Solving TVB shares row some way off despite broadcaster increasing transparency

The SFC raised its concerns during the vetting process of a US$541 million share repurchase planned by TVB

PUBLISHED : Thursday, 06 July, 2017, 5:48pm
UPDATED : Thursday, 06 July, 2017, 10:42pm

The ongoing legal tussle between Television Broadcasts (TVB) and the Securities and Futures Commission looks set to continue with the regulator refusing to act on the broadcaster’s latest disclosure, about its shareholder structure and appointment of directors.

Analysts, however, welcomed the TVB move as they believe it will give the company more transparency.

“We have no comment,” an SFC spokesman told the South China Morning Post, on the latest clarification from TVB that it would make any change to the regulator’s decision over its share repurchase plan.

The securities watchdog first expressed concerns over the shareholder structure at TVB in May and said its major shareholder China Media Capital (CMC) may have too strong an influence appointing and removing directors of TVB.

The SFC raised its concerns during the vetting process of a HK$4.21 billion (US$541 million) share repurchase planned by TVB. The regulator did not accept TVB major shareholder Young Lion’s application for a whitewash waiver – a resolution that must be passed before a target company in a buyout situation can give financial assistance, forgive debts or provide other financial dealings to the buyer of the acquiring entity — to allow the company to be exempted from making a general offer to buy all the outstanding shares in TVB.

In late May, TVB brought judicial review proceedings against the SFC decision, but before

those could take effect, the company on Wednesday voluntarily released more information on its shareholder structure underlining how CMC did not have excessive influence in appointing directors to the TVB board.

Athough the single largest shareholder in TVB through Young Lion, CMC can only nominate two directors to the broadcaster’s 12 member-board of directors, TVB said.

That’s despite Young Lion having the rights to nominate TVB four directors but CMC only has the right to nominate two.

Charles Chan Kwok-keung, the current TVB chairman has the right to nominate one director to TVB through his control of another holding company, Innovative View Holdings, which is also an investor in Young Lion.

TVB now has 12 directors including Chan as the chairman and Li as vice-chairman.

“It would be good for TVB to disclose more information about its shareholder structure and how much influence its major shareholders have on the company. It will add transparency and boost confidence among investors,” said Louis Tse Ming-kwong, managing director of VC Asset Management.

TVB shares price closed at HK$28.95 at midday on Thursday, down 1.03 per cent.

TVB is majority-owned by Young Lion Holdings, which bought a 26 per cent stake in the broadcaster from the late Sir Run Run Shaw in 2011.

CMC, founded by chairman Li Ruigang, dubbed China’s Rupert Murdoch, became an indirect investor in TVB when it bought an undisclosed stake in Young Lion in April 2015. Other shareholders in Young Lion include TVB chairman Charles Chan Kwok-keung and HTC Corp chairwoman Wang Hsiueh-hong.

Some 89.39 per cent of Young Lion’s shares carry no voting rights, only 10.61 per cent have, the TVB announcement on Wednesday said.

Chan’s Innovative View controls a majority of the voting shares in Young Lion while CMC indirectly controls a majority of all shares but most are non-voting right shares, it said.

Charles Chan Kwok Keung, chairman of TVB via Innovative View Holdings controls 56.51 per cent of all voting shares of Young Lion shares and 6 per cent of the total share in the company, the TVB announcement said.

CMC indirectly controls 32 per cent of the voting shares of Young Lion shares and 79 per cent in total, while Profit Global Investment controls while controls 11.49 per cent voting right shares and 14.99 per cent of Young Lion shares in total.

The board of directors of Yong Lion comprises five directors, Innovative View and CMC each nominated two directors while Profit Global Investment nominated the fifth director, TVB statement said.

CMC also has the right to require Innovative Viewto sell all of its voting shares in Young Lion to a third party ordinarily resident in Hong Kong and nominated by CMC, TVB said.