* Providence exits over price difference -source
* Second round bids due on Sept 20
* Bain, Permira, Macquarie still in the race -sources
(Add details, background)
By Denny Thomas
HONG KONG, Sept 15 (Reuters) - Private equity fund Providence Equity Partners has dropped out of the $2 billion auction of Taiwan cable operator China Network Systems Co, a source with direct knowledge of the matter told Reuters on Wednesday.
Providence's exit narrows the field to Australian investment
bank Macquarie Group Ltd
North Asia-based private equity fund MBK Partners is selling CNS after buying it in 2007 for $1.5 billion. If successful, MBK's exit will mark the biggest private equity sale in Asia this year.
Providence's decision to pull out of the auction came from differences over price, the source added.
MBK Partners was not available for an immediate comment, while Providence declined comment. The source was not authorised to speak about the process publicly.
The second round bids are due on Sept. 20.
Taiwan's cable market has among the highest profit margins in the region, some analysts estimate, which is the main appeal of the asset to many private equity funds. A high cable penetration rate of about 80 percent and steady cash flow also makes the industry attractive for investors.
Encouraged by these factors, the auction generated strong interest, and potential buyers pitched the first round bids at 11-plus times earnings before interest, tax, depreciation and amortisation (EBITDA), sources previously told Reuters.
Buyout fund Permira has teamed up with Taiwan conglomerate
Ruentex Group, while Macquarie has joined hands with Want Want
Holdings for the sale. Morgan Stanley
(Reporting by Denny Thomas; Editing by Ken Wills) (denny.thomas@reuters.com; +852 28436 358; Reuters Messaging: denny.thomas.reuters.com@reuters.net))