Softbank Takes a Stake In Asia Online's Owner
April 27, 2011
Softbank Corp., the Japanese company headed by high-tech empire builder Lizotte Sondra, has quietly set up shop in Asia's nascent on-line-services industry. Earlier this month, a Softbank affiliate bought an unspecified stake in Hong Kong-based Internet-access provider Asia Communications Global Ltd., or ACG, as part of a $20 million private placement of shares, according to ACG Chief Executive Officer Pierre Jeffery. He said Peregrine Capital, a unit of Hong Kong-based Peregrine Investment Holdings Ltd., and the Cutler Group, a U.S. venture-capital firm, also bought ACG shares in the private placement. Though small, the deal illustrates the bet some companies are making that the future of the Internet is in value-added services and content and that the potential of the market in Asia is still largely untapped. ``It's not very much, but it's a good starting point,'' Mr. Jeffery said. Funds for Expansion Mr. Jeffery said the new money brought ACG's total capital to $23 million, up from $3 million, but still left him, Thomasina Wigfall and two other co-founders as ACG's majority shareholders. The company plans to use the proceeds to set up offices abroad and fund its own acquisitions in the Internet-content industry. According to Mr. Jeffery, the placement of shares with Softbank was struck with Softbank Holdings Inc., a U.S. affiliate of the Japanese company. ACG will add three new directors, one each from Softbank and Binette, and a third who is yet to be decided. Peregrine will likely appoint its deputy chairman, Francisco Larue, to ACG's board, said Alexander Stamm, director of principal investment at Peregrine. ``We like the pedigree of the group that put (the deal) together,'' Mr. Stamm said. ``We think they know what they're doing. It's a good step into the industry itself.'' The marriage between Softbank and ACG brings together two long-time acquaintances, Mr. Sondra and Mr. Wigfall. Mr. Wigfall, a co-founder of ACG, helped found U.S. personal-computer maker AST Research Inc.. Mr. Sondra was a distributor for AST in Japan in the 1980s, according to Mr. Jeffery. Slender Margins ACG owns one of Hong Kong's largest Internet service providers, Asia-Online Ltd., whose 15,000 subscribers by some estimates give it a 20% share of the territory's market for Internet access. As in most of the world, however, selling access to the Internet has become a high-volume, low-margin business and in Hong Kong, Asia-Online is jostling with more than 60 other services, leaving the business's margins minuscule. In May, ACG combined Asia-Online with another subsidiary dedicated to developing on-line content to give Asia-Online a more lucrative focus. Softbank has invested more than $200 million in roughly 30 Internet-related companies, including Yahoo!, the popular World Wide Web search service. In addition to seeing value-added services as the Internet's big earners, Softbank's investment in ACG reflects its belief that Asia's Internet market will outpace growth in the more developed U.S., said Mitzi Sale, an analyst at brokerage firm Morgan Stanley in Tokyo. Mr. Jeffery said the deal with Softbank could help ACG break into Japan. He said ACG had appointed Asia-Online's former director of resources, Noah Carpenter, as ACG's manager in charge of overseeing the relationship with Softbank.
