MSPEA, Far EasTone to buy Taiwan's CNS from MBK

The size of transaction was not disclosed, but previous reports put it at $2.3 billion, including around $1.6 billion in debt. MPSEA's fourth pan-regional fund - which closed last year at $1.7 billion - will take equity ownership of CNS, with Far EasTone subscribing to a bond of up to NT$17.12 billion ($542.6 million), according to a statement issued by the firms.

CNS is Taiwan's largest cable operator, providing cable and digital television, broadband internet and other services to nearly 1.29 million subscribers. Last year the company launched mobile 4G services and has accumulated more than 2.2 million users to become the second-largest player in the market.

MBK announced the acquisition of CNS for $1.5 billion - including $840 million in debt and equity participation from co-investors - from Koo's Group and Star TV in October 2006. Exiting the asset has proved complicated.

In 2010, MBK agreed to sell its controlling stake for $2.4 billion to a group led by Yen-Ming Tsai-owned snack food and media conglomerate Want Want China Holdings. However, the deal fell through after the regulator - which had raised anti-monopoly concerns to go with general political angst about Tsai's pro-mainland leanings - said Want Want had failed to meet with certain conditions.

Last year local food and drinks conglomerate Ting Hsin International Group agreed to purchase the company. CNS said the buyer was chosen based on ability to comply with regulations on foreign and Chinese investment and involvement with political parties as well as price. But the transaction did not close, supposedly as a result of a tainted food scandal involving Ting Hsin.

Nevertheless, CNS is cash generative and MBK is said to have taken money out through dividend recaps. K.C. Kung, partner and head of Greater China at the private equity firm, described it as a successful investment.

"Since acquiring CNS Group, MBK has invested in and grown the company into not only the largest, but also the most digitized and advanced system operator group in Taiwan. The pending sale crystallizes an attractive uplift in the value of the business achieved by CNS Group management," he added in a statement.

During MBK's ownership period, the digitization rate of the subscriber base has risen from single digits to over 80%. MSPEA and Far EasTone will now support CNS as Taiwan pushes towards full digitization of the cable television industry. Meanwhile, for telecom and digital services player Far EasTone, CNS is an opportunity to integrate wireless and wired solutions and expand into the smart home market.

The sale is still pending to regulatory approval and other closing conditions.

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• Topics
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• Morgan Stanley Private Equity Asia
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