Central European Media Enterprises (CETV) announced yesterday that it had sold 1.275 million shares at $86 for $110 million to Igor Kolomoisky and given him a seat on the Board of the Directors. Kolomoisky will own 3% of CETV, becoming the third largest shareholder after founder Ronald Lauder and private equity firm Apax Partners which bought 50% of Lauder’s control stake in August 2006 at $60.
Kolomoisky is the richest man in Ukraine and a major force in economics and politics through his ownership of Privatbank and investments in energy and materials companies. CETV stumbled in Ukraine this year with poor ratings and EBITDA losses. Aligning with Kolomoisky is a strong signal supporting CEO Michael Garin’s contention on the last conference call that despite the setback Ukraine will be the company’s largest market one day in the future. Kolomoisky offers more immediate upside by possibly smoothing the way for CETV to gain control of its TV broadcasting license in Ukraine (the only market where it does not control its license) and increasing its economic stake in the Studio 1+1 TV network above the current 60%. Kolomoisky also may be helpful as CETV continues its strategy to add new TV stations and networks in Ukraine.
I remain very bullish on CETV with a $130 target based upon my expectations for 2008 EBITDA. The shares are volatile regularly but even more so lately given their status as an emerging markets play.