CME regains control of its 'stolen' flagship station, TV Nova
The media group owned by U.S. billionaire Ronald Lauder is set to regain control of TV Nova, the "stolen" Czech commercial television network that was once the broadcasting group's flagship station.
But apart from the size of the deal, what makes the sale especially noteworthy is that the buyer, Central European Media Enterprises, or CME, is in essence buying back its own "stolen" property.
"You owned this station; it was stolen from you; the international arbitration panel gave you $360 million, roughly, and you are now buying it back for a valuation of roughly $1.1 billion. If you were to do that kind of transaction with each of your stations, you could go broke in a hurry. Given that you got taken in the Czech Republic the first time, what confidence do you have that you won't be taken a second time?"
That question, put forth Steve Farley, the head of Farley capital management group, came in a conference call CME held with financial analysts and journalists on Monday. Although not a strictly accurate assessment of the deal in financial terms — the details of which will not be disclosed until a filing is made with the Securities and Exchange Commission (SEC) of the U.S. — the question did illustrate the odd nature of the battle for TV Nova.
CME - which now operates stations in Slovakia, Romania, Croatia, Slovenia, and Ukraine - says that it is not dwelling on the past but "looking forward" to sealing a deal that is good for shareholders.
In fact, CME is expected to double its turnover by acquiring TV Nova, which it launched in 1994 and lost control of five years later.
CME Chief executive Michael Garin:
And so on. The point being, that TV Nova has an audience share which is the envy of the rest of Europe, and so worth paying a premium for, regardless of previous dealings.
There is speculation that CME is looking to recoup its investment by charging more for advertising spots, although the Czech ad rates are already nearly one-third higher than in Hungary, for example. TV Nova last year enjoyed about a 72 percent market share of the 8 billion crown advesting market.
But back to our tale.
Five years ago the former general director of TV Nova and main licence holder, Vladimir Zelezny, broke off from his American partners at CME and began broadcasting with new partners, in violation of contractual agreements.
In 2001, Zelezny was ordered by a Czech court to pay Lauder $29 million in damages. The financial group PPF — which, by the way, is owned by the Czech Republic's richest man, Petr Kellner — paid the sum in 2002 when it acquired control over the station. Lauder also won arbitration proceedings in Stockholm against the Czech state, which he accused of failing to protect his investment. The Czech government — read taxpayers — paid out $354 million to CME in 2003.
Zelezny, meanwhile, who was himself later forced out of TV Nova by the current owners, was elected to the Czech Senate a few years ago — despite facing charges of tax evasion and harming creditors. His fellow senators stripped Zelezny of immunity from prosecution. But this June, he packed up for Brussels to become a Member of the European Parliament. MEPs were due this week to discuss lifting Zelezny's immunity, so that he can face prosecution in the Czech Republic.
In the meantime, CME will pay about $642 million in cash and shares to the PPF financial group for a controlling interest in TV Nova Group. By some estimates, PPF, which will retain a minority interest in the network, will have made over $340 million by buying TV Nova and reselling it in a few short years — about the same amount that Czech taxpayers had to pay out in compensation for the "theft" of TV Nova.
