(Yicai) April 10 -- Shares of Focus Media Information Technology leaped after China's largest outdoor advertising firm revealed plans to acquire elevator ad peer Xinchao Media Group for CNY8.3 billion (USD1.1 billion), marking a strategic expansion into residential advertising.

Focus Media [SHE: 002027] closed 10 percent higher at CNY7.18 (USD1) in Shenzhen today, bringing its year-to-date gain to over 4 percent.

The out-of-home advertising company intends to purchase 100 percent of Xinchao's shares held by 50 shareholders -- including Zhang Jixue, a unit of JD.Com, and Baidu Online -- through a combination of share issuance and cash, the Shanghai-based firm announced yesterday. The shares will be issued at CNY5.68 apiece.

As part of the deal, Focus Media also plans to appoint Zhang Jixue, Xinchao’s chairman, as its vice president and chief growth officer.

The deal complements Focus Media’s current portfolio, which includes a vast network of digital screens and poster frames in commercial buildings, shopping malls, and cinemas. In contrast, Chengdu-based Xinchao specializes in residential communities, particularly through elevator digital screens.

Xinchao's net assets tallied CNY3.4 billion as of Sept. 30, last year. After preliminary negotiations, the estimated value of Xinchao's equity is CNY8.3 billion. In other words, Focus Media’s acquisition implies a net asset premium of almost 143 percent.

After the transaction, Focus Media intends to focus on its main business, add high-quality locations, optimize the density and structure of resources, and expand the coverage of the company’s urban life circle media network, it said.

According to a report by the China Advertising Association, Focus Media held a 14.5 percent share of China's outdoor advertising market last year, ranking first, while Xinchao came in third with a 2.7 percent share.

Founded in 2007, Xinchao has been operating at a loss in recent years. The company reported a net loss of CNY5.1 million (USD690,000) in the first three quarters of last year, following full-year losses of CNY280 million (USD38.1 million) in 2023 and CNY470 million in 2022, according to its financial disclosures.

Editor: Emmi Laine