Film fund VIP pacts with Brass Hat-$190 mil

Film fund VIP pacts with Brass Hat

Duo have $190 mil production kitty

By ADAM DAWTREY

LONDON — German film fund VIP has formed an alliance to co-invest in upcoming movie projects with London-based financier Brass Hat Films.

The two companies say they have the combined resources to bankroll $190 million of production, both in the U.S. and in Europe.

Typically they will provide equity covering 20% of that figure, and lay off the rest of funding through distribution deals or other forms of trade financing.

They are also starting their own foreign sales operation, headed by Glenn Kendrick Ackerman, to handle the rights for all upcoming productions that don't have sales agents attached.

Brass Hat, which has co-financed 16 movies with total budgets of $380 million over the past three years, including "Premonition" and "Shopgirl," will take the lead in identifying projects and negotiating with producers.

The partnership is the latest move by VIP to rebuild its business and reputation, following the criminal prosecution for fraud of its previous management, and the changes in German tax rules to clamp down on film funds.

For the past year, VIP has been under new management, headed by m.d. Dirk Specht, with no connection the old team.

With VIP's investors unable to withdraw their money from the fund until 2014, Specht's task is to keep finding movies to back that will give them the best possible return, even without the benefit of a tax break.

Brass Hat has always pursued a pure equity investment strategy that did not rely on tax breaks, so VIP is hoping to tap this expertise and Brass Hat's contacts among the Hollywood production community.

Specht commented, "After some turbulent times for German funds and in particular also for VIP, we are looking forward to achieving the best possible opportunities for our investors. The partnership with Brass Hat gives us the opportunity to strengthen VIP's position in the international film production market."

He also admitted that he hoped the alliance would help to solve VIP's "image problem," particularly in Los Angeles.

Brass Hat typically puts up 30% of budgets against North American rights, with a studio handling the distribution for a fee. Recent projects include "Death Sentence," "Dreamer," "The Persuaders" and "The Other End of the Line."

Brass Hat chief exec Lars Sylvest said he believes that "the increasing hesitation of U.S. hedge funds provides a perfect entry point for single picture financers such as VIP and Brass Hat."

VIP, founded in 2002, has financed more than 50 films budgeted at over $1 billion, including "Monster," "Perfume" and "Lord of War." It is already working together with "Brass Hat" on Marco Kreuzpaintner's sex-trafficking drama "Trade."

KKR, Permira top ProSieben auction

By Scott Roxborough - The Hollywood Reporter

Dec 15, 2006

COLOGNE, Germany -- Private equity companies KKR and Permira have won the auction for Germany's leading commercial broadcaster ProSiebenSat.1, sources near the negotiations said Thursday.

According to several sources, the deal between KKR/Permira and Haim Saban's German Media Partners, which control 50.5% of ProSiebenSat.1, values the German group at up to &euro6 billion ($7.9 billion).

KKR, Permira and ProSiebenSat.1 all declined comment Thursday.

KKR and Permira already control Europe's No. 2 broadcaster, SBS Broadcasting, which they bought last year for &euro1.7 billion. The investment houses are expected to sell SBS to ProSiebenSat.1 and run the merged company from ProSieben's headquarters in Munich.

One source familiar with the situation said it was KKR/Permira's business plan that convinced the ProSieben board to pick their bid. Also in the running were Turkish media conglomerate Dogan Yayin and Goldman Sachs/Apax Partners.

"SBS and ProSieben are a logical fit -- SBS has channels in Scandinavia, Eastern Europe and the Benelux countries, while ProSieben is big in Germany, Europe's largest market," the source said. "Together, the two companies have a lot of growth potential."

SBS operates 19 free-TV and 20 pay TV channels as well as 16 radio networks in 11 European countries. ProSiebenSat.1 has five free-to-air and two pay TV channels in Germany, where its stations have a 30% share of the total German audience and account for 45% of the territory's TV ad revenue.

A merged company will be in position to negotiate rights deals for all of Europe and to offer pan-European advertising packages. It will also benefit from synergies through the co-production of drama and entertainment formats.

A merged ProSiebenSat.1-SBS would go head-to-head with Europe's leading broadcaster, RTL. The Bertelsmann-controlled group has stakes in 34 TV and 34 radio stations in 11 European countries. In Germany, RTL runs or co-owns seven free-TV channels and three digital pay channels.

A source familiar with the situation said KKR/Permira will pay &euro29 ($38.15) a share for German Media Partner's voting shares in ProSiebenSat.1, a deal that values the German broadcaster at about &euro6 billion ($7.9 billion). At that price, ProSiebenSat.1's new owners would shell out &euro3.1 billion-&euro3.2 billion ($4.1 billion-$4.2 billion) for German Media Partner's controlling stake.

Saban and his investors, which include Thomas H. Lee Partners, Bain Capital, Hellman & Friedman, Providence Equity Partners, Quadrangle Group, Putnam Investments and Alpine Equity Partners, hold 88% of the voting shares in ProSiebenSat.1 and 50.5% of the company's total stock.

German Media Partners took control of ProSiebenSat.1 in August 2003, paying &euro7.5 a share, or &euro525 million, for 72% of the company's voting shares and a total 36% capital stake.

The group later increased its stake to the current 50.5%. German Media Partners' total investment has been estimated at about &euro900 million ($1.18 billion).

Under German law, KKR/Permira also will have to make a buyout offer to minority shareholders of ProSiebenSat.1. The asking price, however, will be lower than the price tag for Saban's stake.

The law requires an offer equivalent to ProSiebenSat.1's average share price over the past three months. That would come in at around &euro22.50 ($30) a share, adding an additional &euro2.5 billion ($3.3 billion) to the final price.

ProSiebenSat.1 shares were down almost half a% to &euro23.56 ($31.1) in late afternoon trading Thursday.

It is still unclear what German publishing giant Axel Springer Verlag, which holds 12% of ProSiebenSat.1, will do with its stake.

Springer initially had plans to acquire all of ProSiebenSat.1, and had agreed on a &euro4.2 billion ($5.53 billion) deal with Saban and partners, but the deal was dropped in January amid regulatory problems. In the latest round of bidding, Springer indirectly backed Turkey's Dogan Yayin Holding. The German publisher has a 25% stake in Dogan's Turkish television subsidiary Dogan TV.

A Springer spokeswoman on Thursday said the company was keeping "all our options open" for its ProSiebenSat.1 stake.

A KKR/Permira deal also will have to be approved by German and EU regulators.

On the German side opposition seems unlikely. KKR and Permira have no significant media assets in the territory.

The BLM, Bavaria's state broadcasting authority, and the first gatekeeper in the regulatory process, on Thursday welcomed a KKR/Permira deal.

"It would be a very good solution for ProSiebenSat.1," said BLM president Wolf-Dieter Ring. "It would strengthen the company and make it more international."

If confirmed, the deal would also need to past muster with the European Commission, the European Union's antitrust authority.

"When the Commission receives the formal notification from the companies, it will look at whether the new venture will represent a dominant position in Europe's broadcasting market," said EC spokesman Jonathan Todd.

Leo Cendrowicz in Brussels contributed to this report.