Time Warner ups CME stake

Media giant Time Warner is investing another US$300m in Central European Media Enterprises (CME), a move that increases its stake in the broadcast and production group to 40%.

Time Warner has loaned CME the sum in three tranches that the firm will use to buy outstanding senior notes and reduce its debt. CME’s other major shareholder, Ronald Lauder, has also struck a similar agreement with the group.

Time Warner will buy about 11.5 million Class A shares at US$7.51, which increases its shareholding by 6% to 40%, while Lauder, who has a 5% stake, will buy another two million through his RSL Capital venture.

CME said it would repay the loans through the proceeds of the planned stock sales.

Time Warner has the option to acquire additional Class A shares if CME fails to pay any of its loans within a 180-day period with the outstanding money. This could boost its ownership to 49.9%. It first invested US$241.5m in CME in 2009 in return for a 31% stake.

The news comes as CME – which operates as market leader in territories such as the Czech Republic, Croatia, Slovakia, Bulgaria and Romania, and operates production arm Media Pro Entertainment – announced a first-quarter operating loss of US$10.3m, compared with US$7.7m a year ago.

Net revenue for the three months to March 31, 2012 was US$167.4m, compared with US$172.8 in 2011. Broadcast revenue was down 6.8% to US$146.8m and Media Pro’s revenue rose by 8% to US$43.4m. Net loss attributable to CME fell by 36.6% to US$13.4m.

“We are taking significant steps to de-leverage with support from two of our largest shareholders, Time Warner and Ronald Lauder,” said CME president and CEO Adrian Sarbu.

“These steps, together with the planned expansion of subscription revenues, will position the company for growth in the future. Our priority in 2012 is to maintain our audience and market share leadership, grow OIBDA [operating income before depreciation and amortisation] and deliver positive free cash flow.”