Focus Media Holding Ltd., the Chinese advertising company subject to a $3.5 billion buyout offer, sank the most since September after a report that one of the private equity firms involved in the bid has dropped out.
Shares of Focus Media slipped 2.5 percent to $24.12 in New York, the steepest slide since Sept. 24. Trading volumes were more than four times the daily average over the past three months and the stock was among the 10 biggest decliners on the Bloomberg China-US Equity Index of the most-traded Chinese stocks in New York.
CDH Investments Fund Management Co., based in Beijing, has withdrawn from the August bid to take Focus Media private, Dow Jones Newswires said, citing a person with knowledge of the deal that it didn’t identify. CDH and Jing Lu, responsible for Focus Media’s investor and media relations, didn’t immediately reply to e-mails sent after business hours in the Chinese capital. The buyer consortium includes Washington-based Carlyle Group LP, whose spokesman Chris Ullman declined to comment on the report.
“The market was already kind-of skeptical of this take-private” deal, Sachin Shah, a special-situations and merger-arbitrage strategist at Tullett Prebon Plc, said by phone from Jersey City, New Jersey. “With that backdrop, you basically have one of the investors saying, ‘We don’t think it may be attractive.’ Not only has it scared investors, this is what the shorts and skeptics are looking for.”
CDH was to invest about $200 million in the buyout and dropped out because it felt returns on the investment weren’t sufficient, according to the Dow Jones report. Focus Media shares have lost 8.1 percent since the offer was announced Aug. 13. The consortium also includes Chinese firms FountainVest Partners, Citic Capital Partners and China Everbright Ltd.
Focus Media has been targeted by short seller Muddy Waters LLP, which said last November that the Shanghai-based company exaggerated its advertising network. Focus Media said the allegations lacked merit.