Television Broadcasts (TVB)

TVB’s second-largest shareholder says it rejects buyback offer

The declaration by Silchester, a 14.1 per cent owner of TVB, could throw a wrench into the plan by Chinese media mogul Li Ruigang to tighten its grip on the broadcaster

PUBLISHED : Friday, 17 February, 2017, 7:41pm
UPDATED : Friday, 17 February, 2017, 11:55pm

The plan by Chinese media mogul Li Ruigang to tighten his grip on Hong Kong’s main free-to-air television broadcaster may be heading for a messy tussle, after TVB’s second-largest shareholder today declared its opposition to a HK$4.21 billion buyback proposal.

Silchester International Investors LLP, a London-based fund owning 14.1 per cent of Television Broadcasts Ltd, or TVB, said the January 24 buyback -- revised on February 13 -- was “essentially a disguised nil premium takeover attempt” by the controlling shareholder Young Lion Holdings, at a time when TVB and its share price are at a low ebb, according to a letter obtained by the South China Morning Post.

TVB offered to buy back shares at HK$30.50, in a plan that would have cost HK$4.21 billion. The plan would enable Young Lion -- in which Li has an undisclosed investment -- and an associate to increase their TVB stake to 43.66 per cent, from the current 29.9 per cent.

TLG Movie & Entertainment Group, a Hong Kong company backed by two mainland Chinese funds and an overseas investor, has made an unsolicited takeover bid, saying it intends to buy 29.9 per cent of TVB, urging shareholders to reject the buyback.

TLG, which hasn’t said how much it intends to pay for each TVB share, said it’ll announce details of its plan before the end of next week.

In response to TLG’s move, TVB this week raised the per-share offer price by 15 per cent to HK$35.075, making it more attractive for minority shareholders, and costlier for TLG.

That price is within TLG’s budget as it’s still below TVB’s fair value, the company’s founder Alex Chow said this week in an interview.

“Rising the tender offer price to HK$35.075 does not change our basic interpretation,” Silchester in its letter.

A better idea would be to pay out a special dividend of HK$9.6 per share using TVB’s available cash, since the company is funding its buyback from the same reserves, the fund said.

TLG’s unsolicited bid throws a challenge to Young Lion’s attempt to strengthen its grip on TVB.

Li, the chairman of Shanghai-based China Media Capital and shareholder of the Manchester City Football Club, bought an undisclosed stake in Young Lion in 2015.

He was named TVB’s vice chairman last October, after the appointment was approved by Hong Kong’s Chief Executive Leung Chun-ying two months earlier. Hong Kong’s broadcasting ordinance restrict the holders of the city’s television networks to be permanent residents.

Silchester first bought TVB’s shares in 2014 at HK$45.15, according to a December 31 disclosure of that year. The fund kept on adding its stake to the current 61.4 million shares, even as the network’s stock price fell 25 per cent. Its stake is valued at HK$2.08 billion, at current prices.

The fund said it’s failed to convey its opposition to the buyback to TVB’s board, a claim that’s contested by the broadcaster’s spokesman S.Y. Tam.

The network had been in touch with Silchester, and had exchanged views before the fund’s letter was released, according a statement issued to the Hong Kong stock exchange.

Other TVB shareholders are declining to comment. Schroeders Pls, which owns 265, 200 TVB shares, declined to comment.

Added reporting by Jennifer Li