Chinese offshore investment

With eye on Belt and Road Initiative, CEFC to buy majority stake in Czech broadcaster

Highly indebted producer CME is energy company’s third media acquisition

PUBLISHED : Thursday, 23 November, 2017, 2:49pm
UPDATED : Thursday, 23 November, 2017, 11:00pm

CEFC China Energy, the country’s largest non-state energy company, is poised to acquire a third media and communications asset in two years in Czech Republic. The company is expanding its footprint in Central Europe, a key market covered by Beijing’s Belt and Road Initiative.

CEFC will lead a consortium and is expected to provide the bulk of financing to pay 500 million for a majority stake in television broadcaster and producer CME held by the United States-based media giant Time Warner, according to a Reuters report citing three unnamed sources.

Two years ago, CEFC bought minority stakes in publishing house and television broadcaster Empresa Media and marketing communications services firm Medea Group for undisclosed sums. Both are based in Czech Republic.

A CEFC spokesman said he was unable to confirm or deny the Reuters report as he had “received no news on such a matter”.

The news of the acquisition comes two days after CEFC refuted reports linking it to a multimillion-dollar bribery case in which former Hong Kong home affairs minister Patrick Ho Chi-ping – the secretary general of a non-government organisation funded by CEFC – was arrested in the US on corruption charges.

“One cannot use traditional business sense to look at this company’s acquisition spree into so many industries,” said Junyang Securities chief executive Kenny Tang Sing-hing. “Its acquisitions follow closely China’s Belt and Road Initiative and appear to be driven more [by that] than business objectives.”

CEFC has in recent years bought a majority stake in a brewery and invested in football club Slavia Prague, an airline and a travel agency in Czech Republic. It is also in the final stages of buying half of J&T Finance Group, which has banks in the Czech Republic, Russia and Slovakia.

The company has grabbed headlines as its 40-year-old chairman, Ye Jianming, oversees acquisitions such as the US$9 billion purchase two months ago of a 14.16 per cent stake in Russia’s Rosneft, the world’s largest listed oil producer.

CME is highly indebted and struggled to break-even for years as it had to pay hefty financing costs.

It had negative cash flows from operations between 2012 and 2014, and relied on equity and debt financing to stay afloat.

China’s CEFC buys 14pc of Russian oil company Rosneft for US$9 billion

With US$1 billion in net debt on September 30, it posted a net loss of US$7.75 million for the three months to September 30, compared with a loss of US$19.6 million a year ago.

“I am not sure if it makes sense to move from energy to go into media – the only thing I can think of is that they want to diversify away from energy, as the long-term pathway for energy is not as clear and is risky from a political point of view,” said Shaun Rein, author of The War for China’s Wallet and managing director at China Market Research Group.

“But media is such a different business line … perhaps they are trying to show a better face since they are coming under scrutiny due to rumours of bribery,” he said.

For the year’s first nine months, CME booked a profit of US$9.1 million, compared with a loss of US$201.4 million in the year earlier period, as revenue grew by 6.1 per cent year on year to US$378 million.

It has 150 million in loans due next year, 235 million due in 2019 and 468 million in 2021.