Billionaire 102 Becomes MTG Partner in Russia

Russia’s media market is one very big expansion opportunity. Membership in the very exclusive Russian media investors club – much like an exclusive country club – requires substantial money and serious connections. Having both – and joining the club – opens the way to mining Russia’s next big resource: consumer demand.

Gas and oil billionaire Leonard Blavatnik is but the latest serious investor in Russian media. Purchasing 6.1% of CTC-Media’s shares for about $194 million Blavatnik’s Access Industries continues the trend of diversification into media by companies awash in cash from extraction businesses.

CTC-Media is largely owned (40%) and primarily operated by Modern Times Group (MTG) with shares traded on the NASDAQ exchange. It operates CTC and Domashny television networks.

Leonard Blavatnik is an American with Russian roots, emigrating to the US with his family at age 20. Forbes recently listed him at the 102nd ranked billionaire world-wide ($7.6 billion) and New York City’s number 5. After Harvard Business School, Blavantnik started Access Industries and, with and a couple of Russian buddies, cut a deal to merge Tyuman Oil Company with British Petroleum.

Once the cash question is settled the connections required to mine the media must be vetted from on-high. MTG promised the Russian government that it would definitely not become a figure in the news business. Lagardère has owned radio stations from the tail-end of the Soviet days, making the right connections through the defense industries. The now-defunct Metromedia International had the cash – from billionaire John Kluge - but far lesser connections and, in the end, had to essentially walk away from its Russian investments. Others, built on dreams, simply disappeared.

Rumors abound that CME and other non-Russian media companies are hot for deals.

CTC-Media’s 2006 revenue was reported at €280.8 million ($370.8 million), just over 15% of the total Russian TV ad market. For MTG it’s a serious and important part of the portfolio. Most analysts agree that Blavatnik paid a premium and was certainly “invited” to buy the CTC-Media shares owned by investment bank Baring Vostok. As insurance policies go, the premium is probably worth the pay out. - Michael Hedges - March 12, 2007

Keywords:media in Russia, MTG

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