BERLIN — Financially troubled German media giant Kirch was hit by another blow over the weekend as newspaper publisher Axel Springer announced it was preparing a lawsuit against its struggling partner.
Springer is exercising an option to return the 11.5% stake it owns in Kirch’s ProSiebenSat.1 broadcasting group and demanding 770 million euros ($675 million) by the end of April.
Kirch does not recognize the legality of the put option and threatened its own legal action, but the publisher has beaten Kirch to the punch. Springer said Saturday it was preparing a lawsuit it would file if the cash-strapped Kirch didn’t pay up soon.
“In the face of comments from Kirch, we have been forced to prepare a lawsuit and — in the case that the put-demand is not fulfilled in the short term — then it will be filed,” company said in a statement.
Kirch, which owns a 40% stake in Springer, denies that the publisher has a put-option on the ProSiebenSat.1 stake. The Munich-based media giant is facing several credit paybacks and shareholder put options totaling billions that could force it into insolvency.
Kirch is meeting with banks today to present its own painful remedies for its financial woes. Company is expected to announce the sale of further holdings. In addition to its stakes in Springer and Spanish web Telecinco, which are already up for sale, Kirch may be forced to part with its majority share in Formula One motor racing.
Other assets that might go include its money-losing Premiere World pay TV channel, 24-hour news web N24, local broadcasters in Munich and Berlin and technical service provider Plazamedia.
Company wants to cut its debt from $5.7 billion to around $3.5 billion.
In a meeting between Kirch execs and officials of Bavaria’s ruling CSU party last week, company reportedly made it clear that it would find a solution with its creditor banks in the coming weeks, even if it meant selling off cherished assets.
Meanwhile, Dieter Stolte, the outgoing head of German pubcaster ZDF, said Kirch’s crisis could rock the TV establishment by opening the door to foreign players.
Stolte, who steps down next week after leading ZDF for 20 years, said he expects a considerable shift in Germany’s media culture. The Teutonic TV market is dominated by national pubcasters ZDF and ARD and commercial broadcasters owned by Kirch and the RTL Group.
Stolte’s statement came amid reports that U.S. giants Disney, Viacom, AOL Time Warner and News Corp. were eyeing Kirch’s financially sound terrestrial TV broadcasting group ProSiebenSat.1.
“If one of the four participants –Kirch and Bertelsmann Group on one side, ARD and ZDF on the other — breaks away, in this case Kirch, then the structure of this four-pillar system would be in danger,” Stolte said.
Germany’s media market has until enjoyed a cozy status quo among its four major players. Broadcasters have relied on political support to secure cable and satellite rights or, in the case of pubcasters, increases in viewer license fees. In the current election year, the possibility of a foreign player buying into the market is especially disconcerting for politicians.