A man stands near the logo of Alibaba Group at the company's newly-launched office in Kuala Lumpur, Malaysia June 18, 2018. - REUTERS
LOS ANGELES: Chinese e-commerce giant Alibaba has agreed to pay $2.23 billion for a roughly 10% stake in Focus Media, the digital advertising company which operates screens in subways and elevators across China.
The move holds the potential to boost Alibaba's core e-commerce operations. But it also extends Alibaba's as a media operator and may also signal a growing the company's interest in the advertising sector. Alibaba is reported to be considering buying a stake in ad agency WPP China.
The multilayered deal with Focus sees Alibaba pay $1.43 billion for a 6.6% stake in Shanghai-based Focus Media, whose shares are listed on the Shenzhen stock market.
The company also will pay $505 million for a 10% stake in an entity controlled by Focus Media founder and chairman Jason Nanchun Jiang, which controls 23% of Focus Media.
And a non-consolidated, related party of Alibaba, New Retail Strategic Opportunities Fund L.P., will acquire a 1.4% interest in Focus Media. In addition, Alibaba said it plans to acquire another 5% interest in Focus Media within the next 12 months.
"The deal offers synergies with Alimama, Alibaba's largest digital-marketing platform," Alibaba said. It sees increasing exposure to the public for brands selling on its platforms. That in turn can help with Alibaba's big-data activities.
Focus is currently in 300 Chinese cities, and reaches 200 million middle-class consumers. Its medium-term ambition is to operate 5 million terminals in 500 Chinese cities and reach 500 million consumers.
News reports emerged over the weekend that Alibaba, tech rival Tencent, and tech investment group China Media Capital are in early stage talks to buy a minority stake in WPP China, the Chinese unit of global advertising giant WPP.
Plans to sell a piece of the business are understood to pre-date the dramatic exit of WPP CEO Martin Sorrell earlier this year. The reports put a value of $2 billion on WPP China.
CMC, which has several media investments including TVB, Flagship Entertainment, and BaseFX, has been involved with WPP for several years. WPP is an investor in some of the funds operated by CMC.
And CMC chairman Li Ruigang has been a WPP non-executive director since 2012.
Alibaba's existing media and entertainment operations include ownership of video streaming giant Youku; a controlling shareholding in film investment, distribution and marketing group Alibaba Pictures; and ownership of Hong Kong's leading English-language newspaper, the South China Morning Post.- Reuters
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