Sanoma sells Vedomosti to comply with Russian media law

Finnish publishing company Sanoma has sold its 33.3% share in the Russian business daily Vedomosti to publishing executive Demyan Kudryavtsev, in the latest shake-up to Russia's media landscape caused by new legislation limiting foreign ownership.

The stake in Delovoi Standard, the publisher of the daily, was sold to a company called Ivania Ltd, while Sanoma also sold its United Press portfolio to MoscowTimes LLC. Both Ivania and Moscow Times are controlled by Kudryavtsev. 

Before the deal, the assets were part of Sanoma Independent Media (SIM), which publishes The Moscow Times, Cosmopolitan, Esquire, Harper’s Bazaar, Men’s Health, Woman’s Health, National Geographic, and Grazia magazines.

Sanoma posted €104.1mn of net losses in 4Q14 in Russia and Ukraine compared with €31.2mn a year earlier, caused by impairment of assets and devaluation of currencies, the company said in February.

United Press reported revenue of €2.5mn in the first quarter, while Vedomosti revenue in 2013 amounted to RUB1.1bn (€18.9mn/$21.1mn at current rates), the daily said, adding that 2014 financials were not available. 

Neither Sanoma nor Kudryavtsev disclosed the value of the deal, although it had been reported earlier that Kudryavtsev was ready to pay €6mn for the 33.3% stake inVedomosti. The Finnish publisher said in a statement that it would make "a non-recurring capital gain of around €8mn before currency translation adjustment". This means Sanoma sold its assets for €8mn more than their worth as estimated by the publisher itself, Sberbank CIB analyst Anna Lepetukhina told Vedomosti. "Obviously the total sum of the deal is higher," Lepetukhina added. 

Kudryavtsev is known on the media market as the former head of the Kommersantpublishing house. He was appointed in 2006 by the paper's then owner Boris Berezovsky and held the position till 2012. Commenting on the deal, Sanoma Group President and CEO Harri-Pekka Kaukonen said that the "iconic titles are in good hands".

"At the same time, the agreement to sell these assets is an example of our strategy in action, as we look to focus our resources on our core markets, in which we believe we can create the most value for our shareholders," Kaukonen said.

The deal follows the sale of Sanoma’s stake in Fashion Press to US publisher Hearst, agreed in December 2014.

According to Vedomosti sources close to the deal, Dow Jones and FT Group intend to remain co-owners of the paper. "To be partners with these global companies is very useful, it can be a great school. I see no point in immediate changes," Vedomosti cited Kudryavtsev as saying. He also said he would not insist on any changes in the paper's top-management or editorial staff. 

Sanoma bought Vedomosti in 2005, and published the paper together with Dow Jones and FT Group. In 2013 the company said it would leave the Russian market, and started to look for buyers.

Rumours about Kudryavtsev’s interest in Vedomosti emerged at the beginning of 2015 but the publisher struggled to find buyers for its SIM assets. In February 2015, Sanoma said that it hoped to sell all Russian assets by the end of 2015 to comply with a new legislation on foreign ownership in local media. 

Adopted in September 2014, the law limits the foreign presence in any Russian media’s capital to 20% or less and bans non-direct ownership. The owners will must finalise all changes in the structure of their business by the end of 2016.

Broadcaster CTC Media is the largest media company affected by the new legislation.Vedomosti reported on April 28 that the company may sell its assets to Russia’s Rostelecom. According to the daily’s sources, the talks are not at an advanced stage. The details about the size of the stake were not provided.

According to VTB Capital, the purchase of a TV media company would be a bold move by Rostelecom, as CTC’s business of advertising and content production deviates from Rostelecom's core business, and synergies between the two are questionable. However, the changes in media law could make the valuation of media assets potentially appealing, analysts said in a note.

CTC Media comprises several TV channels and has a market capitalisation of $1.5bn. Sweden's MTG holds 39% stake in the company, Telcrest Investments Ltd controlled by Yury Kovalchuk and his partners has a 25% stake, and the remaining 36% is free float which also might be partly controlled be foreigners. 

According to Vedomosti, the new law will affect more than half of the Russian media. The dozens of non-Russian TV channels currently broadcasting in the country include Viasat, Discovery and Animal Planet. Apart from SIM, foreigners control several publishing houses including Conde Nast, Hearst Shkulev Media and Burda. The Forbes business magazine is published in Russia by Germany's Axel Springer.