Russian evolution
CME spends $5 mil to acquire stake in b'caster
CME prexy and CEO Michel Delloye characterized the move, formally concluded Dec. 23, as "a reflection of CME's longterm commitment to Studio 1+1 and the Ukrainian market, and confidence in Oleksandr Rodnyansky," who has been managing director of CME since it launched in January 1997.
With CME's Ukrainian interests looking financially favorable in comparison to some of its other ventures in the region, the decision looks like a logical move. 1+1 has a nationwide share of over 33%.
Playing politics
Behind these bare facts, however, there's a political maze which speaks volumes about the difficulties of running an independent commercial channel in a territory where political power struggles look particularly acute in the run up to presidential elections set for Oct., 1999.
Seen from this angle, CME's stake increase doesn't look like the decisive move it might otherwise seem -- instead, it's the exclusion of one of venture's original partners, Ukrainian-born Israeli businessman Vadim Rabinovich, which appears the important development, at least in the short term.
Alongside CME, which provided the bulk of investment, the 1+1 holding had three original partner-investors -- Rodnyansky, Germany's Innova Film GmbH (partly owned by CME) and Rabinovich.
Subsidiaries included the 1+1 channel itself, a license holding company (where CME's stake was limited by Ukrainian law) and an advertising sales company, which included ad agency Prioritet, exclusive ad broker to the 1+1 channel.
Formal stake
Though he was influential in the channel, Rabinovich's formal stake was limited to 25% of the ad sales company. CME's new expenditure in effect buys part of this stake, while the rest has been purchased by Rodnyansky and Innova for an undisclosed sum.
The move followed months in which Rabinovich's actions had been putting channel's stance of political independence at risk. Abuse of channel's name in complicated local election disputes proved the last straw for the political powerbroker.
Some of the self-made millionaire's earlier business associations certainly came close to the edges of the law -- and saw him declared persona non grata by the US embassy in Kiev.
CME itself has not been involved in the dispute with Rabinovich. Nevertheless, press coverage linking the names of group founder Ronald Lauder to Rabinovich, whose past obviously contained more than CME was aware of when it went into partnership with him, must have been an embarrassment which CME will be glad to be rid of.
