RLPC-MBK kicks off sale of CNS, Gala TV

By Stephanie Tong

HONG KONG, July 19 (BestGrowthStock) – First-round bidding for MBK
Partners LP’s stake in China Network Systems Co Ltd (CNS) and
Gala Television Corp (Gala TV) has started, marking MBK’s exit
from Taiwan’s cable TV industry.

Private equity house MBK, which invested in cable TV
multiple systems operator (MSO) CNS in July 2007 and cable TV
content provider Gala TV in December 2008, has mandated Morgan
Stanley (MS.N: ) and Barclays Capital as financial advisers for
the sale of CNS and Gala TV, respectively.

Among bidders for CNS are Samuel Yin, chief executive of
Taiwan’s conglomerate Ruentex Group, and Australia-based
Macquarie Group (MQG.AX: ), which also has a stake in top-tier
MSO, Taiwan Broadband Communications Co Ltd (TBC).

Bain Capital, Blackstone Group LP (BX.N: ) and Providence
Equity Partners are also looking at the CNS sale, as previously

Three investors including Japanese conglomerate Sumitomo
Corp (8053.T: ) and a U.S.-based private equity firm are vying
for MBK’s stake in Gala TV.

The result of the first-round bidding for CNS is expected
to be announced in early August. Shortlisted bidders will then
enter into a second-round bidding stage, according to a source
familiar with the situation.

The winning bidder for Gala TV is expected to be chosen in
early August.

“It is unlikely that there will be second-round bidding for
the Gala TV sale as the transaction price is not that large.
The Gala TV stake is likely to be worth less than T$10 billion
($311.7 million) , while the CNS sale could fetch more than
NT$30 billion,” the source added.


While bidding is in process, the two financial advisers
have started sounding banks in Taiwan on their interest in
arranging financing totalling about NT$38 billion for the two

Morgan Stanley has talked to Taiwanese banks about
arranging a staple financing for the winning bidder of CNS.

Financing could total NT$35-40 billion ($1.1-1.2 billion)
based on CNS’ 2009 EBITDA of NT$5.337 billion and a
debt-to-EBITDA ratio of around seven times.

As for the financing for Gala TV bidders, the deal size is
expected at about NT$3 billion ($80 million), based on Gala
TV’s 2007 EBITDA of around NT$660 million and a debt-to-EBITDA
ratio of around four times.

“The CNS loan is quite highly leveraged. Acquisition loans
in Taiwan on average have debt-to-EBITDA of five to six times
only. Banks are unlikely to accept that unless the financing
comes with rich pricing or more stringent financial covenants,”
said a senior banker at a Taiwanese bank.
($1=32.08 Taiwan Dollar) (Editing by Chris Lewis)

RLPC-MBK kicks off sale of CNS, Gala TV