Chinese digital media company Focus Media Holding Ltd. said Monday it agreed to buy CGEN Digital Media Co., which operates an in-store digital ad network in China, for $168.4 million in cash.
If CGEN meets certain earnings targets in the two years after the deal closes, Focus Media said it will pay up to $181.6 million more in cash and newly issued stock.
CGEN had been planning to raise about $91.9 million in an initial public offering of roughly 9.2 million American Depositary Shares, which were expected to debut on the Nasdaq Global Market this week.
CGEN would have become the third Chinese digital advertising company to go public in the United States in the last two months, following AirMedia Group Inc. and VisionChina Media.
Shares of AirMedia, which manages an advertising network in Chinese airports, are currently trading about 33 percent above their offer price of $15. VisionChina, which debuted last week, hasn't done as well, but shares have yet to trade below their offer price of $8.
Focus Media was the pioneer of the out-of-home digital advertising industry in China, said Tian Hou, an analyst at Pali Capital Research. Shares of Focus Media, which went public in mid-July 2005, are currently trading at more than 200 percent above their offering price of $17.
As of Oct. 15, CGEN's network of digital flat-panel displays was carried in 534 stores across 65 cities in China, with an estimated target audience of about 80 million shoppers based on retailer data.
For the six months ended June 30, CGEN reported earnings of $7.2 million on net revenue of $18.7 million.
Focus expects the acquisition to increase its earnings per share, excluding any intangible amortization from the deal.
The purchase, which Focus said will expand its digital ad displays in large chain stores in China, is expected to close in the first quarter of next year.
Focus Media shares rose $2.05, or 3.7 percent, to $57.01 in afternoon trading.
