Chinese-language broadcaster TVB is cashing in on its Taiwan business, unlocking value through a 53% stake sale.

The company still retains a 47% slice.

TVB could register a ~US$170 million net gain from the sale, which will be used towards FYE Dec. 2014 dividends for shareholders and investors.

The move comes as TVB refocuses on Hong Kong and the mainland, alongside a push to expand its digital platforms worldwide.

The sale also removes any regulatory overhang or concern for TVB in Taiwan, ahead of next year’s presidential elections and potential scrutiny of direct or indirect Chinese ownership of Taiwanese media assets.

A Mature TV Market

TVB’s Taiwan operations have been under pressure in recent years, due to flattish revenue growth and limited margin expansion.

Some of this is attributable to weak demand from advertisers. Pay-TV advertising, representing the lion’s share of TV ad spend in Taiwan, expanded by only 0.6% from 2011 to 2014, according to industry analysts Media Partners Asia (MPA).

At the same time, affiliate revenue gains have been limited, despite the progress of cable digitalization and the growth of IPTV in a market with high pay-TV penetration.

There is also a sense that TVB has been squeezed locally by stronger domestic competition from the likes of Sanlih, EBC and Fox’s Star Chinese offering.

Nonetheless, the broadcaster has invested in new production facilities in Taiwan, to program new content for the Greater China marketplace.

DEAL TERMS

The deal requires regulatory approval from three separate authorities.

Essentially, TVB plans to sell 53% of its Taiwan cable channels business, housed under subsidiary Liann Yee, for NT$4.7 billion (US$148 million).

Liann Yee, which operates the TVBS, TVBS News and TVBS Entertainment channels, will close the deal through three investment firms registered on the island: Li Mao, De En and Lien Xin.

Part of the proposal also involves TVB receiving two real estate properties and liabilities valued at NT$2.2 billion, as well as an additional NT$1.6 billion in cash from Liann Yee.

Once the transaction closes, Liann Yee will also repay a NT$1.2 billion loan to TVB.

Post-transaction, there will be five directors on Liann Yee’s board: two from TVB and three from the acquirers. The company plans to pay out 25-50% of its net profit as future dividends.