Bidders for Kirch merge

Saban, TF1 may be joining Sony & Commerzbank

With the clock winding down toward a newly imposed Thursday deadline to acquire the assets of Germany’s bankrupt Kirch Media, at least two buying consortia are believed to be huddling to combine forces.

Producer Haim Saban and French TV group TF1 are believed to be negotiating a combined effort with fellow bidding consortium of Sony and Commerzbank.

Among the three consortia that made non-binding offers for Kirch Media this summer, Saban and TF1 had tentatively lodged the highest at $2.5 billion, while Sony/Commerzbank reportedly bid an initial $2.2 billion. Some sources say the final price may be less than that given diminishing rights value of the Kirch library. Kirch vastly overpaid for program distribution deals over the past five to 10 years that seriously inflated the value of the rights library now on the block. Bidders now trying to assign a fair market value for the assets are putting their main focus on Kirch’s 52% stake in broadcaster ProSiebenSat.1.

Saban declined to comment on his bid.

Other known Kirch Media bidders that could join the combined bid include former Kirch Media shareholders Lehman Brothers, retail giant Rewe and Saudi Prince Al Waleed bin Talal. A joint effort is expected to be filed Thursday. Meanwhile, a venture capital-backed management buyout effort is believed to be in the works at ProSieben, which likely will constitute the bulk of the value in the Kirch Media offers.

Bidding detente

The bidding detente between the consortia likely came about over the past week, when it emerged TF1 will significantly pare back its involvement in a Kirch acquisition to appease shareholders.

TF1 investors are loath to see the French broadcast group overextend itself in Germany and had punished the company’s stock accordingly. Management heeded concerns late last week and said it would restrict its total financial commitment in any bid to a mere €450 million ($440.6 million) through a combination of equity and borrowings. This is down from an earlier promise to Saban of $1.17 billion.

At most, this new funding level would give TF1 barely 20% in Kirch Media, necessitating additional financial partners for the Saban-TF1 team. Sources say Saban does not have the ability on his own to raise the $2 billion, though a bidding group could easily debt-finance at least 60% of the funds needed on the value of broadcaster ProSiebenSat1 alone.

TF1 is known to be interested primarily in ProSieben and less so in the other assets. Sources have indicated that a combined bidding effort by Commerzbank, Sony, Saban and TF1 could easily divide up the pieces of the Kirch media pie according to their interests, though TF1’s role in any effort would now appear to be minimal.

Still, the German free TV market will be no picnic for the winning consortium. German TV ad spending is forecast to be down 6.1% for 2002, according to the latest forecasts from ad buyer Zenith Optimedia, and that includes a boost from World Cup advertising.

Accepting bids for assets

Although Kirch execs maintain they are seeking to sell the company as a whole unit, they are also accepting bids for individual assets, like ProSiebenSat.1 or sports web DSF.

U.S. billionaire Philip Anschutz’s name is the most recent to be bandied around as an interested buyer in the Kirch Media insolvency sale. The movie theater maven Anschutz is said to be aligning with Munich kidvidder EM.TV for a joint bid on Kirch Media’s sports weblet DSF, according to German newspaper Welt am Sonntag.

Far from the bidding war that Kirch creditors had hoped for, the lackluster German media market and a rights business entwined in legal disputes with its Hollywood suppliers has kept big-budget interest at bay.

Much of the muted interest problem has come down to difficulties putting a true value on Kirch’s highly encumbered and legally disputed film and TV library. The problem with the rights assets — most of which are in the form of long-term supply deals with major studios — is that they are worth only a fraction of the value originally assigned to them during the German rights boom days. Kirch’s bankruptcy rendered a number of contracts with Hollywood studios null and void, further complicating the current sale. Once valued at several billion dollars, the value of library’s intact library has plummeted to only several hundred million, says one source.

At the same time, the highly political nature of the German banks intertwined with the sale and ownership of Kirch and the large egos and turf wars between the various local media firms has made this anything but a buyer’s market.

Personal differences seen

For example, sources say personal differences between the Kirch family and Herbert Kloiber’s Tele Munchen made it virtually impossible for the latter to make an offer. More recently, German publishing group WAZ appears to have backed out of a deal with former company topper Leo Kirch to purchase his 40% stake in fellow publisher Axel Springer.

Conflicting opinions among WAZ shareholders, aggressive opposition from Springer and Kirch’s reported asking price of $1 billion appear to have led to the decision.

The news comes in the wake of a court ruling last week prohibiting Kirch from selling the stake without Springer’s explicit approval. Kirch has filed an appeal and a Munich court is expected to hand down a final decision on Thursday.

Swiss publisher Ringier now looks to be the front-runner to buy the stake. Kirch has until Sept. 10 to sell it or it goes to Deutsche Bank, which collateralized it against a $725 million loan.

Although Kirch had also been in talks with Ringier, the publisher may simply wait and pick up the stake from the bank at a cheaper price.

Such a deal would be a setback for Kirch, who was set to make a few hundred million dollars from the sale.

(For the latest on the Kirch collapse, visit

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