Photographer: Brent Lewin/Bloomberg

Hong Kong TV Broadcaster Sweetens Buyback Offer; Shares Soar

  • Improved terms may ward off unsolicited approach by TLG
  • TVB raises price, cuts number of shares in planned repurchase

Television Broadcasts Ltd. sweetened the terms of its share buyback offer after Hong Kong’s dominant free-to-air TV broadcaster received an unsolicited bid for 29.9 percent of the company from TLG Movie & Entertainment Group. The shares jumped to the highest since August 2015.

TVB, which announced plans to repurchase as many as 138 million shares on Jan. 24, boosted its offer price to HK$35.075 from HK$30.50 and cut the amount of shares to be purchased to 120 million, according to a filing Monday. The stock gained 9.2 percent to HK$33.15, the highest close in more than 17 months, on Tuesday.

Improving the terms of the buyback may ward off TLG Movie’s approach, which is conditional on shareholders rejecting the buyback of the shares. TVB has attracted new investors including Li Ruigang’s China Media Capital, which took a stake in 2015 through an investment group, after the late media mogul Run Run Shaw sold control to buyers including HTC Corp. Chairwoman Cher Wang in 2011.

"It’s obvious TVB’s move is trying to increase the acquisition cost, hoping to fend off TLG," said Caster Pang, head of research at Core-Pacific Yamaichi in Hong Kong.

Alex Chow, TLG Group’s chief executive officer and founder, told local media that TLG has sufficient funds for the acquisition and it’s not a shell company. "Our bid isn’t a hostile takeover, definitely not. It’s a friendly takeover," said Chow. He added that TVB using borrowed money for the share buyback would hurt cash flow and isn’t ideal for minority shareholders. TVB issued $500 million of bonds in October.

The surge in TVB shares Tuesday has added about HK$1.23 billion ($159 million) to the broadcaster’s market value, raising it to HK$14.4 billion. Planned spending on the repurchase of as much as HK$4.21 billion is unchanged from the initial level, according to TVB’s statement Tuesday.

Read: Why Hong Kong’s top broadcaster could use some cash

The revision to the previous buyback offer ensures the free public float of shares would not fall below the 25 percent minimum, TVB said Tuesday in the statement.

TVB last week said it was seeking more information on TLG Movie, particularly whether it has financial resources to support TVB’s six-year investment plan. The broadcaster is obtaining information on the offerer, TVB spokesman S.Y. Tam said Tuesday.

Calls on Tuesday to TLG’s Beijing office were not answered. The company says it’s “engaged in the cultural industry and real estate development and investments” and will make an announcement related to its offer during the week of Feb. 20, according to its Feb. 8 filing in Hong Kong.

TVB, battling declining advertising revenue and competition from streaming services such as Netflix, warned in December that profit for 2016 could fall by as much as 65 percent. Its stock rose 3.2 percent Feb. 9 on the news of the bid from TLG Movie, suggesting investors may welcome an influx of funds.

The new terms of the share buyback would raise the combined stake of TVB’s biggest shareholders, including Li’s China Media Capital, Chairman Charles Chan Kwok Keung and non-executive director Mona Fong, to about 41 percent from currently 30 percent, according to the filing. Their stake would have risen to 44 percent under the original buyback plan.

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