Russian broadcast group UTH Russia has made a formal offer to buy 75% of CTC Media for US$200 million, ahead of changes to Russian law that will limit foreign ownership of media companies.
If approved, the deal will see CTC will fall in line with new legislation that will require media companies in Russia to be 80% Russian-owned from next year onwards.
The UTH approach came as international entertainment group MTG, which currently owns 37.9% of CTC Media, said its shareholding in the business is now for sale and that it has decided to reclassify its holding in the company to a “discontinued operation”.
CTC Media’s board of directors have appointed a special committee of independent directors to evaluate the UTH Russia offer. UTH has bid US$200 million in cash for a 75% interest in the CTC’s Russian and Kazakhstan business operations, on a cash and debt-free basis.
CTC said that discussions with UTH are at “a relatively early stage”, but the special committee will seek to agree the definitive terms of the deal. If approved by the board, this will then be submitted to stockholders for approval and will be subject to customary closing conditions, including clearance from the Russian Federal Anti-monopoly Service.
“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,” said CTC chairman of the special committee Werner Klatten.
“Although we cannot guarantee that we will be able to conclude this proposed transaction, or when it would be consummated, we believe this offer to be worth progressing further as a means of achieving compliance with the amended Russian Mass Media Law before year end.”
MTG said in a statement that it has decided to change its interest in CTC from an ‘equity participation’ to a ‘discontinued operation’ due to the change in the Russian mass media law and CTC’s consideration of the UTH offer.
“Following the recent sharp fall in the CTC Media share price, the market value of MTG’s holding in CTC Media was below the book value of the holding on MTG’s balance sheet as at the end of the second quarter on 30 June, and this will be reflected in the ‘discontinued operations’ line in the Group’s Q2 results,” said MTG.
Russian president Vladimir Putin signed an amendment to the Russian law on mass media at the end of last year that will limit foreign ownership of media companies in Russia to 20%, down from the current limit of 50%. This will apply to both existing and future foreign ownership and comes into effect on January 1, 2016.
As of March 31, 2015 the shareholder structure of CTC was: 39% owned by MTG; 25% held by Telcrest Investments – a Cyprus-based investment vehicle controlled by Rossiya Bank; with the remaining 36% free float following CTC’s IPO on the NASDAQ in 2006.