Carlyle swaps shares in kbro for Taiwan Mobile stake

Private equity firm Carlyle Group will swap its stake in Taipei-based kbro for a 15.5% stake in Taiwan Mobile, through a deal with an estimated transaction value of NT$32.8 billion ($1 billion). Taiwan Mobile is the counterparty in the share swap and will become the majority owner of kbro, which is one of Taiwan's largest cable television operators.

The deal consolidates the operations of the two firms to create the largest pay TV service provider in Taiwan, with over 1.5 million subscribers and an estimated market share of 32%. Taiwan Mobile is one of Taiwan's leading telecommunications operators.

The deal is being transacted at a valuation of 10 times the Ebitda generated by Taiwan Mobile in the 12 months from July 2008 to June 2009. The deal ascribes a value of NT$55 for each Taiwan Mobile share, a 6% premium to its closing share price on September 15. The deal will be earnings-per-share neutral for Taiwan Mobile in 2010.

The gross debt of Taiwan Mobile post-closing will be NT$21.5 billion in term loans and corporate bonds plus another NT$24 billion in short-term borrowings, for a net debt-to-Ebitda ratio of 1.2 times. A specialist described the debt levels as "very conservative gearing". Taiwan Mobile expects to refinance some of the high-cost debt on the books of kbro, post-closing.

The 15.5% stake will make Carlyle Asia Partners (CAP) the second largest shareholder in Taiwan Mobile after its controlling shareholders, Taiwan's Tsai family, who own 18.2%. The Tsai family also controls Fubon Financial, which has interests in financial services and insurance.

Carlyle was earlier an investor in Taiwan Broadband Communications (TBC), which it sold to Macquarie in 2005 for a firm value of $890 million. At the time, Carlyle had owned TBC for six years. In 2007, the Macquarie group consolidated its stake in TBC, with one of the Macquarie funds acquiring a 20% stake which had been sold down to an investor after Macquarie did the 2005 deal.