CMMB Vision (HKG:0471) aims to raise at least HK$625m (US$80m) in a rights offering to deploy multimedia satellite services across China under a new joint venture.
The group is offering two shares for HK$0.1 for every existing share, representing a premium of 9.89% to their last closing price on 29 January.
Chi Capital, the private equity firm of CMMB’s chairman and CEO Charles Wong and its largest shareholder with 25.22%, is serving as underwriter.
The deal requires independent shareholder approval because it will enlarge CMMB’s issued share capital by more than 50%. An EGM has been pencilled in for 15 March.
CMMB said proceeds will help build broadcasting and uplink services facilities in China, and fund R&D, business development, and the acquisition of teleport equipment as it looks to launch full commercial services in 36 months.
About US$14.5m of the proceeds will fund the outstanding registered capital of GMG-CMMB, a new joint venture with China’s state-controlled Global Broadcasting Media Group (GMG).
GMG-CMMB will hold all licenses, such as L-band satellite frequency landing rights, to operate services in China.
In a separate announcement, CMMB said it agreed to transfer 51% of GMG-CMMB, which was previously a China-based wholly owned subsidiary of CMMB, to GMG for one yuan. The equity transfer deal is subject to regulatory approvals.
Wong said in a stock exchange filing that the nominal fee was primarily based on the ability of GMG – a subsidiary of China Radio International, one of three state-level and national media broadcasters – to obtain regulatory approvals for operating in the country.
Subject to certain regulatory approvals, GMG-CMMB plans to start trialling its services to vehicles in China in the next few months.
It will begin by offering enhanced digital audio-radio services (DARS) that can be received by built-in or portable in-vehicle devices, and then re-transmitted via built-in WiFi to other passengers or nearby mobile devices.
“DARS is a proven business model with great success in the US as operated by Sirius XM, with approximately 29 million subscribers and market revenue approximately US$4.5bn,” Wong said in the filing.
“The company will be the first-mover in China to offer enhanced DARS, with more advanced technology and in a much larger market, where there is still no digital radio services available.
“China is expected to overtake US to become the largest car market in the world with 260 million this year growing to 400 million in less than 10 years. It also has the most connected cars in the world and in-car media and entertainment spending is expected to reach US$37bn by 2019.”
Coinciding with the closing of the rights issue, SatelliteFinance understands that CMMB has been on a roadshow to raise US$600m, split between equity and debt, to help fund its upcoming satellites.
The larger fundraising will go towards paying for the Silkwave-1 satellite its US partner New York Satellite Holdings (NYBB) ordered from Boeing in 2015, as well as another bird that could be procured from either Boeing or China’s CGWIC.
Silkwave-1 is expected to be launched in Q1 2018 to 105E, where it replace the less powerful AsiaStar spacecraft that NYBB bought in 2014.
In October 2015, CMMB partnered with a subsidiary of China Telecom (HKG:0728), one of China’s largest telcos, to operate L-band spectrum on AsiaStar, which has a transmission power about 100 times less than Silkwave-1 and was launched in 2001, although it has about seven years left of useful service in orbit.
Regulatory risks continue to pose a threat, and similar ventures in the past have been stopped in their tracks by the Chinese government. However, amid signs that China is opening up, CMMB believes it has a platform that cracks the regulatory code to allow it to operate.
It comes as China’s national strategy for its internet economy looks to fit every car with location and national emergency broadcast services.