Television Broadcasts, Hong Kong’s dominant free-to-air television broadcaster, will be examined by the telecommunications regulator to make sure it is in compliance with the Broadcasting Ordinance amid concerns that a minority shareholder may have an undue influence on its management.
The Communications Authority, which is responsible for licensing and regulating the broadcasting and telecommunications industries in Hong Kong, said on Thursday that it had engaged a Queen’s Counsel to examine the relevant licence conditions and the statutory declarations and deeds of undertaking submitted by TVB and the relevant parties.
The regulator stepped in after the Securities and Futures Commission (SFC) flagged concerns over the influence of China Media Capital (CMC), controlled by Chinese media tycoon Li Ruigang.
TVB is majority-owned by Young Lion Holdings, which bought a 26 per cent stake in the broadcaster from the late Sir Run Run Shaw in 2011. CMC became an indirect investor in TVB when it bought an undisclosed stake in Young Lion in April 2015. Other shareholders in Young Lion include TVB chairman Charles Chan Kwok-keung and HTC Corp chairwoman Wang Hsiueh-hong.
The SFC said Li, dubbed as China’s Rupert Murdoch, ultimately held about 20 per cent of TVB, making him the single largest shareholder.
CMC had great influence over the appointment of directors at the broadcaster, the SFC said in a ruling on Young Lion’s application for a whitewash waiver to allow the company to be exempted from making a general offer to buy all the outstanding shares in TVB.
The commission also said CMC had the option to require Chan to sell his entire holdings in Young Lion to a Hong Kong-resident third party of its choice.
In January, TVB offered to repurchase 31.5 per cent of its shares for HK$4.21 billion (US$541 million).
Young Lion has indicated it will not take up the buy-back offer, which would see the stake in TVB held by the group and its affiliates rise to 41.19 per cent. As a result, a mandatory general offer will be triggered by Young Lion under the city’s takeovers code.
The Communications Authority said it was “seriously concerned about the possible regulatory implications” of the documents provided by the SFC.
In an interview with the South China Morning Post on Wednesday, TVB chief executive Mark Lee Po-on said the authority was fully aware of the company’s shareholding structure before granting approval for Young Lion to take control of the broadcaster.
The authority’s legal adviser will examine whether any relevant information may have been held back and not fully disclosed during the process of considering TVB’s applications for shareholding changes.
A letter was issued to inform the broadcaster of the developments.
TVB said it would co-operate with the authority and provide the information it requested.