MBK Partners Ltd’s plans to sell its US$2.4 billion stake in Taiwanese cable-television operator China Network Systems Co (中嘉網路) is faltering after the buyer became embroiled in a tainted-food scandal, people with knowledge of the matter said.
MBK’s agreement to sell the controlling interest to the nation’s Wei (魏) family expires soon, one of the people said, asking not to be identified as the matter is private.
The atmosphere in Taiwan now is “challenging” for the acquisition, so the family’s Ting Hsin International Group (頂新集團) has not submitted an application for government regulators to approve the deal, Ting Hsin spokesman Ted Chia (賈先德) said by telephone.
Should the deal collapse, it would be the second failed attempt by the US$8 billion private-equity manager to sell China Network Systems in about four years, hurting the potential return of its first fund raised in 2006.
MBK, North Asia’s biggest independent private-equity firm, is likely to seek another buyer if the existing pact expires, two people said.
Ting Hsin contacted banks for loans at the early stages of the deal, but is not currently in talks for such funding, Chia said.
The company will proceed in accordance with the terms of the deal agreement, he said, declining to comment further due to confidentiality agreements.
The Ministry of Economic Affairs’ Investment Commission has not received any application from Ting Hsin seeking deal approval, commission spokesman Emile Chang (張銘斌) said by telephone.
Ting Hsin has not submitted a filing to the National Communications Commission or the Fair Trade Commission, Chia said.
MBK would have generated a return on equity of about three times from a sale at a US$2.4 billion enterprise value, one person said.
Hong Sei-kyu, a spokesman for MBK at Weber Shandwick LLC in Seoul, declined to comment.
The possible end to the deal shows the widening fallout for Ting Hsin, owner of the Master Kong instant noodle brand, after food safety authorities said the company made lard and beef tallow adulterated with animal feed oils.
Prosecutors charged Wei Ying-chun (魏應充), one of the four brothers who run Ting Hsin, in October last year over alleged violations of food safety laws.
His brother Wei Ying-chiao (魏應交) stepped down that month as vice chairman and president of Taipei Financial Center Corp (台北金融大樓公司), operator of the Taipei 101 tower, which houses the city’s stock exchange.
MBK is not under pressure to sell China Network Systems, as it has already distributed some of the company’s profits to the private-equity fund’s investors, two of the people said.
Taiwanese cable operators can have margins as high as 60 percent of earnings before interest, taxes, depreciation and amortization, the people said.
A proposed sale to Want Want China Holdings Ltd (中國旺旺控股), initially agreed in 2010, was halted in 2013 after regulators expressed concerns about Want Want’s existing media holdings.
MBK also considered an initial public offering for China Network Systems in Singapore after the deal was scrapped, people with knowledge said in July 2013.
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