The Deal: On February 16, 2017, CEE Legal Matters reported that Glatzova & Co. had advised Denemo Media s.r.o. on its acquisition of a 50% shareholding in FTV Prima, with Allen & Overy advising Modern Times Group, the seller. Denemo Media is a Czech joint venture between Alphaduct, a.s. (with 75% ownership) and GES Media Asset, a.s. (with 25% ownership). Alphaduct, a.s. is owned by Czech businessman Vladimir Komar. GES Media Asset a.s. is part of the GES Group, which already owned 50% of FTV Prima Holding.
• Glatzova & Co.: Jiri Sixta, Partner
• Allen & Overy: Hugh Owen, Partner
CEELM: How did you each become involved in this matter? Why and when were you and your firms initially selected as external counsel?
J.S.: I was recommended to Mr. Vladimir Komar [the owner of Alphaduct, a.s., which owns 75% of Denemo Media a.s. – ed.] by his transactional advisor as someone who had broad transactional experience in the media market.
H.O.: We have worked for MTG for as long as I can remember (at least 15 years), first in Russia and then in the Czech Republic, Bulgaria, Hungary, Latvia, and the Netherlands, as well as on other contemplated transactions across pretty much the whole of CEE. We also worked for MTG on their entry into FTV Prima so it made sense to use us for this transaction too.
CEELM: What, exactly, was the initial mandate when you were each retained for this project?
J.S.: To prepare (together with transactional/tax advisor) the most effective structure for acquisition of 50% of shares in FTV Prima Holding a.s. (FTVPH).
H.O.: We were retained to assist MTG to evaluate its options for the Czech business, principally exit options and therefore ultimately on this exit.
CEELM: Who were the members of your team, and what were their individual responsibilities?
J.S.: As the project was extremely confidential, our team was small. There were only four individuals: myself, Jan Vesele (Managing Associate), Gabriela Praskova (Senior Associate) and Nela Zelenkova (Associate). Nela, working under Jan’s supervision, was primarily involved in the legal due diligence of the FTVPH group, including FTV Prima s.r.o. (“TV Prima”). I and Jan were involved in negotiations and drafting of transactional documentation. Gabriela was responsible for filing with the Czech Anti-Monopoly Office.
H.O.: We got the instruction on the last day before my sabbatical last year so originally our London team took the instruction (Lisa Goransson, Head of our Nordic desk [MTG is a Swedish company], and Marton Eorsi, a Senior Associate of mine in Budapest who had done lots of MTG work and then moved to London and now works with Lisa). Later on, it was a relatively small team but included me as the M&A Partner, Prokop Verner (Counsel), and then Magda Pokorna as the Senior Associate coordinating the transaction as a whole, as well as Ivana Dobiskova and Iva Bilinska in Prague on antitrust aspects. Jana Svarickova assisted on some media regulatory aspects.
Charles Andersson from the Hamilton law firm in Stockholm advised on Swedish law aspects.
CEELM: Please describe the final acquisition in as much detail as possible: how was it structured, why was it structured that way, and what was your role in helping it get there?
J.S.: Mr. Vladimir Komar (via his holding company Alphaduct, a.s.) established the special purpose vehicle Denemo Invest s.r.o. Denemo Invest s.r.o. then established a joint venture with GES Media Asset, a.s., called Denemo Media s.r.o., which is controlled by Denemo Invest, s.r.o.
Denemo Media, s.r.o. subsequently acquired 50% of shares in FTVPH from MTG Broadcasting AB (MTG). The remaining 50% shares of FTVPH is owned by GES Media Europe B.V.
We were involved in the legal due diligence of the FVTPH group (including TV Prima), the establishment of the JV (the other JV partner was represented by Ludmila Kutejova of the Kutejova, Marsal, Briasky law office), and the negotiation of the entire deal with MTG on behalf of Denemo Media s.r.o. (in cooperation with Ludmila Kutejova) as well as negotiations with the financing bank (CSOB).
Finally, we handled the clearance of the transaction with the Czech Anti-Monopoly Office.
H.O.: It was on the face of it fairly simple, as it was the sale of a 50% stake to a purchaser in which the other 50% shareholder held a minority stake. We also needed to regulate the sale of the stake pursuant to the shareholders’ agreement to ensure compliance with Swedish law. In order to ensure certainty of funds there was also a Debt Commitment Letter and an Equity Commitment Letter. Finally there was an escrow agreement to ensure funds flow at completion to secure a delivery versus payment mechanism for the transfer of the shares.
CEELM: What was the most challenging or frustrating part of the process?
J.S.: Confidentiality was the key factor in the transaction. There were other parties interested in acquiring TV Prima, and we had to work in such a way that no one knew what was going on until the deal was signed.
The only frustrating part of the process was that our team was not able to participate in the regular skiing trip organized by our office. While the rest of the Glatzova team enjoyed three days of fresh snow and sunshine in Austria, we were working around the clock in order to finalize the transactional documentation.
H.O.: The timing of the transaction was challenging. The deal was signed two weeks from the circulation of the first draft of the SPA. This intense timing required all parties involved to be constructive and approach the negotiations with a commercial mind set.
CEELM: Was there any part of the process that was unusually or unexpectedly smooth/easy?
J.S.: As all parties wanted to close the deal as soon as possible, the deal was completed very quickly. It took only approximately five weeks from commencement of the legal due diligence to signing of the SPA.
I was surprised that even negotiations with CSOB (which was represented by Baker McKenzie) were relatively smooth. Baker was very flexible and cooperative – which is not a common approach of lawyers representing banks.
H.O.: Not really… Is there ever?
CEELM: Did the final result match your initial mandate, or did it change/transform somehow from what was initially anticipated?
J.S.: We were hired as a transactional legal advisor, and we fulfilled that role. The only task that was not initially anticipated was representing Denemo Media, s.r.o. in negotiations with CSOB as the financing bank.
H.O.: It fairly quickly turned into a bilateral process, so the focus was keeping competitive tension and getting the deal done as soon as we could.
CEELM: What individuals in Denemo Media directed you, Jiri, and what individual at Modern Times Group directed you, Hugh – and how would you each describe your interactions with your clients?
J.S.: Due to sensitivity of the transaction, we mostly worked directly with Mr. Vladimir Komar. Given the dynamics of the transaction, there was not space for regular meetings. Our meetings were held ad hoc as needed – in our offices, in the offices of the JV partner (GES), at Baker McKenzie (with respect to financing), and of course in Allen & Overy’s offices.
Mr. Komar likes to give “general direction” and is ready to solve most important/critical issues, but he leaves the details to be handled by lawyers. Therefore, he usually participated in the key part of the negotiations but quite often left and let the lawyers earn their fees.
H.O.: We were instructed by the former Head of M&A at MTG. He has now moved on, but we retain a good relationship with the GC and also with the replacement in-house M&A counsel. MTG also have a deal execution team member who gave us day-to-day instructions and ran the negotiations. We have also known him for some ten years or even more.
We have a very good relationship with the client team that instructs us. As mentioned above, we have known them for a long time, but I hope it is also OK to say that the Swedes are very direct, practical, and no-nonsense. This really helps us to get things done quickly and efficiently. They know their business extremely well, so we get very relevant and useful feedback and instructions. They are experienced in M&A, so all the discussions are based on a shared platform of knowledge on all the usual M&A sticking points, and we are able to decide on issues with shorthand discussion.
CEELM: How would you describe the working relationship with your counterparts at Allen & Overy, Jiri, and you with yours at Glatzova & Co., Hugh?
J.S.: I think that we established a very good working relationship with Allen & Overy, represented primarily by Magda Pokorna. Obviously, there were difficult tasks (caused primarily by the fact that MTG is a listed company and there were certain internal processes to be followed) but at the end, we always found a mutually acceptable compromise.
There were a couple of phone calls, but the vast majority of work was done personally in meetings. I would say that final negotiations took approximately one week – but it was a very intensive one.
In the SPA, we agreed to consult with Allen & Overy (as representatives of the seller) regarding all our submissions and steps towards the Czech Anti-Monopoly Office. Even at this phase of the transaction, they were prompt and cooperative.
H.O.: As mentioned above, the negotiations were intense and lasted less than two weeks. G&Co focused on material issues, and the process was smooth; they were very responsive both on the phone as well as in the meeting room. Decisions were made quickly. The negotiations took place until the very day of signing, but this was mainly due to the added complexity of the escrow and the involvement of the purchaser’s financing bank and the escrow agent.
CEELM: How would you describe the significance of the deal to the Czech Republic?
J.S.: This deal was the biggest deal on the media market in the Czech Republic for the last several years.
H.O.: The target group is the No. 2 private TV in the Czech Republic. The deal was the biggest media transaction in the Czech Republic in the last three years.
By Jiri Sixta, Partner, Glatzova & Co., and Hugh Owen, Partner, Allen & Overy
This Article was originally published in Issue 4.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.