Macquarie leads the field to buy TBC

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Macquarie Bank, the acquisitive Australian group currently mulling a bid for the London Stock Exchange, is the front-runner to buy Taiwan Broadband Communications, a cable operator being sold by the US private equity group Carlyle, for about US$700m.

A purchase of TBC, whose cable and internet service has more than 650,000 subscribers across the island, would underline Macquarie’s appetite for acquisitions outside its home market in its core sectors of infrastructure and utilities.

Its sucess in a highly contested bid would also confirm predictions the Australian group’s pioneering investment style has turned it into a powerful competitor on the mergers and acquisitions markets.

A sale of TBC, bought in 1999 in one of Carlyle’s first Asian buyouts, is set to yield a return of more than three times the US group’s original investment and add to the string of successful Asian divestments by private equity groups.

Carlyle and TBC declined to comment on Tuesday while Macquarie was unavailble for comment.

Taipei-based insiders said Macquarie was the favourite to buy the business because its unusual investment style enabled it to bid higher than other suitors.

Macquarie’s profits over the past few years have soared partly due to its ability to buy assets through debt and then spin them off in listed trusts that offer investors predictable dividends.

“Through clever financial structures, the Australians appear to have stolen a march on the others,” said a banker familiar with the matter.

M&A bankers say that Macquarie’s model will enable it to outbid private equity groups for large assets because the Australian group requires returns of just 7-10 per cent per annum compared to the 25-30 per cent demanded by private equity groups.

People close to the situation warned that although Macquarie had been working on TBC for longer than on its preliminary bid for the LSE, it had not yet entered exclusive talks. However, they added the timetable for the sale was tight, with a deal expected to be concluded within weeks.

Hong Kong’s Tom Group, the internet operator controlled by Asia’s richest tycoon Li Ka-shing, the Taiwanese group Fubon, Liberty Media of the US and Singapore’s Temasek have all reportedly been interested in TBC. Tom declined to comment while the other companies were unavailable.

Carlyle has never confirmed press reports it paid US$355m, together with the local conglomerate Shin Kong for TBC six years ago. Since its purchase, Carlyle is believed to have invested more than US$100m in the business.

Additional reporting by Andrew Yeh in Taipei and Justine Lau in Hong Kong

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