Russia's CTC Media to Return $255 Million to its Foreign Owners

Updated on
  • Sale of broadcasting operations to Usmanov finalized Friday
  • Modern Times shares rise most in 2 1/2 years in Stockholm

Russian broadcaster CTC Media Inc. plans to return about $255 million to shareholders including Sweden’s Modern Times Group AB and U.S. minority investors, after agreeing to sell the media company’s operations. MTG shares jumped the most in 2 1/2 years in Stockholm.

The proposal will take the form of a buyout, according to two people familiar with the matter. The cash return will be financed by $200 million of proceeds from the sale of a majority stake in CTC’s operating business to Russian billionaire Alisher Usmanov-- a deal that was finalized on Friday -- and about $55 million in cash held by CTC, the company said in a statement.

Based on 117 million shares held by CTC’s foreign owners, the offer price would represent about $2.18 a share, or 15 percent more than the stock’s Thursday close in New York. CTC shares rose 2.6 percent to $1.94 at 9:38 a.m. local time, valuing the company at $295 million. MTG traded 9.6 percent higher at 217.80 kronor in Stockholm.

Following the asset sale and the buyout, CTC Media could be delisted in the U.S., said the people, who asked not to be identified because the plan is confidential. CTC said it expects to complete the transaction in the first quarter of 2016.

Putin last year signed a media law limiting foreign ownership to 20 percent, in what some politicians in the ruling United Russia party said was a measure to counter an “information war” with the U.S. and Europe. Local businessmen are benefiting from the exodus of foreign owners including Axel Springer SE and Finland’s Sanoma Oyj, acquiring media assets built up for decades in the months before the law takes effect starting in January.

‘Tight Deadline’

Sweden’s Modern Times Group owns about 38 percent of CTC Media. Telcrest Investment Ltd, the Russian shareholder backed by Bank Rossiya and billionaire Yury Kovalchuk with a 25 percent stake, won’t be tendering its shares and won’t receive any proceeds from the asset sale because its owners are on U.S. sanctions list over geopolitical tensions on Ukraine.

"CTC Media was facing a tight deadline to comply with Russian media law, said Natasha Tsukanova, co-chairman of CTC’s board. The situation was challenging and "most banks were reluctant to work with the company after its Russian co-owner got put on the sanctions list."

The sale of the operations and subsequent return of cash to owners requires shareholder approval. MTG spokesman Per Lorentz said by e-mail the company would support the transactions.

CTC shares, which lost 65 percent in value in 2014, have slid another 61 percent this year through Thursday, almost twice as much as the second-biggest decliner in a Bloomberg index of the most-traded Russian stocks on U.S. exchanges.

— With assistance by Adam Ewing

(Updates with CTC Media trading in U.S. in third paragraph.)
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