What next for Adrian Sarbu?

After media mogul Adrian Sarbu unexpectedly announced his resignation from Central European Media Enterprises, media market commentators are wondering what the Romanian businessman could be cooking up next. Rumors of various negotiations and scenarios have already surfaced on the market.

By Otilia Haraga

Negotiations between Swiss media group Ringier and the Gazeta Sporturilor newspaper, controlled by Intact media group, have reportedly been going on over the past month. Sarbu has become a player in the negotiations, and is interested in some of the team at Gazeta Sporturilor, Paginademedia.ro reports.

At the moment, he owns Mediafax Group, which publishes the newspaper ProSport. Incidentally, ProSport was founded by the journalists now working for Gazeta Sporturilor, so in a sense, the businessman could be trying to bring the old team back home.

“Like the entire print press, the sports publications market has borne the brunt of the economic crunch. In this context, the survival of two daily sports titles is becoming increasingly difficult, if not impossible. Adrian Sarbu’s move is motivated by survival, on the one hand, and by the desire to consolidate ProSport, on the other,” Petrisor Obae, founder of Paginademedia.ro, tells BR.

He explains how Sarbu’s involvement would change the balance of the market. “Unlike Intact group, which focuses on television, Ringier is exclusively focused on print. An investment in Gazeta Sporturilor would strengthen the title and the battle between ProSport and Gazeta Sporturilor would be much fiercer. Without the current team, Gazeta Sporturilor would have big problems in competing against ProSport,” says Obae.

“However, if Sarbu manages to make his move, the whole Ringier-Intact transaction is in doubt. Why? Because, according to the information that Paginademedia.ro has at the moment, Ringier has set a basic condition: a significant portion of the Gazeta Sporturilor team must be taken over with the sports newspaper,” adds Obae.

In mid-August, the media mogul unexpectedly announced his resignation from the position of president and CEO of Central European Media Enterprises (CME), which runs TV stations in six markets: the Czech Republic, Croatia, Bulgaria, Romania, Slovenia and Slovakia.

In June 2013, CME had completed the sale of 200,000 shares for USD 200 million to Time Warner, which now owns a 49.9 percent stake in the company. CME is traded on the NASDAQ Global Select Market and the Prague Stock Exchange.

In Romania, CME controls Pro TV, Pro TV International, Acasa, Acasa Gold, Pro Cinema, Sport.ro, MTV Romania, Pro TV Chisinau and Acasa Moldova, as well as Voyo, a pan-regional video-on-demand service.

Following Sarbu’s resignation, CME appointed Christoph Mainusch and Michael Del Nin as co-chief executive officers.

The former, a consultant at Turner Broadcasting International, has worked for several other media groups including Alpha Media Group in Greece, RTL Televizija in Croatia and ACS Media GmbH.

The latter served as CME director from October 2009 until September 2013. He also worked as senior VP of international and corporate strategy at Time Warner Inc. from early 2008 until leaving the company to join CME as co-CEO.

Sarbu’s resignation, which will become effective on January 1, 2014, was surprising because it came four months after his contract had been renewed until 2016. Sarbu has been with CME for the past 20 years. Initially, he was the firm’s partner when it launched Pro TV in Romania in 1995. Subsequently, he served as chief operating officer of the company from 2007 to 2009. Since 2009 he has been president and CEO.

The terms of his resignation are very advantageous. According to Paginademedia.ro, Sarbu will receive a bonus of up to USD 5.4 million within two weeks of his resignation becoming effective. Until then, he will continue to be paid his annual USD 1.8 million salary.

He will also have pre-emption rights in the event that CME decides to sell shares in MediaPRO Entertainment and MediaPRO Distribution before the end of 2015.

Even more importantly, CME commits to invest up to USD 3 million in a content business which he plans to start after he is free of his CME contract. This means that the media mogul may just have secured financing for his next project and there are rumors on the market that Sarbu may be working on a new TV format.

What legacy does he leave at CME after playing a key role in the media group for nearly two decades?

Firstly, he launched Voyo in 2011, a subscription video-on-demand (VOD) service that established leadership of the segment in the region, with more than 100,000 subscribers at the end of 2012, according to CME data.

Secondly, he changed the company’s business model. Shortly before Sarbu announced his resignation, Pro TV announced a move intended to boost CME’s revenues: it was going to pull out of the must-carry list of programs. Cable TV providers must now request approval and pay to broadcast the Pro TV channels to their subscribers.

“We made this decision because Pro TV is in the process of altering its distribution strategy with a view to passing to terrestrial digital broadcasting and implementing digital multimedia services nationally based on a concept that will help us minimize the impact of digitalization on the business,” stated the TV broadcaster.

In fact, Pro TV recently announced that it had renegotiated the cost of broadcasting its channels with two major cable and satellite TV providers.

Romania grossed the highest revenues in the CME group in H1 2013, posting USD 96 million in the first six months of the year, ended June 30. It was followed by the Czech Republic with nearly USD 82.5 million and Bulgaria, with USD 40.6 million.

“Adrian Sarbu leaves behind a Pro TV that is the most important media product on the Romanian market. The evolution of Pro TV without the ‘influence’ of Adrian Sarbu is something to follow. Because, even though he has not held any position at Pro TV for four years, he has stayed present and involved in the activities of the .ro stations. Pro TV has a close management team that has managed to keep the stations as leaders among TV channels,” comments Orlando Nicoara, head of Mediafax Group, on his blog.

However, just a month before Sarbu announced his resignation, the financial indicators posted by CME clearly indicated lower revenues while losses effectively soared more than tenfold y-o-y.

Furthermore, in 2010 and 2011 the media mogul sold shares he owned in CME worth approximately USD 11 million in total. This reportedly damaged the trust of the CME investors and CME shares plummeted to half their value, destabilizing the company, according to a report by KB, part of Societe Generale.

“With 2 million shares, Adrian Sarbu remains one of the largest individual shareholders in CME. It remains to be seen whether he will keep these shares and how the price will evolve.(…) Adrian Sarbu remains the Romanian who has held the highest position in a ‘listed’ company,” adds Nicoara.

otilia.haraga@business-review.ro

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