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Can LG Uplus buy cable TV operator CJ Hello?

Expectation of Mamp;A deal reignites as CJ needs cash By Nam Hyun-woo The domestic capital market is paying keen attention to moves between leading domestic mobile carrier LG Uplus and cable TV operator CJ Hello as LG seeks to acquire a major stake in the country's leading pay-TV operator According to industry watchers and analysts, Sunday, a cap restricting any pay TV operator from having more than one-third of total pay TV subscribers will not apply after June 27. This will allow mobile carriers, which are already raking in huge profits with their internet protocol television (IPTV) businesses, to expand their presence in the pay TV industry.

'LG Uplus is the No. 1 candidate for purchasing CJ Hello,' said Hana Financial Investment analyst Kim Hong-sik.

'If LG Uplus strikes a deal, the pay TV market will become a battle between mobile carriers.' Earlier this year, LG Uplus said in a regulatory filing that it was 'considering multiple options on purchasing a cable TV operator, without limiting the target to a certain company,' after rumors spread that LG Uplus was close to a purchase deal with CJ Hello.

Although the rumor dissipated after CJ Hello denied the report, market observers say CJ needs cash for its bid to merge CJ O Shopping and CJ Eamp;M, while LG Uplus still wants CJ Hello to become the No. 2 player in the pay TV market.

In the second half of last year, KT and its affiliate KT Skylife led the pay TV market with 30.5 percent share or 958 million subscribers.

SK Broadband -- SK Telecom's subsidiary -- was next with 13.65 percent, CJ Hello with 13.

10 percent and LG Uplus with 10.89 percent.

Given CJ Hello's sizeable pay TV market share, the company has long-been regarded as a 'good bet' for mobile carriers for external growth. SK Telecom had planned to acquire CJ Hello with its IPTV business in 2016, although its efforts ailed due to opposition from KT and LG Uplus.

CJ shareholders have approved a merger between CJ Eamp;M and CJ O Shopping and the two entities will merge on July 1 The problem is that the two companies' share prices are below the set prices for dissenters' rights. To protect minor shareholders' rights, shareholders who oppose a merger between two companies can demand that their acquiring corporation repurchase shares at a predetermined price.

If the market price is below the predetermined price, shareholders can benefit by exercising their rights. To cope with the potential cost, CJ has reportedly provisioned 500 billion won ($464 million), as well as announcing it will retire treasury stocks to prop up the share prices of the two companies.

For CJ, which seeks to engage in 'media commerce' with the merged firm, named CJ ENM, investment for the new business is necessary. CJ O Shopping's 53.

92 percent stake in CJ Hello will provide a good foundation for new businesses if sold, observers say. The stake is worth about 390 billion won.

'With the domestic home shopping business facing stagnation, the merger between CJ Eamp;M and CJ O Shopping will suggest a new business model,' said Samsung Securities analyst Nam Ok-jin. 'CJ Hello's potential sale is a favorable factor for CJ O Shopping's share price.

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Publication:The Korea Times News (Seoul, Korea)
Date:Jun 10, 2018
Words:624
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