Modern Times Group sells Baltic ops as it turns towards digital

Modern Times Group (MTG) is selling its operations in the Baltic states to Providence Equity Partners in a deal that values the free, pay TV and radio businesses at €115 million, or 12 times 2016 earnings before interest and tax.

MTG said the sale was part of its plan to transform itself from “a traditional national broadcaster” into a “global digital entertainer” in line with changing consumer habits. It said it would use the proceeds of the sale as part of its transformation process.

The sale includes the Baltic region’s third-largest pay TV provider, subscription and ad funded streaming services and national commercial radio stations.

It also includes MTG’s three Estonian free-to-air channels – TV3, TV3+ and TV6 – five channels in Latvia – TV3, TV3+, TV6, Kanals 2 and LNT – and three in Lithuania – TV3, TV6 and TV8.

“We have been in the Baltic region for two decades, and our very dedicated and professional colleagues have built a successful business here. I would like to take this opportunity to thank our local team for an extraordinary performance over the years,” said MTG president and CEO Jørgen Madsen Lindemann.

“We are on a journey to build an even stronger presence in the global digital arena, and I am happy that we have found a buyer that shares our view of the potential of the Baltic businesses. Our Baltic colleagues can look forward to a new era that taps the full possibilities of the Baltic media market.”

Karim Tabet, managing director at Providence, said: “MTG’s Baltic broadcasting businesses are all leaders in their respective areas and we’re excited to partner with such a talented group of people to grow the company together. After our acquisition of Bite in 2016, this transaction highlights Providence’s continued commitment to investing in the Baltic region.”

Robert Sudo, another managing director at Providence, said: “Lithuania, Latvia and Estonia are all among the fastest growing countries in the EU. The business friendly environment combined with a highly skilled workforce make the Baltics an exciting region for us. We are looking forward to working together with MTG Baltic’s management and employees over the coming years.”

The sale follows months of media speculation about the future of MTG’s Baltic businesses, which collectively contributed just over SEK1 billion to MTG’s top line in 2016.

The sale of the Baltic business can be seen within the context of Lindemann strategy of focusing more tightly on digital entertainment, including an extensive investment in eSports and games through the acquisition of eSports league ESL and more recent investment in gaming outfit InnoGames.

Speaking at last week’s Cable Congress, MTG’s chief strategy officer Gabriel Catrina said that eSports “is going to become the biggest sport in the world in future”, surpassing football.

Swedish advertising and media news service Resumé reported in December that MTG was also considering a sale of its traditional TV channels in the Nordic region, including TV3, TV6 and TV10, citing unnamed sources.

According to Resumé, MTG touted a sale of its free TV channels to several potential buyers in the spring of 2016. The prospectus did not include pay TV services or digital assets. MTG at the time declined to comment on what it described as rumour and speculation.

In January MTG sold its stake in Czech free TV channel Prima Holding to Denemo Media, having previously sold its free TV assets in Africa.

Providence Equity’s acquisition of MTG’s Baltic operation meanwhile follows a bid last year to secure control of leading Baltic cable operator Starman from East Capital Explorer that failed as a result of a legal challenge from a minority shareholder.

Starman’s Estonian assets were ultimately sold to Finnish cable and media group Elisa, while its Lithuanian cable network, CGates, was retained by former minority shareholders Polaris Invest and Com Holding.

In 2015, Providence Equity acquired Bite Finance International, which controls the number two mobile player in Lithuania and the number three operator in Latvia, from Mid Europa Partners for an undisclosed sum.