hong Kong-based Simpson Thacher team led by M&A partner Kathryn King Sudol, and corporate partners Chris Lin and Daniel Fertig. M&A associate Richard Lin is assisting.
The Fried Frank team acting for the private equity players in the consortium consists of Hong Kong partners Douglas Freeman and Victor Chen, New York-based partner William McGinness, partner Kevin Harnisch in Washington, D.C., and associates Victoria Zhu, Echo Zhn, Wingyan Ng, and William Macholz.
Sullivan & Cromwell is also serving as international counsel to this group of sponsors. The Hong Kong-based team is being led by partners William Chua and Michael DeSombre.
Beijing Skadden partners Peter Huang and Michael Gisser are representing Focus Media chairman Jiang.
Zhong Lun is PRC counsel to the consortium, with Conyers Dill & Pearman advising on Cayman Islands Law.
Candice Mak is North Asia Editor at ALB. Follow us on Twitter: @ALB_Magazine.
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