Central European Media Enterprises Ltd. (CME) announced this morning it has agreed to sell its leading broadcast operations in Croatia (Nova TV) and in Slovenia (POP TV) to Slovenia Broadband S.à r.l., a subsidiary of United Group B.V., subject to certain closing conditions, including regulatory approvals. The transaction is expected to close by year-end.

Highlights of the transaction:

Cash purchase price is €230.0 million (approximately $262.5 million), subject to customary working capital adjustments. The combined OIBDA for Nova TV and POP TV for the twelve months ended March 31, 2017 was $13.8 million.

Proceeds will be used to repay the €250.8 million term loan due 2018, which based on our results from the period ended March 31, 2017 would have reduced CME’s net leverage ratio from 6.3 times to 5.1 times.

CME's current average borrowing cost is expected to decrease 275 basis points to 4.5% upon repayment of the 2018 term loan following closing of the transaction.
Accretive to CME’s OIBDA margin as well as free cash flow, since the cash generated by the Slovenian and Croatian operations will be more than offset by estimated savings of at least $30.0 million of interest costs annually.

Michael Del Nin, Co-Chief Executive Officer, commented: “This represents a transformational moment in the history of CME. We have always had a great set of assets, and this transaction underscores the enduring attractiveness of broadcasters in the region. It also moves us significantly closer to our long-held goal of establishing a more appropriate leverage profile for our operations. Once closed, the cash proceeds from this sale will greatly accelerate our plans for debt reduction, lowering our net leverage ratio by about one turn, cutting our current average borrowing rate by more than a third, and helping us to save over $30.0 million in annual interest costs.”

Christoph Mainusch, Co-Chief Executive Officer, added: “We are very proud of these well-run businesses in Croatia and Slovenia, and the people working there whose efforts have made the channels consistent market leaders. We are firm believers in the importance of television as a medium, and plan to continue operating television stations with scale in a more focused footprint of our largest markets. We were pleased that the United Group, majority owned by the US investment firm KKR and backed by the European Bank for Reconstruction and Development, shares our outlook for local content on television and we believe they will be excellent stewards of these important businesses in the region going forward.”

LionTree Advisors acted as financial advisor to the Company with respect to this transaction.

United Group said it will invest in those channels to further build their local production capabilities and expand their reach beyond their respective local markets by leveraging its regional and international footprint.

The portfolio of assets includes leading TV channels in Slovenia and Croatia, two economies estimated to post real GDP growth of over 2% annually between 2016 and 2018.

Jean-Pierre Saad, Director at KKR, said: "KKR has a strong track record of supporting media and telecom businesses to grow further in the current digital ecosystem. By investing in high quality local and international content, we will support the United Group teams to continue to offer differentiated and attractive content to all its customers across the region. KKR, EBRD and United Group will work closely with all relevant authorities to ensure a smooth transition, in line with European standards."

Dirk Werner, Director Information and Communication Technologies at the EBRD, said: "Today's announcement represents a strong a vote of confidence in the Croatian and Slovenian economies by a leading international investor and will offer consumers direct access to high quality local and international digital content."