DEALTALK-Beijing puts giant media marriage on the rocks

* Sina, Focus Media unlikely to extend deal beyond Sept

* Wary of impact on marketplace, govt approval unlikely

* Deal would be biggest in China's media sector

* Sina stock up 32 pct this yr; markets price in deal failure

By Melanie Lee

SHANGHAI, Aug 20 (Reuters) - China's leading Internet portal, Sina Corp (SINA.O) is likely to call off its planned $1.4 billion purchase of Focus Media's (FMCN.O) core assets if the government fails to bless the marriage by a September deadline.

Since Sina unveiled the deal in December -- the largest in China's opaque media sector -- China's commerce ministry has repeatedly put off reviewing the deal, asking for additional documents, frustrating both Nasdaq-listed companies.

Sina and Focus have the option to either extend their talks or walk away by Sept 30, in a deal many analysts believed would bring about much needed consolidation in the crowded sector.

Analysts -- many with broad access to company officials -- have offered a wide range of reasons on why the deal is faltering, ranging from anti-trust concerns to likely pressure from China's two top state-run media firms.

One analyst said his checks with Sina management indicated the company will not pursue a deal after September.

"The feeling of the management is that they won't be getting government approval by the end of August, and if it doesn't come by then, the government is unlikely to approve it," said the analyst who was not authorised to speak to the media.

A successful merger could create a privately owned, diversified media giant capable of competing with the country's two state-run media titans, Beijing-based China Central Television (CCTV) and Shanghai Media Group (SMG).

Focus spokeswoman Jing Lu said her firm's management had not had any discussions with Sina to renew the deal after September.

Sina declined comment.

Charles Chao, Sina's chief executive, told an analysts call in June the approval process was taking much longer than expected but it was working with the commerce ministry on it.

Sina's shares plunged as much as 18 percent after the the deal was announced, as analysts frowned on the price tag, integration risks and shift in corporate strategy and downgraded its stock. [ID:nPEK28023]

Since then, Focus has slipped into the red in the last two quarters. However, many analysts have upgraded Sina's stock as they took Beijing's stonewalling as a signal the deal will die.

So far this year, Sina stock is up 32 percent, Focus is little changed in a Nasdaq market .IXIC up 25 percent.

WRENCH IN THE WORKS

Through the deal, Sina is looking to leverage Focus Media's outdoor LCD screen advertising network in office buildings, elevators and supermarkets with its own online network.

The commerce ministry will review the deal for anti-trust concerns, but analysts see minimal risks of pricing control or a monopoly forming as both firms operated in different mediums.

"You have to think about which companies are not going to benefit from this deal and what they are doing to stop it from going through," said an analyst who declined to be named.

China's advertising expenditures rose 9 percent to $34 billion in the first half of 2009 from a year ago, according to CTR Media Intelligence.

The two companies' businesses have very little overlap, with Sina focused on Internet and wireless services, while Focus is strong in traditional areas such as display advertising.

"Although their medium of advertising is different, the government may be worried that the two firms put together may be restrictive for competition," said Li Zhi, senior analyst with Analysys International.

CLSA analyst Elinor Leung said the deal also may be getting extra scrutiny because it involves an ultra-sensitive sector.

"At the end of the day it's the media sector so the government is being much more careful," said Leung. "From a law perspective, it is not that easy for the government to just say no, so they are going to have to look at things in detail." (Editing by Doug Young and Anshuman Daga)