It looks LG Uplus may be trying to fork over too much dough for Korea’s largest cable TV operator CJ HelloVision, with market analysts saying the estimated bid of 1 trillion won (US$889 million) is a price too steep.
“Considering the declining competitiveness of cable TV operators, claims that LG Uplus’ proposal should be lower than 1 trillion won are convincing,” said Jeong Ji-soo, an analyst from Meritz Securities.
The brokerage said, however, that the combination of the telecom firm and cable TV operator could create synergy and offer greater profits for shareholders in the long run.
LG Uplus to soon finalize decision to take over CJ Hello: sources
It was reported on Feb. 8 that LG Uplus would convene a board meeting this week to approve a takeover scheme where the company would acquire 53.92 percent of CJ HelloVision, which is currently held by media company CJ ENM.
Both companies have kept mum, but CJ HelloVision confirmed on Feb. 11 in a regulatory filing that its largest shareholder CJ ENM is considering various options regarding the planned sales of stake, and it will make an official announcement when things are finalized.
CJ ENM first put its controlling stake up for sale in 2016, and some of Korea’s largest network operators, including SK Telecom, have showed strong interest in an acquisition.
Past negotiations, however, screeched to a halt as the nation’s fair trade watchdog would not allow telecoms to own TV networks on fears of excessive influence in the segments.
Hana Financial Investment also painted a negative picture of the anticipated acquisition, saying the deal may not be much help for the telecom and the purchase price is too expensive.
“Although LG Uplus can have more subscribers, 810,000 for budget mobile services, 800,000 for broadband services and 4.22 million for cable TV services, costs to gain those subscribers are too pricey,” said Kim Hong-sik, an analyst at the brokerage, adding the deal if made would not be able to boost LG Uplus shares.
The analyst said those companies for budget mobile services, often called mobile virtual network operators, on the other hand, would likely benefit from the takeover as market competition could be mitigated for a while.
By Kim Young-won (firstname.lastname@example.org)