Czech-based CME divests Croatian Nova TV and Slovenian Pop TV for €230mn

Czech-based CME divests Croatian Nova TV and Slovenian Pop TV for €230mn
By bne IntelliNews July 10, 2017

Czech Republic-based broadcaster Central European Media Enterprises (CME) on July 10 announced the divestiture of its leading Croatian and Slovenian TV stations to United Group's Slovenia Broadband for €230mn ($262.5mn) in cash to pay down debt.

The move, designed to help address various bad calls made before and after the global financial crisis, should reduce the group’s average borrowing costs by 275bps to 4.5%, it added.

In a press release, Michael Del Nin, co-chief executive officer at CME, whose main shareholder is Time Warner, said: “This represents a transformational moment in the history of CME. We have always had a great set of assets, and this transaction underscores the enduring attractiveness of broadcasters in the region. It also moves us significantly closer to our long-held goal of establishing a more appropriate leverage profile for our operations. Once closed, the cash proceeds from this sale will greatly accelerate our plans for debt reduction, lowering our net leverage ratio by about one turn, cutting our current average borrowing rate by more than a third, and helping us to save over $30.0 million in annual interest costs.”

CME expects the sale to close by the end of the year. Proceeds will go to repay a €250.8mn euro loan due in 2018, lowering a debt load of $1bn. The majority of CME’s debt is in term loans guaranteed by Time Warner.

United Group is backed by American investment firm KKR and the European Bank for Reconstruction and Development (EBRD). In a separate release, it said it planned to further invest further in CME's channels - Nova TV in Croatia and POP TV in Slovenia - once the deal is closed. United also owns second largest Slovenian internet provider Telemach.

Both J&T Banka and investment bank WOOD & Company rated the sale – subject to regulatory approvals – as ‘positive’ and placed a ‘hold’ assessment on CME shares.

The price implied P/Ebitda 12M of 19x, said J&T, adding that the transaction would mean CME’s net debt to Ebitda declining to 5.1x from 6.3x.

“We consider the news positive with respect to the valuation, which considerably exceeds the valuation of the entire CME (P/EBITDA 2016 of 10x). In addition, we consider positive the planned reduction of debt, which will lead to further savings,” J&T said in a note to investors. 

WOOD & Company said the combined Oibda for Nova TV and POP TV for the 12 months ending 31 March 2017 was $13.8m vs $13.4m in 2016. “High leverage is the biggest risk concerning CME, as we have pointed out in our reports,” the investment bank noted.

LionTree Advisors is acting as financial advisor to CME in the sale process.

CME is a media and entertainment company operating leading businesses in six Central and Eastern European markets with an aggregate population of approximately 50mn people.

The group currently broadcasts 36 television channels in Bulgaria (bTV, bTV Cinema, bTV Comedy, bTV Action, bTV Lady, and, Croatia (Nova TV, Doma, Nova World and MiniTV), the Czech Republic (Nova, Nova 2, Nova Cinema, Nova Sport 1, Nova Sport 2, Nova International, Nova Action and Nova Gold), Romania (PRO TV, PRO TV International, Acasa, Acasa Gold, PRO Cinema,, MTV Romania, PRO TV Chisinau and Acasa in Moldova), the Slovak Republic (TV Markíza, Markíza International, Doma and Dajto), and Slovenia (POP TV, Kanal A, Brio, Oto and Kino).

CME is traded on the NASDAQ Global Select Market and the Prague Stock Exchange under the ticker symbol “CETV”.

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