HONG KONG (XFN-ASIA) - Shaw Brothers (Hong Kong) shares soared after its chairman Run Run Shaw offered to buy out minority shareholders at a big premium. Dealers said taking full control of his company, which has a controlling 26 pct stake in the city's dominant terrestrial TV broadcaster, Television Broadcasts Ltd (TVB), will make it much easier for Run Run Shaw to get out of Hong Kong's broadcasting industry. They said Run Run Shaw's aggressive buyout bid may have been prompted in part by recent top-management changes at TVB rival ATV and prospects that the latter may eventually be stronger competition for TVB. At the morning close, Shaw Brothers was up 4.51 hkd or 55.47 pct at 12.64, off a high of 12.86, while TVB was up 0.65 hkd or 2.73 pct at 24.45. The Hang Seng index fell 411.71 points or 2.82 pct at 14,210.68.
"The management shake-up at ATV must have been one of the reasons why Run Run Shaw is very keen to privatize Shaw Brothers as soon as possible," said Linus Yip, strategist at First Shanghai Securities. "In the event that ATV bolsters its position after recent top-management changes, this might make it more difficult for Run Run Shaw to find a buyer for his company which controls TVB, especially if the latter starts losing advertising market share to its rival," he said. Run Run Shaw offered to buy the shares that he does not yet own in Shaw Brothers at 13.35 hkd per share, a premium of 64.2 pct over the stock's last closing price of 8.13 hkd on Dec 12. The proposed privatization will be carried out by Shaw Holdings, which currently owns 74.92 pct of Shaw Brothers. Shaw Brothers' major asset is its 26 pct stake in the city's dominant terrestrial TV broadcaster, Television Broadcasts Ltd (TVB). Media Partners Asia said TVB captured 73 pct share of Hong Kong's TV advertising market last year compared to ATV's 19 pct. In a bid to narrow the gap, ATV's majority shareholders recently hired Linus Cheung as executive chairman and Ricky Wong as chief executive officer. However, Wong, who is chairman of City Telecom, quit ATV last week over a reported rift with Cheung, formerly deputy chairman of PCCW Ltd. First Shanghai's Yip said he sees limited upside near-term in Shaw Brothers' share price following today's surge. "Shaw Brothers' share price is now very close to Run Run Shaw's offer price and I doubt very much if it has any more upside going forward considering fluctuations in the market and risks of a correction after today's surge," he said. He noted that while there are no fresh market rumors about Run Run Shaw's bid to sell off his stake in TVB, his desire to acquire complete control of Shaw Brothers may be in preparation for an eventual sale of the company. "While TVB continues to make money, the prospects for Hong Kong's broadcast industry are difficult in the face of a global recession," he said. "Many people expect him to sell off his company if he finds an opportunity for doing so," he said. In October, Shaw Brothers said Run Run Shaw's Shaw Holdings Ltd had terminated all talks for the sale of its 75 pct stake in the company. Shaw Holdings cited the "present tumultuous situation in the financial markets" as the reason for its decision. Mainland developer Yeung Kwok-keung was earlier reported to be close to buying the tycoon's stake in Shaw Brothers to take control of TVB. (1 usd = 7.8 hkd) jun.concepcion@xfn.com
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