Time Warner, Dentsu Back British TV Fund

Media giants Time Warner and Dentsu will be the main backers of a £ 6 million to 8 million ($11.5 million to $15.2 million) fund that will invest in London-based tv production companies.

Fund, to be known as the London Television Growth Fund, is the brainchild of the Greater London Enterprise Development Capital, a public agency devoted to kick-starting new business in the city.

It is expected that the fund will be operating by Easter. GLEDC is waiting for Dentsu to complete arrangements with it own partners in Japan. Once Dentsu is in the bag, two or three hesitant investors are expected to commit, bringing the total number of investors to five or six. Newspaper group East Midlands Allied Press and merchant bank Guinness Mahon have been mentioned as possible investors.

Plan is to take minority stakes in well-managed companies that are looking to expand. Five companies have been targeted for investment, and GLEDC expects to back 10 to 15 companies altogether. Venture is in the form of a limited partnership that will be wound up after 10 years.

High-risk area

While independent tv production is undoubtedly a growth industry in the U.K., current conditions – cutbacks at Channel 4 and the BBC, the recession and the uncertainty surrounding the auction of ITV franchises – have made it a high-risk area. Of the more than 1,000 indie producers in Britain, only a handful are expected to prosper in the long term.

GLEDC has about £ 7 million ($13.5 million) invested in 20 companies in a range of industries, including a £ 1.15 million, 12% stake in the Palace Group, which has emerged as a major tv producer in the U.K. GLEDC also has put money into the Grade Co., which has produced a series of made-for-tv movies, and it has provided startup capital for a multimedia development and packaging operation, Union Pictures.

GLEDC has raised funds from third-party investors before. In 1987, it put together a £ 3 million ($5.7 million) pool backed by U.K pension fund managers. This time round, however, it failed to raise any initial interest in the U.K.

Low-cost entry

An introduction by accountants Ernst & Young led to Time Warner’s involvement and an approach from Dentsu’s London office led to the still-to-be-completed Japanese deal. For both companies, the fund provides a low-cost entry to U.K. and European television production.

Paramount is already in the market, with a 49% stake in Zenith, while Capital Cities/ABC Video Enterprises has stakes in Hamster (France), Telemunchen (Germany) and Tesauro (Spain).

Other Yank players

Other U.S. players in Europe include NBC Intl., which has a stake in Joop Van den Ende’s company in Holland and has entered into a joint development venture, Tango, with Yorkshire Television.

In addition, Hearst Intl. has 50% of French tv distributor Ellipse and Harmony Gold has a subsid in Luxembourg.

Advantage of the new fund is that it gives the partners a varied portfolio of investments. If any of the chosen companies comes good, partners would have the option to increase their stakes in second-round financing, or buy a larger stake from the fund, which aims to exit once companies gain momentum.

Launch of the fund will be good news for the U.K. production community, which has become accustomed to bad news. Most recent blow was the merger of satellite services BSB and Sky, which reduced the number of satellite tv channels, largely fueled by indie programs, from nine to five.

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