LI, Tao @ Hong Kong

The keenly anticipated court battle between Asia Television’s tycoon shareholders for control of the company finally began in the Court of First Instance yesterday. Many details of the complicated, multi-party changes in ATV’s shareholding structure were revealed in the proceedings on Monday.

Leveling various accusations, Taiwanese businessman Tsai Eng-meng said ATV’s key shareholder Payson Cha issued convertible bonds at a substantially lower price than agreed, which has breached his fiduciary duty as a director on the board, and the agreement between the pair in which Cha promised to help Tsai gain control of the broadcaster.

Lawyers representing Tsai said in late 2009, Cha issued convertible bonds at only HK$28 cents apiece and benefited from the purchase. This price is much lower than the HK$2.47 price stated in the shareholder’s agreement, and also below the HK$1.37 per share Tsai paid earlier on to become a shareholder of ATV.

According to their earlier agreement, Cha was supposed to sell 2.75 percent of his shares to Tsai to give Tsai control of the board. Instead, Cha signed a contract with mainland property tycoon Wang Zheng to sell his entire stake at HK$0.59 per share, which would make Wang the new boss of the broadcaster if the deal is formally concluded.

Tsai’s lawyer also countered the “unanimous approval” record for issuance of convertible bonds provided by Cha’s lawyer at the court. Tsai’s lawyer said at the board meetings dated November 11 last year that his client formally expressed clear opposition to the conversion price. But Cha, the major shareholder of ATV, who dominates the board, eventually approved the significantly lower price.

Tsai wants the court to cancel the agreement between Cha and Wang, which, Tsai believes, has also jeopardized the best interest of the broadcaster.

The agreement between the two, according to Tsai’s lawyer, requires Tsai to invest HK$80 million in ATV over the years subject to the promise that Cha inject money into the broadcaster first, a requirement with which Tsai complied,while Cha, Tsai alleges, failed to fulfill his end of the deal.

Tsai, chairman of major Taiwanese snack company Want Want, filed the lawsuit against Cha last month, which sought to put Cha’s share transaction with Wang on hold. Tsai has filed for a court injunction halting any share transaction between Cha and Wang, and has paid more than HK$20 million as a deposit to guarantee any loss Cha may suffer from a temporary injunction.

A HK$23 million injection paid into ATV was believed to be the advance for the transaction between Cha and Wang. Court proceedings will continue today.

Wang, chairman of Shenzhen-listed property developer Rongfeng Holding said earlier that he plans to invest HK$2 billion over the next 20 years in the broadcaster, adding that he is determined to build ATV into Asia’s CNN.

China Daily

(HK Edition 04/13/2010 page2)

http://www.chinadaily.com.cn/hkedition/2010-04/13/content_9719477.htm

Chen Xiao, chairman and president of Gome Electrical Appliances Holding Ltd, speaks at the company’s 2009 annual results announcement in Hong Kong Wednesday. The company, whose billionaire founder Huang Guangyu faces bribery charges, posted a 35 percent gain in 2009 profit after closing unprofitable stores and revamping outlets. Edmond Tang / China Daily

Despite joint liability, maximum fine would be easily absorbed by the company

Hong Kong-listed Gome Electrical Appliances, which reported its earnings Wednesday, said the outcome of the trial of company founder Huang Guangyu will have little impact on the firm, China’s second-biggest home electronics retailer by market value.

“After consulting with legal professionals, we believe the outcome will not affect the company in any senses, no matter what it turns out to be,” said Chen Xiao, chairman and president of Gome.

Huang Guangyu, founder and former head of Gome, was charged with “illegal business dealings”, “insider trading”, and “bribery by organization” in Beijing two months ago after 15 months in police custody.

The mainland’s Securities Regulatory Commission confirmed that Huang was indicted for illegal gains by manipulating the share price of two mainland-listed companies, but did not elaborate in detail.

The count “bribery by organization” linked the fate of the former chairman and Gome the company. If Huang is found guilty on this charge, Gome will also face punishment.

Analysts said earlier that since Gome’s liability in the prosecution is 4.56 million yuan, even if Gome is eventually punished with a fine, its operations and financial condition will barely be affected, given that Gome Wednesday reported year-on-year growth of 34 percent in net profits for 2009 to 1.4 billion yuan.

Chen said the company used to focus only on aggressive territorial expansion. While opening large-scale stores in premium locations to accommodate large inflows of customers, the company is now also striving to improve operating efficiency by remodeling stores.

“By closing 189 underperforming stores and opening only 56 new ones last year, the company’s revenue slid by 7 percent, but same store sales achieved a profit increase of 2.8 percent from a year earlier,” said Chen.

Gome predicted a net opening of 80 stores in 2010. “We may further close down 20 existing stores and open about 100 new ones in the mainland this year, specifically to allocate resources to the second- and third-tier markets,” said Wang Junzhou, Gome’s executive vice-president.

The company is also expected to take advantage of the State’s policies to boost domestic consumption, like the “home appliances going to the countryside” and “home appliance replacement” policies.

Regarding Hong Kong, Chen said it is a love-hate market to the investors, which provides tons of opportunities but in the most competitive environment.

“It could not be easy for any home electronic retailers to do business in Hong Kong, where I believe competition is more fierce even when compared to the mainland market,” said Chen.

For example, China’s biggest electronics retailer by market value, Suning Appliance Co said last month it aims to win market share of more than 25 percent in Hong Kong in the next three years, helped by opening up 30 outlets.

Suning has announced its intention to buy Citicall Retail Management Ltd, one of Hong Kong’s local home appliance retailers, to gain 22 stores in Hong Kong and a platform for overseas expansion. Chen said Gome was also in close contact with Citicall in the past, but failed to initiate any cooperation.

(HK Edition 04/08/2010 page2)

http://www.chinadaily.com.cn/hkedition/2010-04/08/content_9699656.htm

Hong Kong’s television industry received what could be a major boost when it was recently disclosed that the smaller of the two free-to-air broadcasters, Asia Television (ATV), is on the verge of receiving a substantial investment from mainland property tycoon Wang Zheng, who could be on his way to becoming the major shareholder.

When asked what he, as a staff member, expects specifically from Wang, who could become the majority shareholder of ATV in the future, ATV Assistant controller Gilbert Au said, “I think for everyone working with ATV, what we should consider is the job at hand. As to ATV’s future plans, we’d better leave that to those who really have power to make those decisions.”

But even if Wang’s investment materializes, ATV still faces considerable challenges. Television broadcasting is capital-intensive, especially for a company such as ATV with only a 10 percent market share in Hong Kong. Cash-strapped ATV is reported to be losing HK$1 million every day.

Wang is technically not yet a shareholder. But he already has promised more hiring. He also brought hope to the station, with plans to inject billions of cash himself and bring in more support from a number of major mainland companies, such as China Life.

“I am not expecting any changes within the short term at the station,” said Cheuk Pak-tong, director of the Academy of Film at Baptist University.

“What ATV needs most now is talent, which could not necessarily be bought with money. But without money, there is no hope for the cash-strapped station to be revived, not to mention his (Wang’s) ambition to build an Asian CNN. I don’t know really how much ATV needs to spend to make a change – several billions at least I guess, and I believe the investment has to be perpetual and persistent,” Cheuk added.

Cheuk said as the first free-to-air television broadcaster in Hong Kong, ATV had a long history and still holds a place in the hearts of Hong Kong viewers. As to a timetable for ATV to stage a comeback in head-to-head competition with Television Broadcaste Pearl TV, an operation 5 times larger, Cheuk said 10 years could be optimistic.

Cheuk said Wang’s plan to launch a Putonghua channel could be a nice start, considering the vast audience and economic opportunities on the mainland. But success is by no means certain. Phoenix Television, a Hong Kong-based mandarin television broadcaster, which has been in the market for more than 10 years, failed to achieve a mass audience on the mainland.

Wang Zheng has vowed to turn the struggling broadcaster into Asia’s CNN, as well as a TV station reflecting Hong Kong’s conscience. He said he is not afraid of losing on the proposition. But he has confessed, “perhaps I am having a midlife crisis.” But Wang’s age is not what analysts worry about. It’s his lack of television experience.

Ronald Soong, chief technical officer at KMR Media Research Group, said Wang’s CNN ambition already sounds too naive for him.

“If it is broadcast in the universal language – English, why wouldn’t they watch the authentic CNN directly?” Soong said.

Soong has watched developments in Hong Kong television over the decades. He said Wang’s lack of experience would make it difficult to save the struggling ATV, even if he brought a lot of cash.

“ATV needs to solve tons of internal problems first. I am now indifferent to its rows and debates, because all I hear about ATV is its internal fight and quarrels,” said Soong.

Not long ago, ATV shareholder, Taiwanese snack-food tycoon Tsai Eng-meng filed a lawsuit, still pending, asking for an injunction to stop ATV’s majority shareholder Payson Cha and his brother from selling their stakes to Wang.

Soong hopes Wang’s takeover, if eventually realized, could end the chaos, as a first step. He said as other broadcasters in the city are also applying for free-to-air licenses, Hong Kong is on the verge of ending duopoly, which will impose more pressure oo ATV when free TV stations are plentiful.

(HK Edition 03/30/2010 page2)

 http://www.chinadaily.com.cn/hkedition/2010-03/30/content_9659110.htm