By Jason Hovet
PRAGUE (Reuters) - Investment group PPF, owned by the Czech Republic's wealthiest businessman, Petr Kellner, has agreed to buy broadcaster Central European Media Enterprises Ltd (CME) <CETV.O> <CETV.PR> in a cash deal valued at about $2.1 billion, the companies said on Sunday.
The deal, due to be completed in the middle of 2020 subject to shareholder and regulatory approval, will mark the exit of CME's largest shareholder, AT&T Inc <T.N>, as it pays down debt. It also expands PPF's reach in the media and telecommunications landscape across central and eastern Europe.
PPF will pay $4.58 per share in cash to shareholders of Nasdaq- and Prague-listed CME, which operates television stations in the Czech Republic, Bulgaria, Romania, Slovakia and Slovenia.
The valuation is a 32% premium to CME's stock price before it announced a strategic review in March, which first floated the idea of a sale. The stock has since risen by a similar magnitude.
The premium was slightly below CME's Friday closing price of $4.65, which gave the company a $1.18 billion market capitalisation.
CME will join PPF's telecoms stable, which includes O2 Czech Republic <SPTT.PR> and Telenor assets in Hungary, Bulgaria, Montenegro and Serbia in 2018. PPF said it did not intend to make any significant changes to CME's operations.
"The acquisition ... will complement and further strengthen our telecommunications operations," Kellner, PPF's 98.9% owner, said in a statement.
"We want to leverage the natural synergies between the creation of content and its distribution with the objective of further developing our telecommunications and media businesses."
Kellner, who is No. 73 on Forbes' world billionaires list with net worth of $15.4 billion, has built PPF since the early 1990s into a group with assets exceeding 45 billion euros ranging from lenders to real estate and telecommunications in Europe and Asia. PPF owns global consumer lender Home Credit, a major player in China.
CME GROWTH OUTLOOK
CME, which AT&T inherited after it bought Time Warner in 2018, has boosted revenue and profits in recent years due to rising advertising spending, with the Czech and Romanian markets its biggest profit drivers.
It raised its core profit guidance three times this year, expecting a 15-17% rise in operating income before depreciation and amortisation (OIBDA) at constant exchange rates. It posted OIBDA of $222.7 million in 2018.
It has also slashed a debt load that once stood above $1 billion to a current net $590.3 million.
AT&T, which holds 64% of the common stock along with preferred shares that give it larger effective control of CME, said it would receive about $1.1 billion in cash at the close and be relieved of a $575 million debt guarantee.
"Given the company’s confidence in reaching a net debt-to-adjusted EBITDA ratio in the 2.5x range by the end of this year, shareholders should expect that share buybacks will be in the mix in the fourth quarter of 2019, along with continued de-levering," AT&T said.
(Reporting by Jason Hovet, additional reporting by Ismail Shakil in Bengaluru; Editing by Peter Cooney and Jane Wardell)