Li Ka-shing's Tom.com is buying a 32.75 per cent stake in ATV, a deal which will extend the interests of Hong Kong's richest man into television for the first time, if cleared by regulators. Mr Li already owns commercial radio station Metro Broadcast through his flagship companies, and could be prevented under cross-media ownership rules from buying into Asia Television (ATV). However, the government can grant an exemption if it wishes. Tom.com last night announced it had entered into a memorandum of understanding with Lai Sun Development to buy its ATV stake in exchange for 87.2 million new Tom.com shares worth $3.33 each, or $290.37 million. The deal, which would make Tom.com the second-largest shareholder in ATV and is likely to fuel concerns over the expanding influence of Mr Li, values Hong Kong's second terrestrial broadcaster at $886 million. Lai Sun controlling shareholder Lim Por-yen sold a 51 per cent stake in ATV to a mainland-backed consortium four years ago in a deal which valued the firm at $1.4 billion. Reporters besieged the offices of Lai Sun Development yesterday morning amid reports of the deal. Lai Sun shares surged 31.3 per cent in the first half hour of trading before being suspended. Shares in Tom.com were suspended before the market opened, pending the price-sensitive announcement. The arrival of Mr Li as a substantial shareholder could see ATV mount a stronger challenge to dominant broadcaster Television Broadcasts (TVB). Sir Run Run Shaw's TVB has dominated the television market for the past three decades with a market share estimated at between 70 and 80 per cent. TVB shares fell 2.41 per cent yesterday to $32.20. Tom.com said the deal was subject to regulatory approval. A spokesman for the Commerce, Industry and Technology Bureau said yesterday the government had not received an application from ATV for any shareholding change. As a sound-broadcasting licence holder, Metro is disqualified from controlling a free-to-air TV company or pay TV company. Metro is wholly owned by Mr Li's Hutchison Whampoa and Cheung Kong (Holdings), which between them also hold 43.3 per cent of Tom.com. Tom.com was listed as an Internet portal operator during the dotcom boom in March 2000 but has since transformed itself into a diversified media company through a string of acquisitions, buying a clutch of magazine, book and outdoor advertising companies. The unusual move by Tom.com to issue the new shares at close to the trading price leaves the way open for Mr Lim to sell them on the market, since he receives no cash directly in the deal. Tom.com closed at $3.325 on Monday. ING Barings analyst David Li said that Li Ka-shing's name could help ATV's listing if it goes public. He believed Mr Li would find it difficult to overturn TVB's dominant position in Hong Kong. JP Morgan analyst Kristian Jhamb said the deal could see an advertising boost for ATV if Mr Li's other companies - such as supermarket chain ParknShop - switched spending to the station. However, more lucrative opportunities might lie in distributing ATV's programmes in the mainland market. Analysts believe Tom.com could eventually raise its stake to take control of ATV. Former PLA officer Liu Changle last month became ATV's biggest shareholder with a 46 per cent stake after buying out his former joint-venture partner and ATV chief executive Feng Xiaoping for an undisclosed amount. That deal is still awaiting regulatory approval.