Ukrainian billionaire snaps up stake in 1+1 through CME for $110 mln

10 Вересня 2007
29928
10 Вересня 2007
21:51

Ukrainian billionaire snaps up stake in 1+1 through CME for $110 mln

29928
Ukrainian billionaire snaps up stake in 1+1 through CME for $110 mln

A bitter legal struggle over a stake in one of the country’s most popular television channels has ended in a truce – of sorts.

 

And despite a flurry of activity surrounding Studio 1+1, analysts have put aside past worries about media being utilized as a political weapon in Ukraine, insisting that the developments are not related to the imminent parliamentary elections.

 

On Aug. 30, NASDAQ-traded Central European Media Enterprises (CME), controlled by US billionaire Ronald S. Lauder and heir to the Estee Lauder fortune, announced that Ukrainian tycoon Igor Kolomoisky had acquired about 3 percent of the publicly-traded company’s premium stock for $110 million. CME also announced that Kolomoisky will join its board of directors.

 

In Ukraine, CME controls stakes in three television channels, including Studio 1+1 – the country’s second most-watched station.

 

The following day, Ukrainian media reported that one of CME’s partners in Ukraine intends on filing a lawsuit against CME in the International Court of Arbitration in Paris.

 

The reports initially speculated that Borys Fuchsman, who owns a stake in 1+1 with CME and Studio 1+1 co-owner Oleksandr Rodniansky, plans on filing the claim in connection with the Kolomoisky acquisition and appointment. Fuchsman and Rodniansky were defendants in a bitter legal battle over a stake in 1+1 initiated by Kolomoisky in 2005.

 

But Fuchsman told the Post that the suit in the Paris court is in no way related to the news of Kolomoisky’s acquisition of CME shares.

 

“The dispute is between Rodniansky-Fuchsman and our American partners [Bermuda-registered CME]. We have a shareholders agreement in place that provides us with a 40 percent interest in CME’s media assets in Ukraine. We are talking about the Citi and Kino television channels in which CME has a 65 percent interest,” Fuchsman told the Post.

 

CME acquired interests in the Kino and Citi channels, previously known as the Gravis channel, in January 2006. The company denied any knowledge of Fuchsman’s alleged suit and declined to comment on his statements.

 

On Sept. 4, CME announced that it has secured 60 percent ownership in Studio 1+1 by registering 42 percent direct ownership in the company, which holds the television network’s broadcasting license via an unnamed Ukrainian subsidiary company.

 

“With its existing 18 percent indirect ownership, CME now has secured control over the Studio 1+1 broadcasting licenses,” according to the statement.

 

 

Litigation lowdown

Fuchsman said the he has no other business interests in Ukraine besides Studio 1+1 and a movie theater complex in Odessa. In the past year-and-a-half, Kolomoisky had tried to legalize a takeover of Studio 1+1 through court proceedings, but eventually lost key court decisions.

 

Fuchsman said his business interests and Kolomoisky’s do not overlap and noted that “Kolomoisky has a reputation of being a successful businessman who is very competent in his affairs.”

 

Kolomoisky has been seeking control of Studio 1+1 since 2005. He claimed that he had concluded an oral deal for 40 percent in the television channel for $100 million with Rodniansky and Fuchsman.

 

“Incidentally, it was CME that froze the deal… Kolomoisky filed a claim with courts in response,” reported Kyiv-based media watchdog Telekritika.

 

“Kolomoisky will be the only Ukrainian on the [CME] board,” explained CME spokesperson Romana Tomasova.

 

She said that CME’s management “decided that to strengthen our position in Ukraine and pursue new investment opportunities, we need a board member with direct experience in the Ukrainian market. Kolomoisky is more than a passive investor in CME. He will not have an executive role, but will play an active role in helping to determine our Ukraine strategy. He will provide significant regional knowledge.”

 

Fuchsman said that as a member of the CME board of directors, Kolomoisky will not exercise operational control over Studio 1+1 and that the CME Vice President, Marina Williams, is responsible for the management of the US company’s media projects in FSU countries.

 

Too late for elections

The 43-year-old Kolomoisky was estimated to be worth $3.82 billion last year and placed third in Korrespondent magazine’s annual 50 richest Ukrainians rating for the second year running.

 

Korrespondent, a publication of KP Media, which publishes the Post, reported in its May rating that the Dnipropetrovsk native’s wealth increased by $1 billion in 2005-2006. With partners, he controls a diversified business empire with assets in banking, energy, ferroalloys and hydrocarbons.

 

In terms of media interests, the Kolomoisky-led Privat business group is known more for its co-ownership in the Komsomolskaya Pravda national newspaper franchise.

 

“Privat TV, also known as 9 Kanal, has been around for more than 10 years,” said Otar Dovzhenko, deputy editor of Telekritika magazine. He said that Kolomoisky does not manage the Privat group’s media assets directly and that Studio 1+1 editorial policy is unlikely to undergo any changes ahead of the Sept. 30 vote.

 

“There simply is too little time left,” said Dovzhenko.

 

“If anything, at issue is the media resource that will be brought to the table for the next presidential elections,” said Dovzhenko, whose magazine forms part of the media holding organized by Oleksandr Tretyakov, former first adviser to President Viktor Yushchenko.

 

Ukrainian media reported that Tretyakov and Kolomoisky merged some of their media interests in August when the so-called Glavred media holding was created.

 

The Media Business online newspaper reported that the holding includes two weekly and one monthly magazines, three daily and three weekly newspapers, five web portals, four local television channels and the UNIAN news agency.

 

Political analyst Kost Bondarenko of the Kyiv-based Gorshenin Institute of Management Issues said that major media holdings are looking more at the 2010 presidential race than at the imminent parliamentary elections.

 

Rinat Akhmetov, Ukraine’s richest tycoon and a backer of Prime Minster Viktor Yanukovych, is “offering Yushchenko a union with the Party of Regions and the east.”

 

“If Yushchenko sides with him then Yanukovych will not run. Kolomoisky and Tretyakov are offering a repeat of the 2004 scenario with the western and the central regions supporting Yushchenko against a ‘Donetsk threat,’” he said.

 

CME bullish on Ukraine

CME co-operates 15 television networks in six Central and Eastern European countries, potentially reaching a combined population of 90 million: Croatia, the Czech Republic, Romania, Slovakia and Slovenia. In Ukraine, CME is involved in Studio 1+1, Studio 1+1 International, Kino and Citi.

 

With an August viewer share of below 20 percent, Studio 1+1 is the only television channel to occasionally overtake market leader Inter in the battle for ratings. Still, 1+1’s numbers are more than double its nearest rivals, namely the STB, ICTV and Novy Kanal television channels, which are reportedly controlled by tycoon Viktor Pinchuk, son-in-law to former Ukrainian President Leonid Kuchma.

 

Ukraine is CME’s largest market with a population of nearly 47 million. According to CME estimates, the Ukrainian television advertising market grew by 25-30 percent in 2006 and was worth $240-250 million.

 

In early August, CME CEO Michael Garin expressed disappointment in Studio 1+1’s performance in the first half of 2007 when the company released its second quarter results.

 

“The 2007 outlook for Ukraine is expected to remain uncertain until the outcome of the parliamentary elections, scheduled for Sept. 30, is known,’ said Garin.

 

Команда «Детектора медіа» понад 20 років виконує роль watchdog'a українських медіа. Ми аналізуємо якість контенту і спонукаємо медіагравців дотримуватися професійних та етичних стандартів. Щоб інформація, яку отримуєте ви, була правдивою та повною.

До 22-річчя з дня народження видання ми відновлюємо нашу Спільноту! Це коло активних людей, які хочуть та можуть фінансово підтримати наше видання, долучитися до генерування спільних ідей та отримувати більше ексклюзивної інформації про стан справ в українських медіа.

Мабуть, ще ніколи якісна журналістика не була такою важливою, як сьогодні.
У зв'язку зі зміною назви громадської організації «Телекритика» на «Детектор медіа» в 2016 році, в архівних матеріалах сайтів, видавцем яких є організація, назва також змінена
Stephen Bandera, Kyiv Post
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