Taiwan Mobile has agreed to acquire one of the country’s leading pay-television operators from Carlyle Group, the US private equity fund, in a $1bn cash and stock deal.
The takeover of Kbro, which is subject to regulatory approval, will create Taiwan’s largest provider of phone, web and TV “convergence” services.
It also comes as the island’s TV viewers rapidly switch to digital services, which offer higher margins for operators.
Carlyle will receive cash of just NT$440m ($12m) and 589m shares, or a 15.5 per cent stake in Taiwan Mobile, the country’s second-largest phone carrier. The buyer will also assume about $800m of Kbro’s debt.
The US fund stressed on Wednesday its long-term commitment to its stake in Taiwan Mobile, where it will become the second largest shareholder after the country’s Tsai family. “We are looking forward to making Taiwan Mobile a bigger, better company,” said Gregory M Zeluck, a Carlyle managing director.
Taiwan Mobile’s cable-TV unit is its fastest growing division but boasts a market share of only 6 per cent, which will rise to 32 per cent after the takeover. The combined cable-TV business will have 1.6m customers, making it the country’s largest provider.
Analysts said the deal would give Taiwan Mobile economies of scale and throw down the gauntlet to rival providers, one of which is owned by MBK Partners, a Korean-based private equity fund, and another by Australia’s Macquarie Media Group.
Jason Wang, managing director of Cypress River Advisors in Taipei, said: “Taiwan is a great market. There’s a large middle class. It’s a perfect market for both content and advertising.”
The transaction is based on a mutually agreed price of NT$55 per share of Taiwan Mobile stock.
Taiwan Mobile shares closed up 1 per cent at NT$52.50. The stock’s 8 per cent advance this year trails the 62 per cent rise in the Taiwan exchange’s benchmark index.
The company said the deal would complement its traditional strength in wireless services, bolster its growth momentum and increase revenue from non-voice services.
Harvey Chang, president, said the most significant aspect of the deal was the direct access gained to around 1.1m Kbro subscribers in urban areas. “That will provide us with a very substantial platform to provide the convergence services.”
Carlyle was advised by JPMorgan.