bne IntelliNews -
The UTV media holding of Russian tycoon Alisher Usmanov has bid $200m for 75% of CTC Media from Sweden’s Modern Times Group (MTG) before a new law limiting foreign ownership of Russian media comes into effect in January 2016.
The offer was confirmed in a statement on July 6 by CTC Media. Investors have been rushing to sell stock in the holding comprising several TV channels since it said in June that it had been unsuccessful in its search to find a buyer. CTC Media's share value plummeted by 28% in the last week of the month and by 57% since January.
“We are disappointed that the change in Russian law regarding foreign ownership of television companies may require a sale transaction, but we are pleased that the efforts of the board have resulted in an offer for a potential transaction that would, if successful, allow us to secure value for our public stockholders and our largest stockholder,” Werner Klatten, chairman of CTC Media’s special committee, said in the statement.
Apart from MTG with 37.9% in the company, CTC Media is part-owned by Yury Kovalchuk’s Telcrest Investments, which has a 25% stake. The remaining 36% is free float, some of which may be controlled by foreign citizens.
CTC Media is the largest media company affected by the new Russian legislation, under which foreigners can hold no more than 20% in media entities as of January 1, 2016.
UTV Holding, which is co-owned by Usmanov’s business partner Ivan Tavrin, was granted access to CTC Media’s financial documents and the exclusive right to hold negotiations on the sale for the next three months, sources close to the offer told the Russian business daily Vedomosti. The newspaper also saw a recent change in ownership of one-third of its stock to comply with the law.
The deal has now been agreed in principle by MTG and Telcrest, but cannot be officially accepted without the agreement of the holders of 51% of CTC Media voting shares, the newspaper added.
CTC Media began to look for a Russian buyer in March in order to comply with the legal amendments initiated by President Vladimir Putin in 2014. Rostelecom was also reportedly interested in acquiring control of the company but UTV was the only company to make an offer so far, officials said. The deal has now been agreed in principle by MTG and Telcrest, but cannot be officially accepted without the agreement of the holders of 51% of CTC Media voting shares.
The company is registered in the US state of Delaware. Kovalchuk and his assets are under US sanctions and therefore cannot vote on CTC’s deals or buy out MTG’s stake. To approve the deal, MTG will have to enlist the support of the bulk of the minority shareholders.
After paying taxes and other costs related to the deal, MTG and the shareholders will receive a premium of "several percent" to the price of CTC’s shares at NASDAQ closing on July 2, Vedomosti sources said. The company's capitalisation that day was $337mn, which means a 75% stake in fact costs $253mn.
One Russian minority shareholder who said he would vote against the deal the newspaper that a premium of several per cent was a "statistical error", and called UTV’s offer "humiliating".
If the offer is accepted, however, CTC Media is likely to become private and will be delisted, Uralsib analysts said in a note. They expect high volatility in the stock, noting that it is already trading at historic lows amid the stagnating advertising market. "We reiterate our Hold recommendation on the stock," the analysts said.
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