China Digital TV has started an internal restructuring to help gain regulatory clearance for transferring its core conditional access and digital broadcasting solutions business into a new venture.
The NYSE-listed group aims to transfer the assets to a…
China Digital TV has started an internal restructuring to help gain regulatory clearance for transferring its core conditional access and digital broadcasting solutions business into a new venture.
The NYSE-listed group aims to transfer the assets to a unit called Tongda Venture, currently controlled by asset firm Cinda Investment, in return for RMB1.15bn (US$185m) in cash and a controlling stake in it.
These assets are currently mostly held under a variable interest entity called Beijing N-S Digital TV that it controls through contractual arrangements in China.
China generally requires companies listed in the country to be held and owned by themselves or their subsidiaries based in China. According to China Digital TV, the contractual arrangements it has in place for Beijing N-S Digital TV are unlikely to be accepted under these regulations. To avoid impeding the wider deal, it has started to transfer all of Beijing N-S Digital TV’s equity to sit under Super TV, one of its China-based subsidiaries.
The company said that, after the move, Beijing N-S Digital TV will become “the subsidiary of a foreign-invested company, instead of a foreign-invested company itself”, therefore minimising the potential risks posed to its asset restructuring deal.
It expects to complete the reorgnaisation within 30 days, but has said it will drop the Cinda deal if it is unable to wrap it up it by 31 December 2015.
China Digital TV listed in New York in 2007 just three years after it was founded. Last month it declared a special cash dividend of US$0.50 per share – the fifth time it has paid out to investors since the listing.
Its shares initially enjoyed a surge of investor interest that saw their price more than triple in three trading days after their NYSE debut of US$16.
However, slowing growth since then helped them gradually fall to around the US$1.20 mark by September 2013. They have since been steadily growing and closed up 15% to US$4.78 on 16 June, the next trading day after the Cinda deal was announced on 13 June.
The group posted US$18.2m in net revenues for the three months to 31 March 2014, representing an 8.7% fall from the same period in 2013 and a 29.8% decrease compared with the fourth quarter of 2013.
It recorded US$14.3m in gross profit for Q1 2014, a drop of 2.3% from the same period in last year and a decrease of 27.9% from the fourth quarter of 2013.
