Alibaba Takes to China's Digital Marketing Sector With Focus Media
China's e-commerce giant is investing $2.2 billion into China's largest online marketing firm in its push to the new sector.
(Updated Thursday with quote from Alibaba)
Chinese e-commerce behemoth, Alibaba Group Holding Ltd. (NYSE: BABA) has signed an agreement to acquire a minority stake in Focus Media Information Technology Co. Ltd., China's largest online marketing firm.
Under the agreement, Alibaba would purchase a 5.3 percent stake in Focus Media, while its subsidiaries, Alibaba Investment Ltd., and New Retail Strategic Opportunity Fund, would jointly acquire a 2.7 percent equity. The total funding comes to 15 billion yuan ($2.2 billion), according to Caixin Global news agency. Alibaba has an option to acquire an additional 5 percent in the next year.
In addition, Alibaba plans to invest $504.7 million for a 10 percent stake in Media Management Holding Ltd., controlled by Focus Media's chairman, Jason Jiang, by subscribing to newly issued shares, the company said. The investment would give the conglomerate an additional 2.3 percent interest in Focus Media.
A chart showing advertising effectiveness of various media.
(Source: Focus Media)
The investment in Shenzhen-listed Focus Media marks the e-commerce giant's expansion into China's digital media sector.
"By partnering with Focus Media, which has set a medium-term goal of having five million terminals in 500 Chinese cities and reaching 500 million middle-class consumers, Alibaba can offer new digital channels through which the brands selling on its e-commerce platforms can connect with these consumers and their rising spending power," the company said in a Thursday report on its official website, Alizila.com.
Focus Media traded its stock on the Nasdaq between 2005 and 2013 before it was privatized and returned to domestic markets.
The stock of Alibaba was trading at $187.39 per American depositary share, down nearly 2 percent by noon on Thursday.