$2 Billion CNS Auction May Have Broader PE Market Impact

HONG KONG (Reuters) – The implications of the auction for Taiwan cable TV company CNS may be felt far wider than just by the seller and the buyers involved.

On the surface, MBK Partners’ sale of CNS looks like a standard private equity exit, as the firm bought it for $1.5 billion in 2006, and is now looking to cash out after signing up Morgan Stanley (MS.N) to advise it on the process. [ID:nTOE63L08I]

But this is Taiwan, where several private equity firms have come seeking opportunities, only to be left disappointed. A successful sale of CNS however could serve as a catalyst for other private equity deals.

For starters, several investment banking sources close to the matter say that the CNS deal may help Carlyle Group [CYL.UL] in its stalled effort to sell its own Taiwan cable asset.

“Carlyle is watching how the CNS process goes and sees who’s interested,” said a source close to the situation.

“Carlyle can take a little break as their business is doing well,” he said, asking for anonymity as he was not authorised to speak to media.

Several private equity firms are expected to bid for CNS, thanks to its size, market share, and steady cash flows. Taiwan is a famously over-banked market, so getting a large, affordable loan is easy for the buyout firms involved.

The private equity firms that don’t win the CNS auction may be inclined to give Carlyle’s Kbro asset a look, which is currently stalled at the government level due to a law on government holdings in media companies.

Another factor about the CNS process that could work to the favour of private equity firms in Taiwan is the light it will shine on the industry.

Taiwan, like many countries in this region, has displayed concern about foreign private equity firms entering the home market. The firms have a reputation globally for loading a company with debt and quickly selling it for a profit.

SUITORS?

About 10 potential buyers have been approached about the CNS sale, including Bain Capital, Blackstone Group (BX.N) and Providence Equity Partners, said Basis Point, citing one banking source. [ID:nRLP96008a]

As for Carlyle’s Kbro asset, it has drawn interest from Hong Kong-based PCCW Ltd. (0008.HK), according to local media.

Taiwan Mobile (3045.TW), whose agreement to buy Kbro expired in June, remained in the picture.

Taiwan Mobile was studying its options, including getting back to talks with Carlyle or having the Tsai family, its controlling shareholder, acquire Kbro in its personal capacity, said spokeswoman Josephine Juan.

Any successful exits from Kbro and CNS would be crucial for global private equity investors, who have suffered from their investments in Taiwan banks as their stock prices are trading far below their entry levels.

Carlyle, SAC Capital, Longreach, Newbridge Capital [NB.UL] are all thinking about options to exit from Ta Chong Bank (2847.TW), Cosmos Bank (2837.TW), EnTie Bank (2849.TW) and Taishin Financial (2887.TW), respectively, sources said.

The most likely buyers would be Chinese banks as trade ties across the Taiwan strait have improved to their best levels in nearly six decades.

Carlyle and MBK declined to comment for the story. SAC and Longreach also declined to comment. PCCW and Newbridge could not be reached immediately for comments. ($1=T$32.2)

By Faith Hung and Michael Flaherty
(Editing by Muralikumar Anantharaman)