Hong Kong broadcaster TVB to seek judicial review of whitewash waiver ruling by SFC
Television Broadcasts (TVB) intends to seek a judicial review of the ruling by the Securities and Futures Commission (SFC) on the majority shareholder’s application for an exemption in making a general offer to buy all the outstanding shares in the company.
“The company will apply to the High Court of Hong Kong for leave to commence a judicial review,” TVB, the city’s major free-to-air broadcaster, said in a statement on Wednesday evening.
The review will focus on the regulator’s decision that the granting of a whitewash waiver that allows the majority shareholder to be exempt from making a general offer should be conditional on the outcome of the shareholders’ vote “without adjustment”.
“We cannot meet the condition ... ‘Without adjustment’ means that we are not allowed to scale back the voting shares. That is against the Broadcasting Ordinance,” TVB chief executive Mark Lee Po-on said in an interview with the South China Morning Post.
The scaleback provision, introduced to the ordinance in 1991, requires the aggregate voting control exercised by a non-resident company with a domestic television programme licence to be scaled back to no more than 49 per cent if the company’s economic interest in the broadcaster exceeds that level.
The intended judicial review will also focus on the SFC’s ruling that stated the waiver should not be put before TVB’s shareholders for a separate vote.
But Lee said allowing a separate vote on the waiver was a condition listed in TVB’s buy-back proposal in January, in which the broadcaster offered to repurchase 31.5 per cent of its shares for HK$4.21 billion (US$540 million). The ruling made the offer uncertain, he added.
Majority shareholder Young Lion Holdings has indicated it will not take up the buy-back offer, which would see the stake in TVB held by the group and its affiliates rise to 41.19 per cent. As a result, a mandatory general offer will be triggered by Young Lion under the city’s takeovers code.
Young Lion bought a 26 per cent stake in the broadcaster from the late Sir Run Run Shaw in 2011.
Another issue that makes the buy-back offer controversial was the fact that the SFC’s ruling report revealed that Chinese media magnate Li Ruigang ultimately held about 20 per cent of TVB, making him the single largest shareholder. This triggered concerns that the city’s dominate free-to-air television broadcaster was controlled by a mainland businessman.
Li, dubbed China’s Rupert Murdoch because of his vast media empire under China Media Capital (CMC), became an indirect investor in TVB when his company bought an undisclosed stake in Young Lion in April 2015.
In the disclosure of the shareholding structure made to the SFC, it was revealed that Li, who holds voting and non-voting shares in TVB, owned a 79.01 per cent stake in Young Lion, which gave him an 20 per cent indirect stake in the broadcaster.
TVB chairman Charles Chan Kwok-keung, who owns 6 per cent of Young Lion, indirectly has a 1.56 per cent stake. HTC Corp chairwoman Wang Hsiueh-hong owns 3.9 per cent while Mona Fong Yat-wah and her associates hold about 3.9 per cent.
The ruling disclosed by the SFC on May 10 said CMC had the greatest influence over the appointment of directors at TVB. It also noted that the firm had the option to require Chan to sell his entire holdings in Young Lion to a Hong Kong-resident third party of its choice.
“If there is any change in shareholding, it needs to be approved by the Communications Authority,” Lee said.
In a written reply to the Post, the Communications Authority said it had received documents from the commission on matters relating to TVB’s shareholding structure and would give a response on Thursday.
It said it was examining the documents to ascertain whether the information contained would give rise to any regulatory issues under the Broadcasting Ordinance and the relevant licence. It would also seek legal advice, it added.
Lee said the Communications Authority was fully aware of Young Lion’s shareholding structure before granting approval for TVB’s buy-back offer.
“We are not worried that the examination by the Communications Authority will affect the licence that allows us to provide free television programme service in Hong Kong. We have met all the requirements under the Broadcasting Ordinance before the authority granted the approval,” he said.
Additional reporting by Bien Perez