Saban faces setback in Kirch takeover

Deal includes programming library, licensing

BERLIN — Haim Saban’s takeover of Germany’s largest commercial broadcaster has hit a snag after the creditor banks of bankrupt TV giant Kirch Media rejected changes to the initial business plan.

In a letter obtained by Reuters to Saban’s chief operating officer Adam Chesnoff dated April 15, the banks said they would not accept a new business plan that changed lending terms presented to them last week.

Saban became the first Hollywood player to enter Germany’s TV market on a grand scale last month when he agreed to buy Kirch Media’s majority stake in multichannel broadcaster ProSiebenSat 1 and its programming library and licensing business.

The deal is still subject to confirmation, and bank sources said they were “perplexed” by what they described as Saban’s attempts to change the terms.

“The most recently presented business plan (April 11) has substantial disadvantages for the banks’ position in comparison with the originally presented business plan,” DZ Bank said in the two-page letter.

Kirch’s creditors also include Commerzbank, state-owned Bayern LB and HypoVereinsbank, which had backed rival bidder Heinrich Bauer.

“The deterioration of lending terms is not at all acceptable to the banks involved,” the letter said. Loan payments scheduled for 2004 and 2005 had been reduced and the maturity extended, the letter said.

The banks insisted that further negotiations must be based on the business plan drafted last month as well as recent documentation drafted by the banks earlier this month.

Sources close to Saban played down the letter.

“These are just regular negotiations, nothing dramatic,” one source said. “We are going to continue the talks next week, right after the Easter holidays, and will conclude them soon.”

Speculation has risen that Saban may have been too quick to outbid Bauer and HypoVereinsbank, which were set to takeover Kirch Media before Saban made a better offer.

Additional costs to the purchase price may have to include an offer to buy out ProSiebenSat 1 shareholders; such an offer could run as high as $432 million. A hefty capital infusion into ProSiebenSat 1 and the library business and a purchase of a remaining 16.5% stake in the broadcasting group still held by Kirch Media could also raise the final tally.

Saban is reportedly set to pay about $1.2 billion for both ProSiebenSat 1 and the film library, which still has some $760 million debt attached to it.

But a source close to Saban told Daily Variety the billionaire producer has “financing lined up, and he’s in negotiations with possible investors who are prepared to join his consortium.”

Fedele Confalonieri, chairman of Italian Prime Minister and media mogul Silvio Berlusconi’s Mediaset, confirmed Wednesday that the company was in talks with Saban about his plans to buy the Kirch assets but provided no details on what role Mediaset might take in the deal.

Mediaset finance chief Marco Giordano described an offer from Saban for a minority stake in ProSiebenSat 1 as far away from Mediaset’s own notion “regarding the price and other aspects.”

“Saban is putting together a group of investors. Things are fluid, people are talking, making proposals and counterproposals,” Confalonieri said at a shareholders meeting. “We are in talks with Saban.”

Mediaset expressed interest in buying ProSiebenSat 1 last year but faced strong opposition from Germany’s government due to Berlusconi’s political office and his near-monopoly of Italian media.

Saban had been looking to partner with French TV group TF1, but that company is likely to take a smaller stake than originally anticipated — now said to be around $150 million.

Bauer is still interested in the Kirch assets.

(Reuters contributed to this report.)

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