Focus Media Says SEC Probes Possible Securities Violation

Focus Media Holding Ltd. (FMCN) said the U.S. Securities and Exchange Commission is probing potential “violations” of securities law, with special attention to purchases and resales of companies including Allyes Online Media Holding.

The Shanghai-based advertising company is cooperating with the SEC, it said in a regulatory filing on Jan. 18 about its going-private transaction with Carlyle Group LP (CG) and other firms.

“On March 14, 2012, the SEC informed the company that it was initiating a non-public investigation into whether there had been any violations of the federal securities laws,” it said in the Jan. 18 filing. “The SEC advised the company that the existence of the investigation should not be construed as an indication by the SEC or its staff that the company or any of its officers or directors had violated any of the federal securities laws,” it said.

Focus Media fell 2.7 percent to $25.09 at 12:25 p.m. New York time in Nasdaq Stock Market trading.

The Allyes deal, involving the resale of an acquisition of the Internet ad company back to the original owners, was one of a series queried in 2010 by the SEC in letters to the company. The regulator noted in its letters, published later on its website, an “apparent pattern” and asked for explanations.

Later, short-seller Muddy Waters LLC published a report that also criticized the deals.

Focus Media agreed in December to be bought by a group of investors led by Carlyle Group in a $3.7 billion deal that will be China’s largest leveraged buyout.

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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Jan. 24 (Bloomberg) -- Margaret Conley reports on an investigation of Focus Media. She speaks on Bloomberg Television's "First Up." (Source: Bloomberg)