Time Warner Pays $241 Million For Stake In International Broadcaster CME

Gives company a foothold in emerging central and eastern European market

Underscoring the increasing importance of international operations, Time Warner said it would acquire a stake in CME, a broadcasting company with channels based in Central and Eastern Europe.

Time Warner is investing $241.5 million for a 31% interest in the company. As a result of the deal, Time Warner will appoint two board directors to the firm. Morgan Stanley media analyst, Benjamin Swinburne, noted Monday that Time Warner is paying a 20% premium to CME’s last closing price. CME shares peaked at $56 in June 2008 and fell to a low of $7.50 this month. Swinburne concluded in his note that, “Cyclical pressures on advertising and throughout Europe plus the company’s debt leverage likely drove the sell-off.”The deal values CME at 8 times earnings (EBITDA).

While the channels are ad supported, they are described as early stage businesses. They include stations in: Bulgaria (TV2 and Ring TV), Croatia (Nova TV); Czech TV (TV Nova, Nova Cinema and NovaSport); Romania (Pro TV and Pro TV International, Acasa, Pro Cinema, Sport.ro and MTV Romania); Slovakia (Markiza), Slovenia (Pop TV, Kanal A) and Ukraine (Studio 1+1 International and Kino.)

CME was founded by Ronald Lauder to take advantage of emerging markets such as Bulgaria where viewers saw only public television controlled by the Bulgarian Communist  Party until the early nineties.

The move follows Time Warner's stated intention to expand overseas business. The media conglomerate has seen its domestic cable channel business grow significantly and wants to replicate that success elsewhere. In 2007, Time Warner’s Turner Broadcasting System acquired Latin American pay-TV operator Claxson Interactive Communications.

The company has also been rolling out the HBO brand, launching in Canda last year.