
MBK CNS process could jumpstart Taiwan deals
North Asia-focused buyout firm MBK Partners has started the formal sale process for its Taiwanese cable TV/broadband asset China Network Systems (CNS) with the first bidding round, forecast to fetch up to $2.5 billion in a deal shaping up to be one of the largest of the year.
Although the process is in its earliest stages, Kohlberg Kravis Roberts & Co. and Permira were previously mentioned as interested in acquiring the multi-billion-dollar company, in which MBK bought a 60% stake in 2007 for $1.5 billion. Bain Capital, the Blackstone Group and Providence Equity Partners have also been cited as eyeing the CNS sale, as well as the CEO of Taiwanese retail corporation Ruentex Group, Samuel Yin, and Macquarie Group, which currently has a stake in Taiwan Broadband Communications.
Taiwan’s cable industry – which reaches 80% of Taiwanese homes – has garnered much attention, largely due to the Carlyle Group’s high-profile dealings with cable investee Kbro. Carlyle had planned to exchange its majority holding in Kbro for 15.5% of Taiwan Mobile, but unexpected regulatory hurdles – namely a conflict of interest, as the government owns a stake in Taiwan Mobile, would breach a law that bars the government from having a stake in a media agency – has forced Carlyle Group to restrategize. The firm instead aims to sell the $1 billion asset to the Tsai family, who control Taiwan Mobile.
The activities suggest that not only is Taiwan’s cable sector heating up, but also that this this may jumpstart other investments in Taiwan – and even beyond. Sources tell AVCJ that Taiwan currently has a very supportive banking environment for larger deals, with local lenders ready to supply leverage. Meanwhile, difficulties with regulators and local business culture have limited privatization opportunities among the large tech companies that are predominant in Taiwan’s bourse, leading private equity investors to target other sectors, such as media and cable. However, Carlyle’s continuing problems in Kbro indicate the regulatory issues that PE investors in the market can encounter, though Carlyle’s process might be aided by the CNS sale, as losing bidders could turn their attention to Kbro.
CNS is a strong acquisition target. The company claims more than 1.1 million subscribers in a country with 23 million people. It has 10 system operations and more than 130 television channels. Spend funneled into Taiwan’s television market still performs strong, and this has been pegged as the most successful pay TV market in Asia by researchers. According to Nielsen Taiwan, spending in Taiwanese media dipped across disciplines in 2009, but radio and TV remained stable, largely attributed to inexpensive subscription rates, which are reportedly under $20 a month.
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