Bain Capital LLC and Permira Advisers LLP were among investors picked by MBK Partners Ltd to make final bids for Taiwan’s second-biggest cable-television operator in a deal worth at least US$2 billion, four people with knowledge of the matter said.
Potential buyers are required to submit binding offers for China Network Systems Co (中嘉網路) by late next month, the people said, asking not to be identified because the talks are private. Macquarie Group Ltd has also been invited to make a final bid, one of the people said.
MBK, the private equity fund which is selling China Network, may opt to sell the company to Taiwanese buyers as that would make securing regulatory approval easier, one person said.
“The cable industry here has stagnant growth and will face more competition as the government is loosening rules to allow inter-regional operations,” said Vincent Liao (廖家偉), a Taipei-based analyst at KGI Securities Co (凱基證券). Bidders for China Network “are eyeing the cash flows of the business, which are still quite steady.”
MBK solicited bids from Ruentex Group (潤泰集團), whose businesses range from textiles to construction, and Want Want China Holdings Ltd (中國旺旺控股) chairman Tsai Eng-meng (蔡衍明), according to the person.
A price of US$2 billion represents about 10 times China Network’s estimated earnings before interest, taxes, depreciation and amortization for this year, the people said. On that basis, MBK could push for a valuation of as much as 12 times earnings, two of the people said.
MBK agreed in October 2006 to buy 60 percent of China Network for NT$30.9 billion (US$932 million). At that time, the Koo family owned 80 percent of the company, whereas MBK now effectively controls all of China Network, the people said.
Taiwan, with 7.8 million households, has 5 million cable TV subscribers. China Network had 1.05 million subscribers at the end of last year, giving it a 21 percent market share, while Kbro Co (凱擘), Taiwan’s biggest cable TV operator, had a 22 percent share with 1.11 million customers, according to a National Communications Commission report published last month.
Washington-based Carlyle, the world’s second-biggest private equity firm, is selling its stake in Kbro to the Tsai family after investing in the business in 2006, people with knowledge of the matter said last month.
Funds linked to Sydney-based Macquarie Group bought smaller cable-TV operator Taiwan Broadband Communications (台灣寬頻) in 2005 from Carlyle and sold a partial stake the following year.