Tsun Yip, a provider of waterworks engineering and roadworks services, will acquire Xinhua TV Asia-Pacific Operating for HK$700 million through a share and convertible bond issue.
Xinhua TV is a branch of China Xinhua News Network Co (CNC).
'We have no experience in the media industry, but we are very interested in exploring new businesses, especially in advertising,' Tsun Yip's chief executive Eric Chia Thien Loong said.
In return for the stake, CNC, a subsidiary of Xinhua News Agency, will own 28.49 per cent of Tsun Yip to become the single-largest shareholder of the company.
The acquisition was approved at Tsun Yip's extraordinary general meeting yesterday.
Chia said the firm's core business would be strengthened even as it expanded into the media sector.
'Annual costs to run the media business will be about HK$7 million,' he said. 'This will include HK$1 million for content payment to CNC, HK$2.5 million to the satellite operator and HK$2.5 million and HK$1 million for broadcasting rights in Hong Kong and Macau, respectively.'
Chia said that assuming the channel sold 10 minutes of advertising every hour, the company would make a profit if per-minute advertising fee was above HK$81.
'Usually the price for television advertising is several hundred [dollars] per minute,' he said.
The channel was launched in Hong Kong in July last year.
Wu Jincai, a deputy editor-in-chief at Xinhua who will now be an executive director of Tsun Yip, said in three to five years CNC expected to reach audiences worldwide as extensively as CNN and BBC. CNC broadcasts to 57 countries and regions.
Wu said that with a base in Hong Kong, CNC would extend its broadcasting to more areas by buying or renting local channels.
'In terms of content, we are similar to news programmes of the West,' he said. 'We will tell China's viewpoint, but to a great extent China's viewpoint is in accordance with that of the world. We all want peace and development.'
Tsun Yip planned to launch a CNC advertising division next year, but Chia said a profit target had yet to be set.
Zou Chendong, a CNC director who will also become an executive director at Tsun Yip, said there had been no advertising income since the launch of the television station at the end of 2009.
'As a young television station, we have been doing pretty well,' Zou said. 'Statistics provided by Hong Kong Cable Television showed that the average audience rating of our Chinese programmes in June was 23,000 PVT [persons viewing television] per week.'
The most popular news channel in Chinese is CCTV-4, the international channel of China Central Television, with a rating of 30,000 PVT.