Race for Taiwan’s CNS narrows

TPG/Newbridge and MBK Partners have emerged as the frontrunners in the race to acquire China Network Systems, Taiwan’s leading cable TV operator, in a deal expected to be worth $1.5bn.

The private equity firms are understood to have edged ahead of four other interested buyers, following the latest stage in the bidding process.

The sale of CNS is being handled by Morgan Stanley, which on Tuesday declined to comment.

However, people close to the situation said the bidding process was entering its final stages after CNS last week invited the remaining bidders to indicate the price, structure and certainty of their proposal. The other groups to have submitted bids include KKR, Goldman Sachs, CVC Asia Pacific and Macquarie Bank. The latter is understood to have been told that its bid stands little chance of success.

Macquarie already owns Taiwan Broadband Corp (TBC), and an acquisition of CNS could be complicated because it would raise the Australian bank’s total share in the local cable market close to the legally allowed 30 per cent limit.

One person familiar with the situation said: “Macquarie has been told that its proposal is not attractive. Others too have been asked to go away but they are asking to get back in.”

Sources familiar with the situation said the high price asked by the Koo family, the business clan that owns 80 per cent of CNS, had put some bidders off.

The Koos are seeking to match the valuation reached in the acquisition of EMC, CNS’s smaller rival, by the Carlyle Group, the US buyout fund. “The Koos are insisting that the T$43,000 ($1,310) per subscriber household that was achieved in the EMC deal be taken as a benchmark,” said one banker close to the talks. “That means those willing to take the higher risks in this deal will win.”

The emergence of MBK as one of the frontrunners is likely to raise eyebrows. The South Korean-based fund is run by Michael Kim, a former Carlyle executive who spearheaded the group’s purchase of TBC in 1999. He also served on the board of TBC so is regarded as having in-depth knowledge of the market. Carlyle sold TBC to Macquarie last year before acquiring EMC.

People close to the situation said no further developments were expected until the end of the month.

●Chunghwa Telecom, Taiwan’s largest telecoms company, will on Sunday pick the financial advisers for its planned $1.2bn overseas share sale, bankers said. The move will get the American Depository Receipt offering back on track after the government forced the company in early August to abort preparations for the sale.

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