The Chinese government has principally agreed that China Digital TV’s (NYSE: STV) 25% stake in its conditional access firm can be used to buy shares in Tongda Venture Capital (SHA:600647).
It marks a key milestone in a year-long restructuring process…
The Chinese government has principally agreed that China Digital TV’s (NYSE: STV) 25% stake in its conditional access firm can be used to buy shares in Tongda Venture Capital (SHA:600647).
It marks a key milestone in a year-long restructuring process that will see Tongda own 100% of Beijing Super TV, helping mitigate regulatory issues that the US-listed, but China-focused conditional access smart card supplier faces.
In return, China Digital TV’s Golden Benefit unit will receive a stake worth Yn800m (US$129m) in Tongda, which is controlled by asset management firm Cinda Investment, as well as Yn2.4bn (US$387m) in cash.
Golden Benefit, a wholly owned subsidiary, will own about 17% of Tongda if the deal goes through. However, China’s Ministry of Commerce has said Tongda would first need to divest its equity in Beijing CNLive Culture Media, a culture and media company focusing on mobile TV in which foreign investment is not allowed.
China Digital TV has previously said that the shares in Tongda will be tied to a 36-month lock-up, and could be given back if Super TV fails to hit certain profit targets up to fiscal year 2016.
Cinda will also be given the option to acquire up to 8% of its Beijing Cyber Cloud and Beijing Joysee Technology subsidiaries.
The restructuring process has gone through at least one iteration since it began in June 2014.
China Digital TV said uncertainties remain and the deal is still subject to China Securities Regulatory Commission approval.
“The restructuring will be subject to review by the respective regulators amid increasingly stringent standards for such transactions,” it said.
The group reaffirmed its intention to scrap the restructuring if it is not completed by the end of this year.