SCMP Plunges as Acquisition Talks Dash Buyout Hopes

SCMP Group Ltd., the newspaper company that surged yesterday on buyout speculation, plunged the most in more than a year after saying it was in talks to make an acquisition itself.

The publisher of the South China Morning Post dropped 7.4 percent in Hong Kong trading, the most since September 2011, to close at HK$1.99. The Hong Kong-based company has still gained 14 percent this week.

SCMP surged 23 percent yesterday before a trading halt on speculation its controlling shareholder, Malaysian billionaire Robert Kuok, was planning to buy out minority investors. Instead, the publisher disclosed talks about taking over a Hong Kong media group, as its flagship newspaper struggles to compete with free publications and online titles.

“Investors are taking a breath to rethink their positions,” said Louis Tse, a Hong Kong-based director at VC Brokerage Ltd. “Hong Kong’s media future isn’t bright.”

Sales at SCMP declined to HK$946 million in 2011 from HK$2.4 billion in 1997. The company produces the Morning Post, Hong Kong’s only paid-for daily English-language newspaper, as well as recruitment publications and Chinese-language versions of Cosmopolitan and Harper’s Bazaar magazines.

The publisher also faces a possible delisting because its publicly traded shares are set to fall below an exchange-imposed minimum. Kuok’s Kerry Media Ltd. is due to buy stock from three banks, which will cut SCMP’s free float to about 11 percent. SCMP has said its shares could be suspended Feb. 26 until the proportion of stock held by minority investors returns to above 25 percent.

Rupert Murdoch

SCMP said yesterday it had reached a preliminary agreement on a Hong Kong takeover. It didn’t elaborate on the target. The company could buy a Chinese-language publisher or a TV broadcaster, said Doug Young, a journalism professor at Fudan University in Shanghai.

“Buying a broadcaster could generate synergy,” said Young, the author of “The Party Line: How The Media Dictates Public Opinion in Modern China.” “Advertisers like it if they can buy deals in one place to get ads in print, online and on TV.”

Kuok, 89, bought a controlling stake in SCMP from Rupert Murdoch in 1993. He bought a further 30 percent for HK$1.1 billion ($142 million) in 2008 through Kerry Group Ltd.

Kuok is ranked 38th in the Bloomberg Billionaires Index with a net worth of $18.8 billion. He also has interests in property, hotels, palm oil and logistics.

The Morning Post, first published in 1903, has an audited weekday circulation of 108,047, according to a marketing brochure on its website. The newspaper’s main English-language rival, the Standard, stopped charging readers in 2007 to boost circulation after the government ended a requirement for companies to publish stock-exchange announcements.

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