form8k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date
of Report (date of earliest event reported): January 31, 2008
CENTRAL
EUROPEAN MEDIA ENTERPRISES LTD.
(Exact
name of registrant as specified in its charter)
BERMUDA
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0-24796
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98-0438382
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(State
or other jurisdiction of incorporation and organization)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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Clarendon
House, Church Street, Hamilton
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HM
11 Bermuda
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant's
telephone number, including area code: (441) 296-1431
Not
applicable
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item
1.01 Entry into a Material Definitive Agreement
On
January 31, 2008, Central European Media Enterprises Ltd. and certain of its
subsidiaries (collectively, “CME” or the “Company”)
entered into a
series of agreements to purchase a 30% beneficial ownership interest in the
Studio 1+1 Group (as defined below) from the Company’s partners, Alexander
Rodnyansky and Boris Fuchsmann, and to provide Messrs. Rodnyansky and Fuchsmann
with a put option and CME with a call option for the remaining 10% interest
in
the Studio 1+1 Group that will be held by Messrs. Rodnyansky and Fuchsmann
following a successful completion of the initial sale transaction. CME currently
holds a 60% beneficial ownership interest in the Studio 1+1 Group. In
conjunction with the initial transaction, CME also entered into an Assignment
Agreement with Igor Kolomoisky, a shareholder of the Company and a member of
the
Company’s Board of Directors, pursuant to which Mr. Kolomoisky has assigned his
option interests in the Studio 1+1 Group to CME. The Studio 1+1 Group is the
principal entity through which the operations of the STUDIO 1+1 television
station are conducted and is comprised of several entities in which CME holds
direct or indirect interests. These entities include Studio 1+1 LLC (“Studio 1+1”), Innova Film Gmbh
(“Innova”) and
International Media Services (“IMS”). As further described
below, the consideration payable by CME for the initial sale transactions,
exclusive of the put and call options, is approximately U.S.$ 219.6
million.
Framework
Agreement. CME
entered into a framework agreement (the “Framework Agreement”) with
Messrs. Rodnyansky
and Fuchsmann on January 31, 2008. Pursuant to the terms of the Framework
Agreement, CME shall acquire a 30% interest in the Studio 1+1
Group. The interests to be acquired consist of (i) an 8.335% direct
and indirect ownership interest in the Studio 1+1 Group currently held by
Messrs. Rodnyansky and Fuchsmann (the “RF Interests”) and (ii) a
21.665% direct and indirect interest in Studio 1+1, Innova and IMS over which
Mr. Kolomoisky currently holds options (the “Optioned
Interests”). As reported in our Form 10-Q for the period ended
September 30, 2007, CME entered into an agreement with Mr. Kolomoisky
on October 30, 2007 (the “October Agreement”) to acquire
such Optioned Interests from Mr. Kolomoisky following a successful exercise
by
him of these options over the Optioned Interests. As described below, the
Assignment Agreement between CME and Mr. Kolomoisky supersedes the October
Agreement.
At
completion Messrs. Rodnyansky and Fuchsmann will receive a combined total cash
consideration of U.S.$ 79.6 million, including a de minimis amount of
consideration upon exercise of the Optioned Interests and the remainder for
the
RF Interests, in exchange for the 30% beneficial ownership interest in the
Studio 1+1 Group. Following the completion of this transaction, CME
will hold a 90% interest in the Studio 1+1 Group and Messrs. Rodnyansky and
Fuchsmann will each hold a 5% interest.
In
addition, under the Framework Agreement CME has granted Messrs. Rodnyansky
and
Fuchsmann the right to jointly put both of their remaining 5% interests in
the
Studio 1+1 Group to CME. The consideration upon exercise of the put option
is:
(i) U.S.$ 95.4 million if exercised at any time from the closing date of the
transaction to the first anniversary of the closing date; (ii) U.S.$ 102.3
million if exercised after the first anniversary up to the second anniversary
of
the closing date; and (iii) the greater of U.S.$ 109.1 million and an
agreed valuation if exercised at any time after the second anniversary of the
closing date. Under the Framework Agreement Messrs. Rodnyansky and Fuchsmann
granted CME the right from the closing date to call their combined 10% interest
in the Studio 1+1 Group for a consideration of U.S.$ 109.1 million. From the
first anniversary of the closing date, Messrs. Rodnyansky and Fuchsmann have
the
option of electing to have an agreed valuation conducted, in which case the
call
price will be the greater of U.S.$ 109.1 million and the agreed
valuation. In the event CME exercises the call option, Messrs.
Rodnyansky and Fuchsmann have the right to elect to receive their consideration
in the form of cash or shares of Class A Common Stock of CME. Both the put
and
call options may only be exercised for the entire 10% interest held by Messrs.
Rodnyansky and Fuchsmann.
Termination
Agreement. Simultaneous with entering into the Framework Agreement, the
parties to the Framework Agreement entered into a termination agreement (the
“Termination Agreement”)
pursuant to which the Company’s historical partnership agreements with respect
to its Ukrainian operations have been terminated and Messrs. Rodnyansky and
Fuchsmann have resigned all positions within the Studio 1+1 Group. Messrs
Rodnyansky and Fuchsmann have entered into consultancy agreements with the
Company providing for total annual aggregate compensation under both agreements
not to exceed Euro 1 million that terminate at the time either sells his
remaining 5% interest in the Studio 1+1 Group. The Termination Agreement
contains non-solicitation provisions as well as limited non-compete provisions
that restrict the ability of Messrs. Rodnyansky and Fuchsmann to compete against
the Company in the television business in Ukraine directly or through companies
controlled by them.
Following
the completion of the purchase of the 30% ownership interest in the Studio
1+1
Group by CME, Messrs. Rodnyansky and Fuchsmann intend to acquire 10% of the
Company’s interest in the entities operating the channels KINO and CITI in
Ukraine (collectively, “Gravis”) for consideration
of
U.S.$ 1.92 million. In the event Messrs. Rodnyansky and Fuchsmann exercise
the
put or CME exercises the call described above, this 10% interest in Gravis
will
be transferred to the Company together with the 10% interest held by Messrs.
Rodnyansky and Fuchsmann in the Studio 1+1 Group, and Messrs. Rodnyansky and
Fuchsmann shall not be entitled to any additional consideration other than
as
described above in respect of the put and call options.
Assignment
Agreement. On January 31, 2008, CME entered into an assignment agreement
with Mr. Kolomoisky pursuant to which Mr. Kolomoisky has assigned his right
to
acquire the Optioned Interests to CME. In consideration of this assignment,
CME
will pay Mr. Kolomoisky an amount equal to the lesser of (i) U.S.$ 140 million
and (ii) 4% of the number of outstanding shares of Class A Common Stock of
CME
at the time CME acquires the Optioned Interests (using a weighted average
trading price), provided, that in the event the lesser amount is U.S.$ 140
million, Mr. Kolomoisky will have the option of receiving his consideration
in
cash or shares of Class A Common Stock of CME. CME is not obligated
to pay this consideration to Mr. Kolomoisky prior to the acquisition of the
RF
Interests and the Optioned Interests from Messrs. Rodnyansky and
Fuchsmann.
The
October Agreement shall terminate following the completion of this transaction.
Mr. Kolomoisky was appointed to the Company’s Board of Directors in connection
with his purchase on August 30, 2007 of 1,275,227 unregistered shares of CME’s
Class A Common Stock for cash consideration of U.S.$ 110.0 million, pursuant
to
which Mr. Kolomoisky has registration rights. For additional information on
the
October Agreement and Mr. Kolomoisky’s share purchase, please see the Company’s
Form 10-Q for the period ended September 30, 2007.
The
Framework Agreement and the Assignment Agreement also provide that Messrs.
Rodnyansky, Fuchsmann and Kolomoisky, as well as other parties who entered
into
historical arrangements with respect to the Optioned Interests, enter into
mutual release arrangements on the closing date to confirm the performance
of
the transactions contemplated by those previous arrangements and to release
any
claims arising out of or in connection with those arrangements or the ownership
of the Studio 1+1 Group. In addition, Mr. Kolomoisky and other parties who
obtained rights in respect of the Optioned Interests are releasing CME and
the
Studio 1+1 Group from any claims in respect of the ownership of the Studio
1+1
Group on the closing date.
Completion
of the transactions described above is expected to occur by the end of the
second quarter of this year. Under the terms of the Framework Agreement, the
ownership of the Studio 1+1 Group is being restructured in order to facilitate
these transactions and such restructuring will require certain regulatory
approvals.
Signatures
Pursuant
to the requirements of the Securities Exchange Act of 1934, we have duly caused
this report to be signed on our behalf by the undersigned thereunto duly
authorized.
Date:
February 5, 2008
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Chief
Financial Officer
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