The National Communications Commission (NCC) yesterday said that it would scrutinize the investment structure of a pending sale of China Network Systems (CNS) and verify the sources of funding for the transaction.
A deal was signed earlier this year to sell the nation’s largest multiple system operator to an investment team led by KHL Capital chairman Gary Kuo (郭冠群) for about NT$51.5 billion (US$1.68 billion).
Two of the investment team’s largest shareholders are investment firms set up through the Y.L. Lin Hung Tai Education Foundation, which is owned by the Hung Tai Group, a real-estate developer.
The Chinese-language Wealth Magazine yesterday published an investigative report that said the two investment firms have invested about NT$8 billion in the deal and would together hold nearly half of CNS if the government approves the deal.
The case is another example of big corporations turning organizations such as nonprofit foundations, which were originally designed to encourage the wealthy to engage in charity, into an investment mechanism to evade taxes, the magazine said.
The foundation on Wednesday said that it has not directly invested in CNS, adding that its funds are used strictly for educational and cultural charities, as well as medical supply donations.
The Hung Tai Group has been focusing on real-estate businesses, Kuo said on Wednesday, adding that buying CNS was mainly a “complementary investment” that would help the group branch out to the cable TV industry, which has a high cash flow.
NCC Chairwoman Nicole Chan (詹婷怡) said in an interview on the sidelines of a forum yesterday that the commission would first determine the investment structure of the transaction.
“We will then study the laws that the commission has been entrusted to enforce,” Chan said. “We will also communicate the facts of the deal to the public through a series of processes, including consulting media experts and holding public and administrative hearings.”
In addition to the investment structure, the commission would also examine the sources of funding that Kuo’s investment team have used for the purchase of CNS to determine if the deal has contravened laws banning media investments by political parties, the government and the military, she said.
This is the fourth time CNS’ largest shareholder, MBK Partners, has attempted to sell the company. Other potential buyers have included Want Want China Times Group from 2011 to 2013, Ting Hsin International Group from 2014 to 2015 and Morgan Stanley from 2015 to last year.
As the transaction involves MBK, an overseas private equity firm, exiting through the sale of a Taiwanese multiple system operator, any deal would require approval from the NCC, the Investment Commission, the Fair Trade Commission and other government agencies.
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