CVC in $644m City Telecom carve out

CVC is acquiring the business through Metropolitan Light Company, a Cayman-incorporated entity controlled by CVC Asia Pacific. The private equity firm is putting in HK$2.65 billion and will finance the remainder of the transaction through a HK$2.5 billion loan from J.P. Morgan and Standard Chartered.

"We have drawn upon our global telecom, Hong Kong, operations and financing teams to achieve signing," Roy Kuan, managing partner at CVC Asia, said in a statement. "We look forward to supporting HKBN's management and employees in providing high speed and high reliability broadband and telecom services to its customers.

City Telecom said in a filing with the Hong Kong Stock Exchange that, given the likely endorsement of its application for a domestic free television program service license, it was the right time to divest the telecom business. The company expects to commit at least HK$2.5 billion to its broadband television operations in the next four years. A further HK$2 billion of the proceeds will be paid to shareholders as a special dividend.

A source familiar with the situation told AVCJ that only a handful of buyout firms have the capacity to handle a deal of this size, adding that CVC didn't want to miss out on a rare opportunity to enter Hong Kong's telecom market.

HKBN owns and operates a fiber network that serves approximately 2 million homes and 1,700 commercial buildings in Hong Kong. It offers broadband, VoIP, IPTV and IDD services, competing against the likes of Hutchison Telecommunications and PCCW.

CVC is currently investing out of its third Asia Pacific buyout fund, which closed at $4.2 billion in 2008. Previous investments in the telecom space include LinkNet, Indonesia's second-largest fixed-line broadband and cable TV operator. CVC paid $275 million for a 33.95% stake in March 2011.

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• Topics
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• Greater China
• Buyouts
• Media