SHANGHAI—Focus Media, a Chinese outdoor-advertising-display company that delisted in the U.S. two years ago, has found a vehicle through which to list in China after a previous attempt fell through.

If the planned listing goes through, it would value Focus Media at more than twice its $2.6 billion valuation when it delisted from the Nasdaq Stock Market in 2013—despite the continuing market turmoil in China.

The plan calls for Focus Media to be bought out by Hedy Holding, a Shenzhen-listed maker of computers and electronic equipment, according to Hedy Holding's Aug. 31 filing to the Shenzhen Stock Exchange. The $7.2 billion "reverse merger" would include cash, newly issued shares and an asset swap. After the deal, Media Management (HK)—controlled by Focus Media CEO Jason Jiang—would be Hedy Holding's biggest shareholder, with a 24.77% stake, according to the filing.

Focus Media had earlier planned a similar deal with Shenzhen-listed plastics maker Jiangsu Hongda New Material, but dropped it when regulatory approvals were delayed by an investigation of Jiangsu Hongda's former chairman for suspected violations of securities law.

In a reverse merger, sometimes known as a backdoor listing, a company lists by being acquired by a publicly traded company, often one with less brand recognition. Less costly than an IPO, it also involves less regulatory oversight.

Though the new listing, if it happens, will raise Focus Media's valuation, its difficult experience doesn't bode well for the many U.S.-listed Chinese companies with take-private and relisting plans of their own. They announced their plans at a time when China's stock market was booming, but the rout that started in June has hit the U.S. stock prices of many of those companies, with the investors in the $9 billion Qihoo 360 buyout—the biggest—considering a cut in the price they are offering.

Hedy Holding plans to finance its purchase of Focus Media, whose advertisements run on office elevators across China, by placing up to 5 billion shares privately at no less than 11.38 yuan ($1.79) a share, according to its filing. Shares of Hedy Holding resumed trading on Wednesday after a near four-month suspension for "major event planning." They gained the daily 10% maximum to finish at 15.05 yuan.

Trading in Hongda New Material's shares, which likewise had been suspended since May, resumed Tuesday following cancellation of the Focus Media acquisition. They fell by the 10% limit to close at 7.24 yuan.

Focus Media dropped its much-anticipated Hongda plan due to a lack of development in the investigation of its former chairman, Zhu Dehong, Hongda said in its filing Monday. Hongda had said in June that the China Securities Regulatory Commission was investigating Mr. Zhu; he resigned a week later. Hongda announced its deal with Focus Media on June 3.

Focus Media went public in 2005 in a $172 million IPO. It was taken private eight years later—after questions about its accounting by short seller Muddy Waters hammered its stock price—in a transaction backed by CEO Mr. Jiang and private-equity firms including Carlyle Group . At the time, the $3 billion delisting was China's biggest leveraged buyout.

Yifan Xie

 

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(END) Dow Jones Newswires

September 02, 2015 06:15 ET (10:15 GMT)

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