Sino-Murdoch media deal

This big-name deal sees the government further strengthen its connection to China’s aired media, as China Media Capital’s three backers are each state-owned. China Media Capital is backed by SMG, the China Development Bank and China Broadband Capital and was launched last year with RMB5 billion ($739 million) in AUM.

China’s media industry – both on and offline – is notoriously red tape-ridden as the State Administration of Radio, Film and Television (SARFT) vigilantly monitors content, prompting foreign investors to approach media deals with caution. In the case of News Corp., the media owner’s ambitions to establish itself as a resilient broadcaster faltered almost immediately upon entry. In 2002, News Corp. launched StarTV in China, only to see the channel broadcast in just one province, when News Corp. had hoped to air the network nationwide. The group also encountered a series of hurdles that led to its decision in 2006 to reduce its stake in Hong Kong-based network Phoenix Satellite Television, selling half of its 40% stake to government-run China Mobile.

Yet, News Corp. does not appear to be giving up on China; it is reportedly set to keep a nearly 50% stake in the assets. And, the fact that it has sold the remaining stake to a PE-backed company suggests that it is trying to better position itself for SMG’s potential exit in the coming years.

Managing Principal of Quadrangle Ed Sippel said of the deal, “What I think News Corp. is saying is that it wants to find a way to succeed in China and one way to do that may be to link with a well-connected local media group. SMG is the second-largest media group in China and arguably the most forward looking and diversified – so a good potential partner, at least on paper.

“This is a very small transaction for News Corp., but the partnership could help it finally make some headway in China. And given the local partner is a PE affiliate of SMG may actually be more attractive to News Corp. given that organization’s presumed requirement for liquidity at some point in the future. You never know, in a few years’ time News Corp. could buy back the stake – it all seems somewhat counterintuitive on the surface, but that’s the China media market.”

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• Topics
• Greater China
• Media
• Regulation
• Quadrangle Group Asia
• Edward Sippel