Sir Winston Churchill had it right. Russia is indeed "a riddle wrapped in a mystery inside an enigma."
The latest mystery: Last week, The Moscow Times reported that the founders of Russia's last independent television network, Ren-TV, are attempting to buy back some of their shares in the company. The strange thing is that Irina and Dmitry Lesnevsky just finished selling off their 30% stake in the company to Germany's RTL Group one month ago.
Why are the Lesnevskys having second thoughts? Well, it might be because Ren-TV is about to become much more valuable than they thought it was when they sold it. Recent news reports are starting to firm up rumors that Rupert Murdoch's News Corp. (NYSE:NWS) wants to buy a stake in Ren-TV. Such an acquisition would give News Corp. an entry into the lucrative Russian television market and create a new sales outlet for DVRs and set-top boxes manufactured by its subsidiary, NDS Group PLC (NASDAQ:NNDS).
Ren-TV is currently split between two owners. Russian steel company Severstal owns a 70% majority stake; RTL Group owns the remaining 30% blocking stake ("blocking" because it is large enough to prevent Severstal from forcing through a major restructuring or liquidation of the company without RTL's consent). Given that RTL would not likely be interested in parting so quickly with shares it only recently acquired, the Lesnevskys are reportedly seeking to instead buy Ren-TV shares from Severstal.
As a result, Severstal is now sitting in the catbird's seat. Supposedly, the steel conglomerate wants to unload its Ren-TV shares quickly. And now it has four potential bidders for these shares: the Lesnevskys, who want to buy 19% of shares outstanding; News Corp., which wants to buy as much as 35%; RTL, which can buy just under 20% more before running afoul of a law forbidding foreigners from directly owning a majority interest in a television company; and surprise bidder Surgutneftegaz (OTC BB: SGTZY), a Russian oil company that is reportedly seeking a 33% interest in Ren-TV.
Valuation
The Lesnevskys are reportedly willing to pay about $25 million for the 19% stake they're pursuing, or about $1.3 million per 1%. However, Severstal paid about $100 million for its own 70% stake, or about $1.4 million per 1%. It's unlikely that Severstal will be willing to part with its shares at a loss, the more so given that multiple bids for the shares seem likely. Although some reports put this tiny network's intrinsic value at just $85 million, it seems more likely that the bidding war will push its market value upwards of $130 million.
Fool contributor Rich Smith owns no shares in any company mentioned in this article.
