Carlyle To Sell Taiwan TV Unit for $1.25 Billion

TAIPEI/HONG KONG (Reuters) – The Carlyle Group has agreed to sell Kbro, Taiwan’s largest cable TV operator, to the controlling shareholder of Taiwan Mobile (3045.TW), for about $1.25 billion, sources with direct knowledge of the situation said on Monday.

Buyers are interested in Taiwan’s cable TV industry because it generates strong, stable cash flows, while telecom operators are also seeking TV assets to offer content and compete with industry leader Chung Hwa Telecom (2412.TW).

Taiwan Mobile had agreed to buy Kbro in September 2009 but its deadline lapsed last month, hit by a Taiwan law that banned state ownership of media entities. [ID:nTOE65T027]

In a restructuring of that deal, the Tsai family, which controls Taiwan Mobile, would pay about T$40 billion ($1.25 billion) and assume Kbro’s debt of more than T$20 billion, the sources said.

The deal not only opens another way for the Tsai family to own Kbro through a private company, but is also seen as a positive move for the upcoming sale of private equity firm MBK Partners’ Taiwan cable asset, China Network Systems Co. Sources say MBK is seeking around $2 billion for CNS, including debt.

“The Tsai family sees cable TV as an investment with strong potential. They can choose between Kbro and CNS. And the most sensible choice is Kbro,” said one source in Taipei, who like other sources, asked for anonymity because he was not authorised to speak to the media.

The Kbro deal, pending Taiwan regulatory approval, marks a multiple of 11 times EBITDA (earnings before interest, tax, depreciation and amortisation), two sources said.

“Some people have been giving a hard time to MBK for their valuation expectations, but this completely validates it,” said another source in Hong Kong.

CNS was being shopped around for 10 times EBITDA, though some potential investors have balked at the asking price.

A successful exit from Kbro or CNS would be an encouraging step for global private equity investors in Taiwan, where they have struggled to recoup their investments in several banks.

Carlyle and the Tsai family signed a contract last week on the deal, said one source in Taipei.

Carlyle declined to comment.

PRIVATE EQUITY INTEREST

Fubon Fianncial (2881.TW), which is also controlled by the Tsai family, said the acquisition of Kbro by the family was an option but had not been finalised.

“There is no way to break the regulation,” Fubon Financial chairman Daniel Tsai told reporters on the sidelines of a business event.

But the Tsai family’s acquisition of Kbro also means reduced competition for the potential sale of CNS, as Taiwanese regulators are unlikely to allow the Tsai family to own two dominant cable assets.

Private equity funds Bain Capital, Blackstone Group and Providence Equity Partners are among the buyout groups that are likely to show an interest in the sale of CNS, sources have previously told Reuters. [ID:nRLP96008a]

Australian investment bank Macquarie Group Ltd (MQG.AX) and Taiwan conglomerate Ruentex Group are also expected to express an interest, sources added.

The first round of bids for CNS are due by mid-August.

Shares of Taiwan Mobile ended up 1 percent, outperforming the main index’s 0.3 percent rise. ($1=T$32.1)

By Faith Hung and Denny Thomas
(Additional reporting by Rache Lee in Taipei; Editing by Ken Wills and Lincoln Feast)