U.S. Billionaire Set to Save Israel's Debt-strapped Channel 10

The RGE Media group, which includes Len Blavatnik, agreed to buy a controlling share in the TV station, which would have been forced to shut down within weeks.

Access Industries chairman Leonard Blavatnik.
Bloomberg

Channel 10 television appeared to be on its way to being rescued after RGE Media, whose shareholders include the U.S. billionaire Len Blavatnik, agreed on a deal to acquire the financially ailing broadcaster just weeks before its license was due to expire.

The parties are now hammering out the final details of an agreement, but RGE — whose other shareholders are Aviv Giladi and Udi Recanati — is expected to assume the broadcaster’s 120 million-shekel ($30.9 million) debt and pay another 10 million shekels to sellers Yossi Maimon and the U.S.-Israeli movie producer Arnon Milchan. The sale will enable Channel 10 to provide the 50 million shekels in guarantees required to get a 15-year broadcasting license.

The sale comes amid turmoil in the Israeli television industry amid speculation that Prime Minister Benjamin Netanyahu is seeking to influence news coverage in his role as communications minister. Only last week, it looked like Channel 10 might collapse as both RGE and a second prospective buyer — the telecom and media entrepreneur Ilan Shiloah — signalled they were dropping out just a little more than a month before its current broadcasting license was due to expire.

Among the commercial television broadcasters, Channel 10 is in the worst shape both in terms of finances and ratings. Maimon is estimated to have lost 700 million shekels in the 13 years he was a shareholder, while Ronald Lauder, the U.S. billionaire and Jewish community leader, who divested himself of Channel 10 at the end of 2013, lost about NIS 500 million. Milchan is seeing a loss of about 200 million shekels.

Under the new ownership structure, RGE will hold a 51% stake in Channel 10, and the rest will be divided between Maimon and Milchan, who may get up to another 40 million shekels in milestone payments on the basis of the broadcaster’s future performance.

The newsroom at Channel 10.
Tomer Appelbaum

Channel 10 is due to submit 50 million shekels in guarantees by Sunday to the Second Broadcasting Authority, the government body that regulates commercial broadcasting, partly for the broadcasting license and partly for royalty debts. RGE will present the guarantees together with First International Bank of Israel.

Negotiations to complete the acquisition accelerated after Prime Minister Benjamin Netanyahu decided two weeks ago, in his role as acting finance minister, to demand that Channel 10 repay a 16.8 million-shekel debt. It was one of his last acts as finance minister before Moshe Kahlon took over the post with the establishment of the new government. Channel 10 appealed to the High Court of Justice to reverse Netanyahu's decision, but because of a strike by state prosecutors, the government could not defend it.

The RGE media empire already includes a controlling stake in Sport Channel 5, the Children’s Channel, the Logi Channel and other media. The Second Broadcasting Authority has already received documents concerning RGE’s other media interests and is expected to approve the acquisition. Shiloah has right of first refusal to buy control of Channel 10 under the same terms as RGE within the next 14 days, but he is not expected to exercise it.

The acquisition must also be approved by the Antitrust Authority, which has yet to receive an application.

In related news, Channel 2 News reached an agreement with its workers committee on Thursday over job cuts as the broadcaster contends with a 4 million-shekel deficit. Under the agreement, 13 jobs will be cut in the next few months while salaries will be reduced until the end of the year and possibly longer by between 2% and 10% depending on the employee’s salary level.

Channel 2 News began losing money as costs grew to cover last year’s conflict in Gaza, Operation Protective Edge, and this year’s general election.