Rupert Murdoch’s Star TV is considering re-entering Taiwan’s cable TV market if, as expected, it sells its 20 per cent stake in China Network Systems as part of an auction of the company.
Six overseas private equity bidders – Kohlberg Kravis Roberts, Macquarie Bank, Goldman Sachs, CVC Asia Pacific, TPG/Newbridge and MBK Partners – have joined the race to purchase CNS, the country’s leading cable TV operator, in a deal expected to fetch $1.5bn.
Hong Kong-based Star remains bullish about the growth prospects for CNS but is expecting to have to sell its holding following the decision by Taiwan’s family-controlled Koos Group, which owns an 80 per cent stake, to auction the company.
People close to the situation said that Star, part of Mr Murdoch’s News Corporation, was in exploratory talks with some of the bidders, including Macquarie Bank, about striking a possible post-sale deal.
One option being considered by Star is to buy back a major stake in CNS from
the winning bidder. Star declined to comment.
CNS has attracted intense interest because of its strong cash flow and growth potential. It holds 26 per cent of the market.
People with knowledge of the situation said that Star’s eventual decision would depend on the final sale price and on which group acquired CNS. One said: “Star has had plenty of talks but it hasn’t signed up with a bidder. If CNS fetches a sky-high price, Star could simply pocket the cash and re-enter Taiwanese cable when prices fall.”
Star’s desire to remain in the market highlights the continued global interest in the industry, following two other large deals involving Taiwanese cable companies in the past month.
Carlyle, the US buy-out fund, last year sold Taiwan Broadband to Macquarie for $900m and this year re-entered the market by acquiring a controlling stake in Eastern Multimedia for about $1.4bn.
Foreign investors are hoping that Taiwanese authorities will change the regulations to permit cable TV operators to introduce new technology and services.
The sale is being handled by Morgan Stanley, which declined to comment.
The six bidders have until this Friday to confirm the structure of their bids.
The private equity groups will be requested to price their bids in late September, with CNS expected to conclude the sale process before December.
Cable TV market share is regulated in Taiwan and people familiar with the
situation said that “deal certainty” was a major consideration for the Koo family.
Some observers believe that Macquarie’s bid for CNS could attract regulatory scrutiny because the Australian bank already owns Taiwan Broadband.