Major restructuring at China Digital

NYSE-listed China Digital TV Holding Co Ltd is to carry out a somewhat complex restructuring in order that its legal ownership stays within the law as far as Chinese regulations are concerned.

According to Peoples Republic of China rules and securities regulations, the assets of a China-listed company generally must be held and owned by it or its subsidiaries in China, while certain current contracts and contractual arrangements are unlikely to be accepted.

The reorganisation will see China Digital become a subsidiary of Shanghai-registered Shanghai Tongda Venture Capital Co. China Digital will inject its Conditional Access business, plus its broadcasting technology and VoD businesses into Shanghai Tongda in return for a payment of RMB 1.15 billion in cash (about $185 million) and which will then see China Digital with a controlling stake in Shanghai Tongda.

Also coming into the restructuring mix is Beijing N-S Digital Ltd, which trades as ‘Super TV’ and the intention is to see the new businesses obtain the necessary licences from regulator SARFT.

However, there are also senior management changes with the CEO resigning, CFO resigning (although both stay as directors).

The company warns: “There will be significant difficulties and uncertainties in completing the Restructuring, which is pending the entry of definitive transaction agreements, and is also subject to applicable approvals by the board of directors and shareholders of the relevant parties involved as well as regulatory clearance (including that by the CSRC, the PRC Ministry of Finance and the PRC Ministry of Commerce). The Restructuring is expected to be subject to close scrutiny by regulators amid increasingly stringent standards for similar transactions. There is no assurance that these approvals or regulatory clearance will be obtained within an expected timeframe, or at all. The Restructuring will terminate if it has not been completed by December 31st 2015.”

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