Six private equity groups have been selected to conduct due diligence on Taiwan's China Networks Systems, in a transaction estimated to be worth $1.4 billion. The interested parties are Kohlberg Kravis Roberts, Goldman Sachs, MBK Partners, TPGNewbridge, CVC Asia Pacific and Macquarie Bank, according to a source close to the company.
Earlier in the process, The Carlyle Group had also showed interest in the business. Morgan Stanley is arranging the sale. The six bidders on the shortlist will have a month to conduct due diligence before they are expected to submit binding bids in the middle of September.
The race for China Networks, which has 1.1 billion subscribers, comes hot on the heels of the successful acquisition of a rival media group, Eastern Multimedia Company, by Carlyle for $1.5 billion. Taiwan's Investment Commission approved the acquisition in July.
Eastern Multimedia, which has 1.05 billion subscribers, marked Carlyle's return to the sector after it sold its stake in Taiwan Broadband Communications to Macquarie Media Group in December. Macquarie paid $890 million for a 40 percent stake in Taiwan Broadband, which has 650,000 cable customers.
More consolidation activity appears likely. Taiwan's fragmented cable television market comprises 67 system operators with a total 4.58 million subscribers as of May, according to the Department of Investment Services.
Despite a relatively high penetration rate – 62.7 percent of Taiwanese households are connected – future growth is expected to be attractive, in part because of digital convergence.
China Networks is controlled by the Koo's Group, a conglomerate, which holds an 80 percent stake in the cable operator. The remaining 20 percent stake is held by Star Group, a subsidiary of Rupert Murdoch's News Corp.
According to a Taiwanese cable television law, direct investment by overseas investors in any local TV network may not exceed 20 percent. In addition, combined direct and indirect investment by foreign investors may not exceed 60 percent of a company's shares.
Still, Carlyle managed to acquire more than 90 percent of the issued share capital of Eastern Multimedia. Under the deal, three offshore companies invested in three Taiwanese companies, which in turn invested in Eastern Multimedia and its cable subsidiaries on Carlyle's behalf.
Macquarie, in its acquisition of Taiwan Broadband, avoided the ceiling by arranging for a local investor to buy preferred stock in the company.
?The law can be interpreted in many ways,? said a legal expert who has advised on one of the transactions.
In the 12 months to 30 June 2006, 266 foreign companies bought Chinese businesses for a combined $9 billion, a 56 percent increase in terms of value.
Hana-MBK loses LG Card to Shinhan
Shinhan Financial Group of Korea has narrowly beaten Hana Bank and MBK Partners to acquire Korea's LG Card Co in the country's largest takeover to date.
Shinhan, Korea's second largest financial services group, was selected as the preferred bidder for LG Card, the second largest credit card issuer in Korea. Hana Bank and MBK Partners, a North Asian private equity firm, submitted the second highest bid, according to several media reports.
The transaction, worth approximately KRW 6.7 trillion ($7 billion), involves the purchase of a 78.6 percent stake in LG Card, a spokesman for Shinhan said. Shinhan is expected to conduct a second round of due diligence in September before finalising the deal in October, the company spokesman said.
Carlyle bids for Allsec Technologies
The Carlyle Group has offered to buy over 3 million shares, or the equivalent of a 20 percent stake, in India-listed Allsec Technologies for $17 million in a nonbinding agreement. Allsec is a business outsourcing company.
The investment will be made from Carlyle Asia Growth Partners III, a fund that closed on $668 million in June this year. Allsec's founder and president Adi Saravanan told India's CNBC-TV18 in an interview that Carlyle may acquire up to 40 percent of his company.
3i into India electrics
3i, the global, London-listed private equity business, is poised to invest $26 million in Vijai Electricals, an Indian manufacturer of power transmission and distribution equipment. Anil Ahuja, managing director of 3i India, said: ?India is witnessing significant growth, driven by government spending, in the power sector particularly in transmission and distribution.?
3i also recently made a foray into India's real estate market when it invested $40m in a $160 million India-focused real estate fund promoted by Indian business tycoon Ajay Piramal. To date 3i has committed to five investments in India.
Vina checks into Hilton Hanoi
VinaCapital, a Vietnamese private equity firm, has acquired a 70 percent stake in Hilton Hanoi Opera Hotel. VinaCapital is buying the stake for about $43 million from a group of investors led by Vivendi, a French business group.
Hilton Hanoi Opera, the second five-star hotel investment for VinaCapital in Hanoi, is a 296-room French Colonial-style building with an occupancy rate above 80 percent. The investment was made from two funds under VinaCapital's management: 75 percent from VinaLand Fund and 25 percent from Vietnam Opportunity Fund. In a separate transaction, VinaLand acquired a 25 percent stake in Vung Tau Tourist, a company that owns over ten hotels and other tourist facilities in the province. The former provincial government-owned entity, privatised toward the end of July, has a market capitalisation of $15m.