Russia’s CTC Media has entered a definitive agreement to sell a 75% stake in its operating businesses to UTH Russia-affiliated UTV Management for US$200 million in cash in order to comply with the new foreign ownership restrictions imposed by the Russian government.
CTC Media had previously confirmed it had received a formal, non-binding offer from channel operator UTH in July. CTC said its board would recommend the approval of the transaction, which is expected to close in late December.
Modern Times Group, which holds a 38% stake in CTC, has indicated it will support the deal.
Russia’s new media law forbids foreign entities from owning more than 20% of media businesses and is set to come into force in 2016. Thirty-six per cent of CTC Media’s shares are traded on the NASDAQ exchange while the remainder is currently held by Cyprus-based Telcrest, owned by Russian businessman Yury Kovalchuk.
CTC Media has a current market capitalisation of approximately US$295 million. Its shares have fallen from a 52-week peak of US$8.67 to a current price of about US$1.85 over the past year.
“This agreement represents a significant achievement in light of the extremely challenging environment in which the company is operating in Russia and the pending effectiveness of the Mass Media Law,”said Werner Klatten, an independent member of the board of directors of CTC Media and chairman of the special committee of the board.
He added: “Although it is unfortunate that Russian law will require that we effect a sale of the operating businesses, we believe that UTH will be a good new owner of the business and will be well positioned to build on the historical success of CTC Media as the first and leading commercial broadcasting network in Russia.”
CTC Media CEO Yuliana Slashcheva said: “The sale agreement will enable the management team to focus on the business, with the issue of compliance with the Mass Media Law resolved. We operate in a very challenging market environment, but I am confident that as part of UTH our operating businesses will remain strongly positioned to build on our historical achievements as we continue to set new standards in media entertainment across Russia and Kazakhstan.”