* Time Warner taking 31 percent stake in CME media group
* Shares jump 40 percent in Prague, 30 percent on Nasdaq
* CME sees lower revenue in Q1
(Adds details, wraps release on outlook)
By Jason Hovet
PRAGUE, March 23 U.S. media group Time Warner
(TWX.N) is paying $241.5 million for a 31 percent stake in
Central European Media Enterprises (CME) (CETV.O) CETVsp.PR,
giving CME cash to navigate an economic slowdown in its markets.
CME reaches an audience of 97 million people in Bulgaria,
Croatia, Czech Republic, Romania, Slovenia, Slovakia and
Ukraine, having expanded quickly in recent years in the
once-booming region now being battered by the global downturn.
Separately, CME and Time Warner's Warner Bros unit will form
a partnership to launch new stations in those seven central and
eastern European markets, featuring international films and
television series, including titles from Warner Bros's library.
Monday's news lifted CME shares 40 percent in Prague to
trade at 260 crowns by 1340 GMT. On Nasdaq, where CME is also
traded, its shares climbed 28 percent to $12.75.
Time Warner shares rose 2 percent to $8.02. The deal is
expected to close by the end of the second quarter.
"CME is ideally positioned over the long term as central and
eastern Europe returns to significant growth and the media
sector in these countries continues to evolve," Time Warner
chairman and chief executive Jeff Bewkes said in a statement.
Time Warner, which is set to receive up to $9.25 billion
from the spinoff of its cable unit, has said it would consider
Under the deal, Time Warner will receive 19 million newly
issued CME common shares, consisting of 14.5 million shares of
class A stock at $12 apeice and 4.5 million shares of class B
stock at $15.
Time Warner also agreed to allow CME founder and
non-executive chairman Ronald S. Lauder to vote Time Warner's
shares for at least four years, subject to certain exceptions.
Time Warner will get two seats on CME's board.
CME posted a weaker than expected finish to 2008 last month
and said the next two years would be difficult, with revenue
from advertising likely to be flat or in single-digit decline.
CME forecast first-quarter revenues of $135-$145 million,
down from $223 million in the first three months of 2008.
"Advertisers have been cautious with their expenditure in
response to rapidly changing conditions and the strength of the
dollar. As a result the first quarter of 2009 has been extremely
challenging," said Adrian Sarbu, chief operating officer of CME.
CME books revenue in local currencies.
Analysts said the pairing with the global media giant would
give CME a strong partner going ahead, along with strong cash
proceeds from the share sale.
"It is good for both parties," said Patrick Vyroubal, an
analysts with broker Atlantik FT in Prague. He estimated the
share dilution could amount to $2.50 per share.
(Additional reporting by Yinka Adegoke in New York; Editing by
David Holmes and Dan Lalor)
($1 = 19.64 Czech crowns)