NEW YORK-Metromedia International Group Inc. sold 18.4 million shares of common stock June 28 at $15 each in order to finance its eastern European telecommunications interests.
Gross proceeds, before underwriting and other expenses are deducted, amounted to $202.4 million. Donaldson, Lufkin & Jenrette Securities Corp., Los Angeles, was lead manager of the stock offering.
Metromedia, the Atlanta-based entertainment media and communications company owned by American entrepreneur John Kluge, also completed its merger with The Samuel Goldwyn Co. and Motion Picture Corporation of America July 2, the same day the stock sale closed.
Kluge first entered the eastern European market in 1992, having built his latest fortune by investing in the emerging U.S. cellular industry during the 1980s. Kluge began during the early 1990s to invest in joint ventures with government-owned enterprises and local businesses to obtain communications licenses in under-served eastern European countries.
So far, Metromedia has invested in 11 such countries. Its interests include eight paging systems with combined target populations of about 79.5 million and a nationwide cellular telephony service in Latvia. Metromedia also is exploring wireless local loop telephony in former Soviet Republics including Georgia and Uzbekistan.
Many of these ventures are start-ups requiring significant capital investments before they generate cash flow. The prospectus for the stock sale predicts the existing communications businesses in eastern Europe will need $40 million this year. The remaining proceeds will finance future projects in the region this year and next.
While there are many opportunities in the region, the prospectus also acknowledges many risks, including unstable local politics, high inflation, weak currencies and the potential for adverse changes in local laws that could affect foreign investment in communications.
