CTC Media is filling its price: Usmanov will have to buy a company without the promised discount

Source: Reuters

According to the new amendments to the Law “On Mass Media”, since January 2016, foreigners are prohibited from directly or indirectly owning more than 20% of any Russian media.

Now the largest shareholder is CTC Media Inc. (registered in the US state of Delaware) is the Swedish company Modern Times Group ( MTG ) with a package of 38.53%. Approximately 36% are traded on the NASDAQ exchange. And the remaining 25.4% belong to the Telcrest company in Cyprus.
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In this regard, the owners agreed with the co-owner of UTV holding Alisher Usmanov and Ivan Tavrin about the sale of 75% of the operating business of STS Media at an initial price of $ 200 million, wrote Megamind in September.

However, it became known in the fall that the amount of the transaction under a conservative forecast could be reduced to $ 185 million.

The discount could have been caused by several factors, including the indicator of the audience share, the revenue of the flagship channel of the CTC and the cash flow (in the UTV it was thought that it could be negative). To a large extent, the low results of the work of CTC Media in Kazakhstan could have affected the amount of the discount.

In addition, it was in the autumn that the capitalization of CTC Media reached a minimum. Today, January 13, 2016, it is $ 290.4 million. Before the law “On Mass Media” was amended, that is, on September 17, 2014, the company's capitalization was almost $ 1.5 billion.

In November, CTC Media announced a possible reduction of the discount to several million dollars, and by the end of December it became known that there would be no discount on business in Kazakhstan. Management made efforts to collect revenues and effectively controlled costs, which made it possible to fulfill the cash flow plan, explains the Kommersant interlocutor.

At the same time, in the first nine months of 2015, the net cash flow from the company's operating activities decreased from $ 55 million to $ 0.9 million, which was influenced by the volatility of exchange rates and the fall in the advertising market. The company's revenue in rubles decreased by 22%, to $ 14.7 billion, profit increased by 9%, to $ 3.5 billion.

The implication was that the discount would be possible if in the second half of 2015 the market fell the same way as in the first, but already at the conference call for the third quarter it was clear that CTC Media will show good results, said Raiffeisenbank analyst Sergey Libin. If the transaction goes along the upper boundary, the total price of the shares will be about 15% higher than the current one ($ 2.19 versus $ 1.86 per share), this is good news for sellers, he concludes.

Another source of "Kommersant" said that the transaction can take place at the maximum border. In this case, UTV holding can pay $ 200.54 million for the company. Another source said that the final amount can be discussed after the company's audit.

As previously reported by Kommersant, the transaction was conducted in two stages. In December, CTC Media received over $ 150 million for 75% of the business, the remainder of $ 50 million could vary depending on the results of the holding’s work.

At the end of December, the meeting of the founders of CTC Investments LLC elected a new board of directors. It includes Ivan Tavrin, Chairman of the Board of Directors of Kommersant Publishing House Vladimir Zhelonkin, Director General of YUTV Andrey Dimitrov, Director General of CTC Media Juliana Slashcheva and member of the Board of Directors of CTC Media Inc. Jean-Pierre Morel.

CTC Investments was established in 2015 as part of the restructuring of CTC Media due to restrictions on foreigners in the media and owns the Russian and Kazakh businesses CTC Media. In fact, the Board of Directors of CTC Investments, together with the management, will now manage the entire media holding. The board of directors of the American head company CTC Media will continue to operate for several more months, but its powers have been greatly reduced.