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De Mol, Berlusconi buy Endemol

Duo pair with Goldman Sachs

John De Mol is back in control at Endemol, the company he founded, but this time he’s teaming with former Italian prime minister Silvio Berlusconi.

Spanish telco giant Telefonica announced Monday that it had sold its 75% stake in the European TV giant to a three-way consortium. Its partners are Mediacinco Cartera, a joint venture of Mediaset and Spanish broadcaster Telecinco; Cyrte Fund II B.V., an investment fund partly owned by De Mol; and GS Capital Partners VI Fund, owned by Goldman Sachs.

Other suitors for Endemol included Stephane Courbit, head of Endemol France, allying with Bernard Arnault, the chairman of French luxury goods group LVMH Moet Hennessy Louis Vuitton, and Italian media and publishing house DeAgostini.

Former Endemol exec Tom Barnicoat, U.S. mogul Haim Saban and U.S. risk capital company T.H. Lee, supported by Apax Partners, also reportedly bid for Endemol.

Deal price, announced by Telefonica as E2.63 billion ($3.6 billion), slightly miffed the market, which knocked down Telefonica shares. Investors were piqued that the total announced price appears to be higher than the E25 per-share-of-Endemol value of the deal claimed by the companies. With 125 million outstanding shares of Endemol, at E25 per share the total value of the deal for 75% of the company should be about E2.34 billion or $3.17 billion. If the sale price really is $3.6 billion, that’s at the high end of analysts’ estimates of Endemol’s total value.

The big question, however, is what De Mol, Berlusconi and partners are buying. The makers of “Big Brother” and “Deal or No Deal,” Endemol posted $8.3 million in losses last year. But 2006 revenues were a strong $1.5 billion.

Franchises such as “Big Brother” and “Deal or No Deal” still have a long life ahead of them. But the library value of middling reality shows is far lower than that of catalog TV fiction.

The De Mol-Berlusconi purchase looks set to spark a stampeding exit of top Endemol management.

Courbit is unlikely to stay with the company. Endemol Spain top execs Toni Cruz and Josep Maria Mainat, who supported Courbit’s bid, are also likely to ankle. The continuity of Endemol’s chief creative officer, Peter Bazalgette, is also open to question.

One Endemol insider said, “This is a backward step. We all know that John De Mol is a bit of a control freak.”

The upside is that the sale ends a period of uncertainty, and Endemol will be owned by people who are committed to the company.

For Mediaset, Endemol offers the chance to diversify into TV production in the face of anticipated TV regs that would cap advertising on two of Mediaset’s Italian TV channels.

But in Spain, broadcaster Telecinco’s joint ownership of Endemol could prompt rival webs to boycott its productions, one TV producer predicted.

De Mol has made a packet through the sale and repurchase of Endemol. He sold the company to Telefonica forE5.5 billion ($7.5 billion) in 2000.

Just where De Mol will want to take Endemol, which helped drive the reality TV revolution, is far from clear.

“My guess is that he will now look toward new kinds of productions to re-energize the company, while allowing its franchises like ‘Big Brother’ to aid cash flow,” said one source.

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