China’s BlueFocus Seeks to Expand Into U.S. as Profits Grow

Digitally focused holding company has ambitious goals

If you want to set up a new industry holding company today, it might look a lot like what BlueFocus chief Oscar Zhao is trying to build: a digitally focused global entity with strong roots in the world’s largest, booming consumer economy, China. If little known in the West, the 44-year-old, who was part of a Beijing PR startup 18 years ago, now sits atop one of the fastest-growing communications groups with a market capitalization of $4 billion. It’s expanded from PR into other marketing services and works for multinationals like VW, Pepsi, Microsoft, Audi and BMW, as well as China’s Lenovo and Baidu.

This year, BlueFocus has its sights on North America for acquisitions. (It’s already looked at, and passed on, Montreal-based digital products and services network Nurun.) Zhao, who wants BlueFocus to be a digital version of WPP, has said he currently has $300 million earmarked for U.S. and European acquisitions. The company, which listed on the Shenzhen Stock Exchange in 2010, promises investors it will grow tenfold over the next decade, aiming for revenue of $3 billion by 2022. Even by the size of Chinese ambition, that’s a tall order. But BlueFocus is on its way, saying last week it expects first-half 2014 profits to rise 100-120 percent to $44-49 million—not bad for Zhao and three Peking University classmates who started by investing $6,000 apiece. “Oscar Zhao and the team have a clear vision,” said Greg Paull, a principal at R3, enlisted to handle BlueFocus’s U.S. acquisition search. “They don’t want to just plant their flag in the U.S. and around the world, they want to create a truly world-class, digitally centric holding group.”

Given the cultural differences between East and West, that’s no easy feat—as evidenced by the uneven efforts of other Asia-based would-be global holding companies like Dentsu, Cheil and Hakuhodo.

But those who know Zhao say don’t expect him to look for massive acquisitions like an Interpublic. “The model for Oscar is to meet individuals and establish a moral trust and obligation to grow their companies. You can’t do that with large publicly held companies,” said Jim Houghton, a U.K. partner at financial advisers Results International. Results worked on London-based We Are Social’s sale of a majority stake to BlueFocus last December.

“While we could see the heights and scale of their ambitions, they were very clear in their focus on digital and the people they want to work with. That was very much in sync with us,” said We Are Social co-founder Nathan McDonald. Added Leila Thabet, managing director, U.S.: “Oscar is an intelligent guy who knows what he knows and, more importantly, what he doesn’t. He’s genuinely interested in the U.S. and how we work.”

That decisiveness was on display in 2005 when BlueFocus was in its own talks to sell. London-based PR company Huntsworth was a potential buyer, but Zhao chose not to go forward. Now BlueFocus not only has 10 times the market cap of that erstwhile acquirer, Zhao’s also bought 20 percent of it—a sign of his determination to raise China in the industry’s worldwide hierarchy.

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