By Robin Kwong in Taipei
Published: July 28 2010 23:47 | Last updated: July 28 2010 23:47
International private equity groups and Taiwanese companies have expressed interest in the sale of China Network Systems, Taiwan’s leading cable television company, according to a person close to the deal.
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MBK Partners, the pan-Asia private equity fund, is putting its 60 per cent stake in CNS up for auction, with first round bids due in early August. It bought the stake for about $1.5bn in 2007 and is looking for a deal that it expects will value the company at $2.2bn
Taiwan’s cable TV market, which has the highest profit margins in Asia, has seen a surge of deal activity as foreign investors who flocked to the sector in 2007 look to recoup their investments.
Carlyle is in talks to sell Kbro, another cable TV company, to Taiwan’s Tsai family for about T$70bn ($2.2bn), according to a person close to that deal.
“Carlyle’s deal valued Kbro at 11 times ebitda [earnings before interest, tax, depreciation and amortisation] … MBK will definitely look to the north of that [valuation],” the person said. CNS’s ebitda for 2010 is expected to be $200m, implying that MBK values the company at $2.2bn.
MBK’s auction has attracted potential bidders from international private equity firms Bain, Blackstone, CVC and Kolhberg, Kravis & Roberts, to Taiwanese companies such as mobile operator Far Eastone and conglomerate Ruentex Group, according to the person. The two-stage auction process is expected to result in final bids being made by September.
The CNS sale is attracting broad investor interest partly because of the ample credit available in Taiwan. “This is one of the few places where pre-crisis leverage is still available,” said a person close to the deal.
CNS, which has 1.3m cable TV subscribers and another 200,000 from broadband and other digital products, has a 25 per cent market share in Taiwan and generated $350m in sales last year from all its system operators, according to Media Partners Asia, a Hong Kong research consultancy.
Taiwan’s cable TV industry is attractive to investors because cable is pervasive in Taiwanese households. The penetration rate is 80 per cent. “Cable is entrenched infrastructure in Taiwan,” Vivek Couto, executive director of Media Partners Asia, said.
Growth opportunities come chiefly from cable providers breaking into the broadband internet market. Cable’s market share in broadband has grown from about 6 per cent four years ago to 15 per cent, and is expected to reach 20 per cent within the next four years, said Mr Couto.
The potential bidders and Morgan Stanley, which is handling the sale, declined to comment.
MBK could not be reached for comment.
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