Wed, Sep 21, 2016 - Page 12 News List

Investment Commission suspends CNS acquisition

By Kuo Chia-erh  /  Staff reporter

The Investment Commission yesterday said it will suspend its review of Morgan Stanley Private Equity Asia IV’s (MSPE) planned acquisition of local cable TV operator China Network Systems Co (CNS, 中嘉網路) until the National Communications Commission (NCC) re-examines the case.

MSPE’s acquisition bid was approved by the Fair Trade Commission and the NCC in December last year and January respectively, leaving the Investment Commission’s approval as the final step to complete the deal.

Last year, MSPE proposed to purchase a significant stake in CNS for NT$74.5 billion (US$2.38 billion) through a holding company called North Haven Private Equity Asia IV LP.

Far EasTone Telecommunications Co (遠傳電信), the nation’s No. 3 telecom, inked an agreement with MSPE to subscribe to NT$17.12 billion of non-convertible corporate bonds issued by MPSE’s local subsidiary, which is seen as an expansion of the company’s digital convergence.

According to the proposal’s funding structure, about 70 percent of capital would come from bank loans, which would make Far EasTone the largest investor in the deal.

“Commission members have concerns that Far EasTone might indirectly take substantial control of CNS if the acquisition is approved, considering the funding structure of the deal,” Investment Commission Executive Secretary Emile Chang (張銘斌) told a news conference yesterday.

Far EasTone had allegedly attempted to evade the restrictions imposed by the Cable Radio and Television Act (有線廣播電視法), the Investment Commission said in a statement.

The telecom, whose shareholders include the government’s investment funds, is banned from holding shares in CNS due to regulations prohibiting investments in media outlets by the government, political parties and the military.

“The details of the planned investment could not convince commission members to approve the case,” Chang said, adding that the NCC should review the case to dispel the doubts surrounding the deal.

The NCC yesterday said it would re-examine the case in accordance with the law, adding that it will take into account the conclusion reached at the Investment Commission and the evidence it has gathered for the case.

“The case is a major event for the development of the nation’s cable television system, and the proposed investment would have major impacts on the diversity of public opinion, market order and the development of the media industry,” the Investment Commission said.

NCC spokesperson Wong Po-tsong (翁柏宗) said that the NCC gave its conditional approval in January for North Haven’s acquisition of CNS.

However, it has been collecting evidence and information related to the transaction, as both the public and NCC members are concerned about the case.

Far EasTone said it was shocked by the Investment Commission’s rejection of the proposal.

“The deal has been under the scrutiny of the NCC for the past year. We do not understand why the Investment Commission rejected the deal and handed it back to the NCC,” Far EasTone said in a statement released yesterday.

The company said the Investment Commission must have mistakenly thought that the company would control CNS by holding MSPEA corporate bonds.

Far EasTone is not allowed to convert those bonds into MSPEA shares according to their agreement, the company said.

That makes Far EasTone a bond holder of MSPEA, it added.

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