MaHui | Focus Media (002027) Plans to Acquire MaHui Member Xinchao Media — 36Kr

Nanchun Jiang believes the industry's competitive dynamics are far from over.

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• This article is republished from 36Kr Future Consumption

On April 9, Focus Media (002027) announced its plan to acquire Xinchao Media. According to the filing, Focus Media intends to purchase 100% of Xinchao Media's shares through a combination of stock issuance and cash payment, with a preliminary valuation of 8.3 billion yuan. The transaction will rely primarily on equity consideration, with a small portion paid in cash. Xinchao Media's previous investors include Baidu, JD.com, and Red Star Macalline. Upon completion, Xinchao Media will become a wholly-owned subsidiary of Focus Media.

In Focus Media's tenth year, Xinchao Media emerged, also operating building advertising with a focus on third- and fourth-tier cities and mid-to-low-end residential communities. Low pricing became its key competitive weapon. Though it had never turned a profit, it ranked third in China's outdoor advertising market and secured funding from Baidu and JD.com. With this deal, a 12-year rivalry and entanglement finally comes to a close.

The evening of the announcement, 36Kr conducted an exclusive emergency interview with Nanchun Jiang, founder and chairman of Focus Media, and Jixue Zhang, founder and chairman of Xinchao Media Group. Both disclosed their thinking behind the transaction and post-acquisition business arrangements.

On this deal, 36Kr had three main questions.

First, why did the deal happen, and why now — what signal does this send?

On the timing of the merger, Jiang told 36Kr that it was driven first by operational needs; at the same time, the policy environment encouraging M&A made this an opportune moment — since the CSRC issued its "Six Measures for M&A" last September to encourage merger activity, A-share M&A has become more active.

Second, how should the 8.3 billion yuan valuation and equity-heavy deal structure be viewed?

Regarding the 8.3 billion yuan price tag, some industry voices after the announcement called it a "steal" — in Xinchao's previous funding round, when JD.com invested in 2021, the company was valued at 16 billion yuan; looking at Xinchao's full funding history, it had raised nearly 8 billion yuan in total, with a peak valuation of 20 billion yuan. Additionally, Xinchao holds ample cash on its books. Thus, after the announcement, Zhang proactively addressed the most frequently asked question: "Why sell at such a low price? Is this a fire sale?"

Zhang's response was that a cash transaction would indeed be a fire sale, but because it's a stock deal, there's upside ahead. Jiang, meanwhile, told 36Kr that based on industry-standard valuations for building advertising点位 (point-of-display assets), the price is "fair."

Addressing outside questions of "Why sell? Is Xinchao in trouble?" Zhang said, "On the contrary, Xinchao today is in the best shape it's ever been. Core operations are profitable, and cash reserves are abundant." According to the filing, for 2022, 2023, and the first nine months of 2024, Xinchao Media reported revenue of 1.94 billion / 1.93 billion / 1.5 billion yuan, with unaudited net profits of -470 million, -280 million, and -510 million yuan, respectively. Additionally, Shenwan Media estimates Xinchao's 2024 revenue at 2 billion yuan, and according to research, Xinchao achieved profitability in Q4 2024 and for full-year 2024.

Third, what impact will this transaction have on Focus Media and the outdoor advertising market?

Following the deal, concentration in the outdoor advertising industry will rise further. China Advertising Association data shows Focus Media currently ranks first in China's outdoor advertising market with a 14.5% share, enjoying a leading position; Xinchao Media ranks third with 2.7%, behind second-place JCDecaux China. Combined, the two companies will command over 17% market share.

More importantly, this horizontal merger will deliver predictable integration benefits. Looking at Focus Media's history, it has completed multiple industry consolidations, including the 2005 acquisition of Framedia and the 2006 acquisition of TargetMedia. Its past horizontal mergers have consistently yielded greater competitive advantages.

Specifically, after being acquired, Xinchao will gain access to Focus Media's client resources, and the value of its advertising点位 is expected to rise. Shenwan research shows Xinchao Media operates 740,000点位, generating 2 billion yuan in revenue, or roughly 2,700 yuan per screen. Post-acquisition, assuming Xinchao reaches 5,000 yuan per screen at a 30% net margin, the 740,000点位 could contribute 3.7 billion yuan in revenue and 1.1 billion yuan in profit.

Zhang will take on the role of Chief Growth Officer at Focus Media Group. He believes that "internet traffic is increasingly expensive today, and for businesses to make money, new marketing channels are needed," with his strengths lying in "digital platform operations, brand-performance synergy, and performance attribution."

Below is the full transcript of 36Kr's interview with Nanchun Jiang and Jixue Zhang.

36Kr: Focus Media has completed its acquisition of Xinchao. After 12 years of competition, what are you feeling right now having just acquired your longtime rival?

Nanchun Jiang: This acquisition is similar to when we acquired TargetMedia back then. TargetMedia held about 28% market share at the time, and this too is normal market behavior.

Xinchao's community building resources effectively complement our coverage network, particularly extending our reach in non-core areas. Focus Media had previously focused mainly on premium office buildings, which was relatively centralized, while Xinchao covered our periphery, comparatively more decentralized. We believe apartment building audiences are as valuable as office building audiences for FMCG advertisers.

Our past competition was never a fight to the death — Focus Media has always been a company far ahead in this space. Outside observers may be overinterpreting the significance of this acquisition. This is a normal acquisition, and a good one. Buying this company will give us more comprehensive audience coverage.

36Kr: Focus Media has completed multiple acquisitions in its history. How is this one different?

Nanchun Jiang: It's fundamentally the same as acquiring TargetMedia — both are consolidations within the elevator media industry. As the industry's pioneer, Focus Media has ample experience with such mergers. Compared to cross-industry acquisitions, we're better at strategic moves in familiar territory.

We're probably the world's foremost experts on elevator media, bar none. I believe acquiring an elevator media company is a relatively safe and reliable choice for Focus Media — there's no question about it.

36Kr: The market is focused on the timing of this merger. There have been several notable M&A cases in the capital markets since last year. How do you view the current M&A window?

Nanchun Jiang: We prioritize business synergy. This acquisition addresses Focus Media's operational needs, making a strategic addition in a high-certainty area. Xinchao's layout in peripheral communities happens to fill our gap. At the same time, the policy environment is very favorable now — policy encouragement and support for M&A is critical.

36Kr: Do you consider 8.3 billion yuan for Xinchao a very good deal?

Nanchun Jiang: I believe this is a fair price. For shareholders on both sides, it's relatively equitable — there's no question of a steal or not.

36Kr: What considerations led to using stock payment rather than cash?

Nanchun Jiang: Stock payment is the better choice for both sides. We prefer to align long-term with strategic investors, with shared long-term interests to grow the pie together. Xinchao shareholders like JD.com and Baidu are long-term investors, and holding Focus Media stock fits their investment strategies. These shareholders also see long-term value in Focus Media stock.

36Kr: What impact will this merger have on industry dynamics? Does it mean the end of price wars?

Nanchun Jiang: I believe price wars will always happen — market competition is ever-present. Elevator media is just one segment of outdoor media; our real competition comes from the entire media ecosystem. Our main competitors aren't Xinchao — we also compete with other outdoor media categories, video media, and internet media. I believe the overall market remains very open and competitive. Moreover, there are still several hundred elevator media companies out there.

The main significance of this acquisition is expanding Focus Media's user coverage scale and territory. But the competitive landscape won't change because of it. Price wars are a market constant — they don't end with a single merger.

36Kr: Can you summarize the core value of this acquisition?

Nanchun Jiang: The fundamental value lies in business expansion. By integrating Xinchao's resources, Focus Media achieves more complete audience coverage, which carries strategic significance for long-term development.

In the near term, people may wonder about any stock price impact — I don't think we can judge that. As for whether it's a good deal or not, different people will have different views. I believe the transaction is first and foremost fair, and from a long-term perspective, I believe it's a good deal.

36Kr: When did discussions on this acquisition begin, how long did they take, and how were they facilitated? How did Focus Media win you over when you had previously insisted on remaining independent?

Jixue Zhang: We've known each other a long time and communicated frequently, but the decision came quickly. Our shared understanding and perspectives on the advertising industry's development facilitated the deal.

36Kr: Does the merger mean the end of price wars in offline building advertising? What changes will this market see?

Jixue Zhang: China's annual advertising spend is 1.4 trillion yuan, outdoor advertising accounts for over 80 billion, and elevator advertising is less than 200 billion — the growth potential is enormous. Going forward, elevator advertising will evolve from traditional brand-centric models to digital models combining brand and traffic synergy — there's vast room for growth. Currently, elevator advertising serves fewer than 10,000 clients annually; in the future digital out-of-home era, with AI and algorithm empowerment, over 100,000 SMEs will equally benefit from the democratization of traffic dividends brought by China's digital elevator media. We shouldn't simply fight in the competitive arena — we should promote healthy industry development and bring China's excellent business models global.

36Kr: How do Xinchao's investors view this deal? Did they push for the acquisition?

Jixue Zhang: Capital is the smartest thing in the world — investors aim to profit. Having a better path to indirect public listing while supporting the company's development, and being eager to see China produce a world-class outdoor advertising company, investors were certainly willing to push this forward. With complementary strengths, investors believe the combined larger media network will create 1+1>2 effects and are optimistic about post-merger growth.