Sina Corp is to terminate a deal to buy the out-of-home business of Focus Media as it failed to get approval from China's Ministry of Commerce before the deadline.

The companies announced in December that Sina would buy the out-of-home digital advertising business of Focus Media in an all-stock transaction valued at US$1.4 billion. However, the deal failed to pass a government antitrust review. The parties had until September 30 to negotiate for an extension or walkaway from the deal.

"The prolonged process of the pending deal has brought a negative impact to the business operation of both companies," Sina Chief Executive Officer Charles Chao said.

However, both sides will continue to cooperate on a business level.

"We will continue our cooperation with Sina although we felt very disappointed the deal failed to meet regulatory approval before the deadline. I think we'll still be able to achieve 60 to 70 percent of the results we hope to see had the merger been successful," Jason Jiang, chairman and CEO of Focus Media said yesterday.

"We'll stick to our business model to grab market share in outdoor advertising, and we currently have no plans for other merger and acquisition deals," he said.

Focus Media has seen net losses for three consecutive quarters as the global financial crisis hurt advertisement spending. Net loss in the second quarter of this year was US$22.7 million, compared to US$5.67 million in the first quarter.

Sina, the biggest Chinese Internet portal by advertising revenue, saw net income for the second quarter at US$13.1 million, up 37 percent from the previous quarter but down 41 percent from US$22.5 million in the same period a year earlier.

Meanwhile, Chao and his management team are to become the biggest shareholders in Sina in the first management buyout in an Internet company in China.

Sina Corp will issue 560 million new ordinary shares to New-Wave Investment Holding Co, which is under control of Chao and other members of his team.

Chao and his team will buy back these new shares for US$180 million. New-Wave Investment will become the biggest shareholder with a 9.4-percent stake in Sina.

The deal has already won approval from Sina's board.