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.
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.
