Dec. 22 (Bloomberg) -- Sina Corp., operator of China’s biggest Web portal, may buy part of Focus Media Holding Ltd. for about $1 billion to expand into non-Internet advertising, four people familiar with the matter said.

The acquisition of Focus Media’s digital out-of-home operations, which sell advertising in elevators and office buildings, may be announced as early as today, the people said, declining to be identified before a public disclosure. Sina plans to issue stock for the purchase, two of the people said.

Sina would gain at least 120,000 flat-panel television screens in office buildings and public spaces in more than 90 cities, broadening its advertising sales beyond the Internet. Shares of Focus Media, China’s largest listed advertising company, have slumped 81 percent this year, making it an acquisition target in an advertising market forecast by JPMorgan Chase & Co. to expand 10 percent next year.

“China’s ad market will maintain very solid growth next year because of demand from both multinational and domestic companies,” said Steven Chang, chief executive officer at advertising agency Optimedia China. “Focus Media has very strong distribution, but is lacking in content-production expertise, and Sina will help rectify this.”

The cost of the acquisition may be about $1.3 billion, depending on the final assets to be purchased, one of the people said. Sina Chief Executive Officer Charles Chao and Focus Media spokeswoman Jing Lu declined to comment.

Shares Surge

Focus Media jumped 19 percent in U.S. trading on Dec. 19 amid speculation Google Inc. may buy the company’s online- advertising unit, giving it a market value of $1.4 billion.

Sina’s stock gained 0.2 percent to $29.24 that day and is down 34 percent for the year. The sale would require approval from two-thirds of Cayman Island-registered Focus Media’s board and doesn’t need the backing of its shareholders, two of the people said.

The acquisition of Focus Media’s biggest division may help lift earnings at Sina, which forecast Nov. 13 that sales this quarter may decline as much as 7 percent from three months earlier to $98 million, as advertising revenue falls after the end of the Beijing Olympic Games.

Sina derived 73 percent of its sales from online advertising in the three months to Sept. 30, as clients including Nike Inc. and Volkswagen AG boosted marketing spending during the Olympics. The Chinese company also sells mobile-phone content such as ring tones and messaging services.

Sina, which had $562.5 million in cash and equivalents at the end of September, said this month it will use $100 million to buy back its stock, following other Chinese Internet companies including Baidu Inc. and Sohu.com Inc.

Higher Earnings

Focus Media, controlled by Chairman Jason Jiang, said last month third-quarter profit rose 10 percent to $51.4 million as sales in its digital out-of-home operations jumped 64 percent. The division accounted for 68 percent of revenue in the period.

Focus Media has acquired companies including CGEN Digital Media and Dotad Media Holdings Ltd. to expand into advertising in other venues such as supermarkets.

Earlier this month, Focus Media said it will book a one-time charge of $200 million this quarter for costs related to the purchase of CGEN, which sells advertising in retail stores.

The company also said it will record a $20 million charge for losses in its mobile-phone advertising business. Focus Media bought Dotad in 2006 to offer advertising on handsets.

To contact the reporters on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net; Cathy Chan in Hong Kong at kchan14@bloomberg.net.

Last Updated: December 22, 2008 06:37 EST