[A-List] Germany: Kirch crisis

["Keaney Michael" <Michael.Keaney@xxxxxx>]

Axel Springer offered stake in KirchMedia
By Bertrand Benoit in Frankfurt
Financial Times: March 28 2002

Investors in KirchMedia, the rights and free-TV business of debt-laden
Kirch Gruppe, have offered Axel Springer, the publisher, a stake in the
business as part of a rescue plan that would wrest control from Leo
Kirch, the group's founder.

The publisher of the popular Bild daily is considering the proposal that
would see it swap part of a E767m ($675m) cash claim against KirchMedia
for a minority stake in the unit.

KirchMedia's creditors and shareholders will meet in Munich on Thursday
to hammer out the details of their plan to save the unit from
liquidation and take it over from Mr Kirch - including an E800m capital
increase and a E200m short-term loan.

The shareholders, including Rupert Murdoch's News Corporation, Italian
Prime Minister Silvio Berlusconi's Mediaset, Lehman Brothers, and Prince
Alwaleed's Kingdom Holdings, think Axel Springer's involvement would
assuage political concern about foreign investors taking over
KirchMedia.

KirchMedia owns 52 per cent of ProSiebenSAT.1, Germany's largest
television broadcaster.

Should Axel Springer get on board, the shareholders could claim that
German investors, including retailer Rewe, Mr Kirch, who would retain a
small stake, and the banks, would hold the largest block of shares.

Wolfgang Clement, Social Democrat prime minister of the state of North
Rhine-Westphalia, said on Wednesday the prospect of Mr Berlusconi
getting a big stake in ProSiebenSAT.1 was "monstrous".

A deal would also remove one of the most threatening liabilities facing
KirchMedia. In January, Axel Springer exercised a E767m option forcing
the unit to buy its 11 per cent stake in ProSiebenSAT.1.

The investors have finalised a draft memorandum of understanding
describing the KirchMedia rescue. Barring opposition from Kirch's
creditor banks, which were reviewing the memorandum, the document will
form the basis of Thursday's talks.

Without a signature, KirchMedia would be forced to start insolvency
proceedings soon.

The memorandum does not outline the exact stake each shareholder would
own in KirchMedia but says the capital increase would give the current
minority shareholders a majority. Mr Kirch now holds 72.6 per cent of
the unit.

The memorandum would provide a commitment by the investors and the banks
to subscribe to the capital increase within about eight weeks, while the
banks would provide the bridge financing.

It would be conditional on KirchMedia renegotiating long-term film deals
with US studios signed on behalf of Premiere, Kirch's loss-making pay-TV
business.

KirchMedia, which overpaid for the rights in the 1990s, faces about E3bn
in commitments to the studios up to 2008.

Mediaset, the TV group, this week said it had written E172m off its 2.3
per stake in KirchMedia, equivalent to nearly 90 per cent of its initial
investment. This suggests it now values the unit at no more than E850m.

Full article at:
http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3O27GQBZC&live=true&useoverridetemplate=ZZZ3XDHE90C&tagid=ZZZA31PK20C

Michael Keaney
Mercuria Business School
Martinlaaksontie 36
01620 Vantaa
Finland

michael.keaney@xxxxxx