Kirch sans Murdoch

Mediaset, Kingdom more likely partners

LONDON — Rupert Murdoch is “increasingly unlikely” to be involved as a partner alongside Mediaset and Saudi prince al Waleed ben Talal in the restructuring of the Kirch Group, according to a senior Kirch exec.

In an interview Wednesday with Germany’s Suddeutsche Zeitung, Dieter Hahn, managing director of the Kirch Group, said, “talks between Kirch and Mediaset should be concluded by the end of this year. But the participation of Rupert Murdoch seems increasingly unlikely, given his resistance to being relegated to a secondary role in the partnership.”

Under the deal, Kirch would roll his German TV stations and his library into a new holding company, dubbed Taurus, excluding only his pay-TV platform Df1 and his stake in publishing giant Axel Springer.

Mediaset, al Waleed’s Kingdom Holdings and Murdoch’s British Sky Broadcasting would together pay around $2 billion for a 20-25 percent stake in the venture, which would then go public in a stock offering.

Response expected

Murdoch had asked Kirch for financial details of the new company, to enable BSkyB to make a decision about the investment, and Kirch is expected to respond in the next week, said people familiar with the situation.

Kirch originally approached News Corp. several months ago, proposing the idea of the three-way investment. Under the proposal, Murdoch would put up half of the money, and the other half would be split between al Waleed and Mediaset, which meant Murdoch would likely end up with about 10 percent of Kirch’s company.

But doubts have arisen among the other partners over his enthusiasm for such a deal, given his usual reluctance to make minority investments with no management role. Sources say Murdoch and Kirch have had no discussions on the matter for several weeks, as Murdoch awaits more financial information.

“Whatever happens, this process will lead to the creation of a European major which includes at least Kirch and Mediaset,” Kirch Group chief exec Jan Mojto said at Mediaset’s Monte Carlo confab earlier this week, hinting that Murdoch’s participation is not crucial to the deal.

Four media players

“In Europe only four media groups today are strong enough to be international players and meet the real challenge, which is competition, not survival. They are Mediaset, Kirch, CLT-Ufa and Canal Plus, with a fifth newcomer, Murdoch, trying to get in. It’s up to you to guess who will form an alliance with whom,” Mojto teased.

Hahn was blunter in his press interview about Murdoch’s possible exclusion, commenting, “The agreement with (Mediaset) and al Waleed is unrelated to other possible partners.”

While there are potential synergies between an investment in Kirch Group and News Corp.’s global media businesses, sources said Kirch pitched the deal purely as an investment that could make money for the partners once the new Kirch company went public.

The three partners would put their money in as a loan, and the debt would be converted to equity after Kirch went public. The terms of the deal would be designed to ensure the three partners made a profit at the public offering price.

Steep price

The question is whether Kirch’s terms are acceptable to Murdoch. Sources said the price might be a bit steep for Murdoch but that a decision won’t be made until more financial information is available.

Whether Murdoch would be satisfied with a passive investment is not clear, however, but no one who knows Murdoch disputes Hahn’s contention that the media mogul does not like to take the passive role in any venture.

(Martin Peers in New York contributed to this report.)

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