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Chinese energy and investment group CEFC has teamed up with Czech-Slovak financial group Penta Investments to try and buy Time Warner’s TVX.N Central European Media Enterprises (CETV.O), three sources familiar with the matter said.

One of the sources said privately-held CEFC is leading the consortium and is expected to provide the bulk of the financing for any deal to acquire CME, which could be worth about 500 million euros ($590 million). CME has over $1 billion in debt and a market capitalization of $623 million at Tuesday’s close.

The Nasdaq-listed television broadcaster and production company operates in six central and eastern European markets, with the Czech Republic and Romania being its biggest profit drivers.

Time Warner has a 46.5 percent voting share in CME but on a fully diluted basis the U.S. group has a 75 percent interest in CME, based on warrants exercisable until May 2018.

A potential sale has come into prospect since AT&T (T.N) agreed to take over Time Warner, agreed in October last year. Several bidders could be interested, including international players, another source said familiar with the matter said.

Penta declined to comment. It has already invested in print and online media in the Czech Republic and Slovakia.
A spokeswoman for CEFC, which has previously bought a Prague office building from Penta and has a range of other Czech investments, did not respond to a Reuters request for comment. CEFC had briefly held a stake in another Czech publisher and TV broadcaster, Empresa Media.

A Time Warner spokesman declined to comment.

But CEFC, a rapidly growing oil and finance conglomerate with assets across the world, may face a challenge to get the deal done following Beijing’s recent clampdown on capital outflows in sectors such as media.

LOCAL INTEREST
CME shares climbed over 7 percent in Prague on Wednesday and traded up 5.8 percent at 99 crowns at midday.
CME has long attracted Czech financial groups’ interest. A fifth source said PPF, the investment group of Czech businessman Petr Kellner, was also looking at potentially buying CME, something Czech media also reported recently.

PPF had owned CME’s Czech TV station Nova for two years before selling it in 2004. It owns a majority stake in telecoms firm O2 Czech Republic (SPTT.PR) which supplies TV content. PPF declined to comment.
Suitors may submit offers around mid-December, according to one of the sources.

Any potential CME sale could still hit snags. The U.S. Department of Justice sued AT&T on Nov. 20 to block its $85.4 billion deal with Time Warner, saying it could raise media content prices for rival pay-TV companies.
CME has also been hit by Croatian regulators who have blocked the sale of its Croatian business, which is amongst the assets it had earmarked for sale to help pay down debt.

CME has reported rising earnings this year but is still burdened by debt. It posted a 30 percent rise in its core operating income before depreciation and amortization (OIBDA) in the third quarter, and expects full-year core profit up as much as 17 percent which would put it $165 million.

An acquisition by a Czech company would mark another step in the departure of foreign firms that had dominated the country’s media market for most of its post-Communist history.

Ringier, as well as several German publishers and Sweden’s MTG (MTGb.ST), have all sold out to local business or financial groups in recent years.