Mediaset, private equity firms eyeing ProSiebenSat 1

BERLIN — The prospect of Italian media mogul Silvio Berlusconi taking over Germany’s biggest commercial broadcasting group, ProSiebenSat 1, is sparking calls for antitrust reform.

Rankled Teutonic industryites and politicos are finding it hard to swallow a Berlusconi bid — after regulators barred one of their own, Berlin publishing giant Axel Springer, from acquiring the group in January.

The board of Berlusconi-controlled Mediaset agreed last week to a non-binding bid for the 50.5% controlling share in ProSiebenSat 1 held by German Media Partners, a private equity consortium led by Haim Saban.

Also said to be eyeing ProSiebenSat 1, valued at e5 billion ($6.4 billion), are private equity firms Apax Partners, Blackstone, Kohlberg Kravis Roberts, Texas Pacific Group and Permira.

German regulators nixed Springer’s bid, arguing that the combination of ProSiebenSat 1′s four terrestrial webs — Sat.1, ProSieben, Kabel 1 and N24 — and Springer’s leading tabloid Bild would give the publisher undue media influence and stifle ad market competition.

For Mediaset, however, the acquisition could be a walk in the park. The Milan-based company won’t face antitrust restrictions in Germany even though it owns Italy’s three biggest commercial broadcasters.

Wolfgang Boernsen and Reinhard Grindel, Bundestag media experts and members of Chancellor Angela Merkel’s Christian Democratic Union, say they are watching Mediaset’s bid with concern.

They have called for a re-evaluation of the law that allows foreign companies to acquire German TV broadcasters and publishing companies relatively easily while barring large German media groups from doing the same.

“German cartel law must be in accordance with European Union cartel law guidelines to safeguard the quality of television programming,” say Boernsen and Grindel. “Basically, we want to see television channels managed from Berlin, Cologne, Munich or Hamburg, rather than from Milan, London or Los Angeles.”

For many, it’s not just frustration with the law. Loathing and distrust of Berlusconi runs deep among German officials and industry reps.

Manfred Helmes, head of the state media regulator in Rhineland-Palatinate, goes so far as to compare Berlusconi with German nationalist media mogul and politician Alfred Hugenberg, who used his vast media empire, including the UFA film company and nationwide newspaper operations, to pave the way for Adolf Hitler’s ascension to power. He later became economics minister for the Third Reich.

“When you talk about a Hugenberg, it applies to Berlusconi,” Helmes says. “Berlusconi has already proven in Italy that he misuses his media to retain power. I see it as a catastrophic development. I find it appalling that Springer was barred from becoming a majority shareholder and we might now have to swallow Berlusconi.”

It’s not the first time Berlusconi has eyed ProSiebenSat 1.

Mediaset was a minority shareholder in ProSiebenSat 1′s former parent Kirch Media before it went bankrupt in 2002.

Mediaset considered a bid for the broadcaster following Kirch Media’s demise but faced loud opposition from German pols dead-set against the then Italian prime minister expanding his power onto Germany’s airwaves.

While a Mediaset takeover of ProSiebenSat 1 is by no means a given, the conglom has been hit by a double whammy in its home market that is forcing it to look beyond its borders for expansion.

Italy’s Romano Prodi-led government wants to break up the dominance of Mediaset and pubcaster RAI by opening up the digital and terrestrial market to more competition.

At the same time, an advertising slump has forced the company to shave full-year net profit forecasts by 9% to $704 million. The company is hesitant to say whether the ad market will pick up next year.

With such uncertainty in the domestic market, a bid for ProSiebenSat 1 seems increasingly likely.

Mediaset chief financial officer Marco Giordani cautions that a deal would hinge on finding operational synergies.

“This is the challenge,” he says, adding, “clearly, when a train passes you have to look at it.”

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