US firm regains TV Nova
By Kate Bulkley
Tuesday December 14, 2004
'Strategic' Czech station bought by Estee Lauder heir for $642m
It has been a long and acrimonious road back, but six years after being forced out as owners of the first commercial television station in the Czech Republic, Central European Media Enterprises is back, spending $642m (£334m) in cash and shares for a majority stake in one of the hottest broadcast stations in eastern Europe, TV Nova.
Michael Garin, the chief executive of CME, said in Prague, where the deal was announced: "The importance of TV Nova as a strategic asset cannot be overestimated. Targets for growth in eastern Europe are known by everybody.
"It's fair to say that there isn't a company or a private equity firm interested in this area that hasn't visited the Czech Republic and TV Nova."
According to audience research gathered by CME, TV Nova has the highest all-day share of total television audiences of any commercial broadcaster in Europe - not just eastern Europe - at 43.4%. Mr Garin is convinced that there is more growth to be had in the Czech Republic as more realistic, market-rate advertising fees are charged to advertisers that he says have undervalued audiences there.
"We can grow by growing the overall ad market," he said, pointing to 4% underlying GDP growth in the republic.
CME will pay about $529m in cash and 3.5m new CME shares to PPF Group, a Czech-based private finance group that bought TV Nova in 2002.
Television US firm regains TV Nova 'Strategic' Czech station bought by Est¿e Lauder heir for $642m Kate Bulkley Tuesday December 14, 2004 The Guardian It has been a long and acrimonious road back, but six years after being forced out as owners of the first commercial television station in the Czech Republic, Central European Media Enterprises is back, spending $642m (£334m) in cash and shares for a majority stake in one of the hottest broadcast stations in eastern Europe, TV Nova. Michael Garin, the chief executive of CME, said in Prague, where the deal was announced: "The importance of TV Nova as a strategic asset cannot be overestimated. Targets for growth in eastern Europe are known by everybody. "It's fair to say that there isn't a company or a private equity firm interested in this area that hasn't visited the Czech Republic and TV Nova." According to audience research gathered by CME, TV Nova has the highest all-day share of total television audiences of any commercial broadcaster in Europe - not just eastern Europe - at 43.4%. Mr Garin is convinced that there is more growth to be had in the Czech Republic as more realistic, market-rate advertising fees are charged to advertisers that he says have undervalued audiences there. "We can grow by growing the overall ad market," he said, pointing to 4% underlying GDP growth in the republic. CME will pay about $529m in cash and 3.5m new CME shares to PPF Group, a Czech-based private finance group that bought TV Nova in 2002. After regulatory approval is received and the deal is completed early next year, PPF will own 11% of CME, becoming the second largest shareholder of the Nasdaq-listed company.
CME's chairman and founder, Ronald Lauder, an heir to the Estée Lauder fortune, will own a 23.4% stake in CME but still control it through super-voting "B" shares.
The TV Nova deal reunites CME with its first station in eastern and central Europe, originally set up in 1994 with a flamboyant local partner Vladimir Zelezny.
The station was a success with audiences, but in 1999 Mr Lauder and Mr Zelezny fell out over who owned what, leading to an acrimonious lawsuit that reached government level. In March 2003, CME finally won a $353m award from the Czech Republic for damages.
"We have done extensive due diligence," said Mr Garin, when asked if he was worried about CME getting burnt a second time. "It's a new Czech Republic because it is a member of the EU now ... the government has done an outstanding job creating a transparent and reliable regulatory and legal regime so it's a place where companies can invest with confidence."
The purchase of TV Nova will in effect double the size of CME by revenue and operating cashflow, and add a sixth country to its eastern and central European markets.
It will also make CME the leading media owner of commercial TV stations in this part of Europe, reaching about 85 million people. Although there had been other bidders for TV Nova, Mr Garin said CME had been in exclusive negotiations for two months. PPF executives declined to comment on the deal.
TV Nova expects revenues of 5.2bn Czech crowns (£118m) in 2004 with an estimated operating profit of CZK2.2bn and net income of CZK1.5bn. CME's told analysts before the TV Nova deal that it would post 2004 revenues for its eight TV stations of $240m and operating cashflow of $70m.
CME operates television stations in Croatia, Romania, Slovakia and the Ukraine. The company is also looking at Poland, but since the TV Nova deal, Mr Garin said: "The focus is now on managing our assets rather than continuing to expand."