Informed sources said Ruili - which has a market capitalisation of just $146.44 million - planned to issue new shares or convertible bonds to finance its purchase of the Galaxy stake. Hanny reportedly will subscribe to the new shares, raising its interest in Ruili and, by extension, Galaxy.

The TVB sale values Galaxy at about $700 million, far less than the US$150 million Malaysia's Astro Broadcasting was willing to pay in an abortive deal in 2000 that would have valued Galaxy at $2.92 billion.

In 2003, TVB sold a 51 per cent stake in Galaxy to Intelsat for $542 million, valuing the loss-making pay-television firm at $1.06 billion.

Intelsat abandoned its Galaxy stake in September and wrote off the investment. That left TVB with 100 per cent of the venture, forcing it to ask the Broadcast Authority for a temporary exemption from rules limiting it to a minority stake.

'[$350 million] is a reasonable price,' Mr Chan said. 'It is a straightforward deal and I hope to do business in pay-TV.'

Analysts are cautiously optimistic about the new Galaxy deal. 'We are sceptical about the synergy that the new joint-venture partners, Ruili and Mr Chan, could bring to Galaxy,' BNP Paribas Peregrine said in a report. 'However, the market has already taken a bearish view on Galaxy and any breakthrough should be perceived as positive.'

Mr Chan denied reports that he hoped to buy a stake in PCCW's NOW broadband television. He also said his transactions were not related to Hutchison Global Communications.