Why Astro Is Moving?

Despite having looked at it before, a privatisation is always on the cards for Astro. However, the stock has had many false alarms on the possible privatisation move. This time around its moving again with volume. Its probably not the privatisation thing this time. It is something a lot more important. How about buying the controlling stake in TVB? That's a very very significant asset. Shaw Brothers said in a stock exchange announcement last night its controlling shareholder "is currently in discussions with representatives of interested parties" regarding a possible sale of the shares in Shaw Brothers. Hong Kong media pioneer Run Run Shaw is in talks to sell his stake in holding company Shaw Brothers (0080), the largest shareholder of Television Broadcasts (0511), Shaw Brothers said yesterday.

No agreement has been entered into yet, Shaw Brothers said. The company said it is aware that its controlling shareholder is approached by various parties "from time to time." Run Run Shaw, who turned 100 years old last October, controls 75 percent of holding company Shaw Brothers, which is the single largest shareholder in TVB with a 26 percent stake. "I'm not sure about the pricing," an analyst said. "There were reports Run Run Shaw was looking for a very high price for the stake" several years ago.

Markets rumors pegged a foreign private-equity firm as the interested buyer, according to industry publication Basis Point. A mainland buyer is also said to be vying for the stake.

The background of the party looking to buy the stake will be important to whether any deal gets done, an analyst said. "TVB is the leader in the media sector, and they do have a good deal of influence on the public," the analyst said.

Trading in TVB and Shaw Brothers was suspended yesterday afternoon pending the announcement. TVB shares surged 10.8 percent, the most in eight years, to HK$48.35 before being suspended. Shaw Brothers surged 11.3 percent to HK$21.25 before being suspended.

Astro already has a very strong relationship with TVB. Celestial Pictures bought the 760 movie library from Shaw Brothers, Celestial Pictures belongs to Astro.

The 32.5 percent stake Shaw controls in TVB, as Television Broadcasts is known, is worth HK$5.96 billion ($766 million) based on the TV company's share price of HK$41.9 today. His 74.9 percent stake in Shaw Brothers is valued at HK$4.27 billion.

Of course it will take a lot to wrest control from a China mainland buyer, especially one where it can leverage on TVB's influence and business into China. Nonetheless, Astro has proven to have substantial experience in managing and owning content. Its a bit of a longshot, but I would be very surprised if Ananda does not put in a very hefty bid. TVB's assets are quite lucrative and still under leverage in many aspects. TVB has almost total monopoly on Cantonese content. Its TV serials stand heads and shoulders above other Asian countries, even Korean and Japanese. TVB series are translated into Vietnamese, Mandarin and Thai - and that explains the its asset translate well across most of Asia and its communities globally. To have TVB's asset is to own content, and that will allow for the owner to negotiate better deals with respect to revenue sharing of subscribers and attaining more lucrative cable channels.

The recent appointment of Henry Tan as COO may be a hint of things to come. Tan is reportedly leaving GroupM after 17 months as CEO of its operations in Malaysia and Singapore. GroupM Asia Pacific COO Mark Patterson is reportedly searching for Tan’s successor.GroupM is the media investment management arm for Nasdaq-listed communications services group WPP. Media investment management brands housed by GroupM include MindShare, Maxus, Mediacom, Mediedge:cia, MediaComplete, Motivator and Maximize.

I have to qualify that this is still my view only. Nothing bad will happen if TVB goes to someone else, but if Astro gets it, watch Astro fly towards RM4.50.

p/s photo: Kathy Chow Mun Kei