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FYI: Advantures of Ron Lauder (стосуєтсья СМЕ Мідія і 1+1)

03/10/2003 | Serhiy Hrysch
На протязі року, СМЕ продасть свої частки в мідія в Україні? (1=1, etc.)


Has Ron Lauder Lost His Touch?
Tomas Kellner

http://www.forbes.com/2003/01/24/cz_tk_0124lauder.html

Seems like Ronald Lauder has lost his Midas touch. The billionaire cosmetics heir's Estée Lauder has been trading near a four-year low for months. His telecom venture RSL Communications, a long-distance telecom company operating in both the U.S. and Europe, went bankrupt in 2001. Shares of his Eastern European television empire, Central European Media Enterprises, were delisted from Nasdaq and traded over the counter for pennies in 2000.

But CME (nasdaq: CETV - news - people ) has staged a remarkable comeback. Last year, Frederic T. Klinkhammer, Lauder's executive at CME, started selling the company to Wall Street, saying the business had turned a corner. It worked. In August, Bermuda-based CME got $30 million in fresh financing from a group of investors led by GoldenTree Asset Management. In November, the push hauled CME shares back on the Nasdaq. The stock split twice and appreciated a stunning 280% over the last 12 months. (It was up 0.48 to $11.03 in late-morning trading.) The company, now worth $150 million, reported its first profitable quarter ever, pulling in $20.5 million in operating income between July and September 2002. Analysts are crowing, "Strong buy."

Not so fast. CME's numbers look so good only because of a $28 million one-time infusion from an arbitration award the company received last summer. Subtract that from operating cash flow and the company lost $3.7 million in operating cash over the quarter. Although that's 56% growth over the same period in 2001, CME has never turned a net profit in its nine-year history.

There's an alternative reason why investors have run the stock up. The company may pocket a huge windfall by March: as much as $500 million from another lawsuit--currently wending its way through European courts--or seven times its total 2001 revenue. "I don't think anyone's placing a bet" on that, says Klinkhammer.

Klinkhammer wants you to believe that Wall Street loves CME for what it is, not for legal issues stemming from what it was. The company's saga is rife with great ambition, but also greed and betrayal. Lauder grew acquainted with Eastern Europe while serving as U.S. ambassador to Austria in 1986-87. After the Berlin Wall came down in 1989, most post-communist governments were still holding on fast to their airwaves. But Lauder saw an opening when the Czech Republic, one of the wealthier Soviet bloc countries, decided to privatize a TV broadcasting license. However, the government said it would sell only to a Czech citizen. So Lauder teamed up with former Czech dissident Vladimir Zelezny and put his money behind the man's bid.

They won in 1994. The same year Lauder started CME, which provided capital and programming for the new television channel, called TV Nova. Lauder owned 99% of Nova, but Zelezny held the actual permit to broadcast. Nova was glitzy station, serving Czechs with Baywatch and Beverly Hills 90210 in prime time and sex on weekend nights. Lauder put $140 million behind the venture. Nova was soon booking $1 million per week in profit.

Lauder's appetite grew, and CME soon expanded to TV markets in Romania, Slovakia, Ukraine and elsewhere. But Lauder's timing was off. Those markets were too green to generate sufficient ad sales. Nova's profit was soon bailing out its sister stations.

In 1999, with CME's losses mounting, Lauder decided to merge the company with Sweden's SBS Broadcasting. But old friend Zelezny became Lauder's foe. He wouldn't let go of Nova's profitable broadcasting license. Without Nova, the SBS deal was off. A flurry of international lawsuits and appeals followed, against both Zelezny and the Czech Republic, which Lauder said breached an international treaty by allowing the license to be taken from CME.

Lauder bought full-page ads in The New York Times and The Washington Post urging business to "think twice" about investing in the Czech Republic, where practices "fall woefully short of international standards." (Strangely, Estée Lauder, the cosmetics firm, of which Lauder owns 35% and is a director, kept its Prague store open and recently launched a second one.) CME's earnings plummeted. The directors ordered an 8-to-1 reverse split to prevent delisting from Nasdaq. No matter. Soon CME traded over the counter for as little as 7 cents.

After two years in the courts of various European capitals, things started turning around for Lauder. CME has sued the Czech government for over $500 million, the assumed fair market value of TV Nova in 1999. Courts in the Netherlands, London and Sweden agreed with CME and released a "partial finder of order" that held the Czech government responsible for the loss of Nova. The damages award should be announced by March 2003. The company also won a $28 million award from Zelezny. The Czechs appealed, but Zelezny, who was elected to the Czech Senate and whom the Czech police reportedly investigated on charges of tax evasion, paid up last fall.

"In 1999, when this business was hijacked from us, everybody thought we were going to roll over and die," says Klinkhammer. "Now we are on the eve of getting this big decision that will generate a significant pot of cash for the company that will allow us to return to expansion."

There's a catch, though. The principal on their senior notes worth $169 million is coming due in August 2004. Klinkhammer says that by then CME will be strong enough to refinance in the open market. The International Tribunal, from which there can be no appeal, is supposed to rule by March on the award from the Czech government. If the Czechs pay up, the company will end up with a windfall. But if the Czechs stall in the European courts, CME may end up in bankruptcy court.


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