You're reading: CME buys Rabinovich out of 1+1

Central European Media Enterprises, the majority investor behind the private television channel Studio 1+1, has increased its stake in the group of companies behind 1+1 to 60 percent by paying $5 million for Israeli-Ukrainian businessman Vadim Rabinovich's former share, according to CME and 1+1 officials.

'The stakes were purchased from companies that used to be owned by Vadim Rabinovich,' Gerry Buckland, a CME spokesman based in London, said in a telephone interview.

Studio 1+1, which broadcasts in place of state channel UT-2 during daytime and evening hours, is Ukraine's leading private television channel, and CME is the largest investor in the Eastern European television market.

CME initially held a controlling stake of just over 50 percent in the Studio 1+1 group of companies while holding a 30 percent stake in the company that holds the broadcasting license, in compliance with Ukrainian legislation.

According to Rodnyansky, Rabinovich came into conflict with 1+1 management after last year's parliamentary elections.

In October, Rodnyansky and other Studio 1+1 employees said that Rabinovich's departure from the 1+1 group was imminent. At the time, 1+1 sources said the dispute was a result of an attempt by Rabinovich to take over control of programming.

On Jan. 12, Rodnyansky gave a similar but more detailed account. Rodnyansky said he initiated the deal because he and other Studio 1+1 employees got tired of the struggle for power at the company, which he said intensified after the March 1998 elections.

'The rumors that [Rabinovich] helped the Green party into parliament and then influenced the outcome of the [parliament] speaker's election made him feel like he had the power,' Rodnyansky said.

The initial announcement of CME's purchase, faxed to the Post on Jan. 11 from Studio 1+1 on joint CME-1+1 letterhead, hinted in a similar direction, saying that CME's investment 'strengthens the independent position of Studio 1+1.'

Rabinovich was considered to be closely linked to President Leonid Kuchma and other political players close to the president.

CME has been present in Ukraine since 1996 when the Studio 1+1 group of companies were founded. Previously a similar license to broadcast on UT-2 was held by Perekhid Media, but that license was revoked after Leonid Kuchma took over the Ukrainian presidency from Leonid Kravchuk.

An addendum to the press release suggested a slightly different version of events.

'CME's decision to purchase an additional 10 percent equity share in the Studio 1+1 group of companies might be directly linked to Studio 1+1 having broken up its partnership with the Israeli businessman Vadim Rabinovich, who plays an influential role in Ukrainian political life and whose reputation affected the positive image of the company,' the addendum said.

The addendum said that comment was to be attributed to a Studio 1+1 source. Rodnyansky, however, said the announcement was issued by CME, while Buckland said he had no knowledge of the addendum. Rabinovich, through a secretary, declined to comment.

According to Western press reports at the time, CME suffered embarrassment after The Washington Post reported in 1997 that Rabinovich's visa to the United States had been revoked in 1995 due to his connections to the company Nordex and Latvian-Russian businessman Grigory Luchansky.

Nordex and Luchansky were accused by U.S. intelligence officials of being involved in illegal arms trading, drugs smuggling and attempts to sell nuclear materials to rogue nations. Luchansky denied the accusations, while Rabinovich has said he severed his cooperation with Nordex and Luchansky and has always been involved only in legitimate business.

Buckland said that he had no knowledge of Rabinovich's reputation being a factor in CME's decision to purchase Rabinovich's former stake.

'I'm being completely straight with you, I'm totally unaware of that,' Buckland said. 'I've been working with CME for nearly 5 years, so I'm aware of most of the things that go on in most of its companies.'

Neither Buckland nor Rodnyansky would specify which of the four companies behind Studio 1+1 CME had increased its stake in, although Buckland stressed that CME's stake in the license-holding company remained at 30 percent.

The group includes broadcasting company Studio 1+1, which holds the license for 16 hours of prime-time broadcasting on UT-2, Prioritet advertising company with an exclusive license to sell advertising on 1+1, and the Nova-film and Intermedia production companies. Rabinovich had denied he held any stake in Studio 1+1 but acknowledgement involvement in Prioritet, the group's main revenue earner.

Rodnyansky said he has a 10 percent stake in the group and German national Boris Fuchsman has the remaining 30 percent.

Buckland said CME would not reveal the ownership structure. He initially said that Rodnyansky had also increased his stake in the company, but later said that he wasn't sure.

'I'm not familiar with the total overall details. I'm sure whatever Rodnyansky said, it's right,' Buckland said.

Rodnyansky said he might have liked to increase his share but lacked the funds.

Buckland said the $5 million price tag on the 10 percent share did not mean that the group of companies was worth only $50 million. He declined to elaborate.

Buckland said the investment is further proof that CME is not out for quick returns but for long-term growth. He pointed out that Ukraine is the largest market in which CME is involved, saying he has seen 'great improvements' in Ukraine and sees enormous potential in its television market.

'CME is very pleased with the outcome [of the deal],' Buckland said.