ProSieben closes in on SBS

$4.7 billion merger nears completion

BERLIN – ProSiebenSat 1 and Luxembourg-based pan-European broadcaster SBS are well on their way to a full merger, although the planned union is said to be causing discontent at the German TV group.

ProSiebenSat 1 and SBS are both majority-owned by private equity firms KKR and Permira, which are looking to create a powerful German-based pan-European broadcasting group to rival Bertelsmann-owned RTL Group.

ProSiebenSat 1 is set to take over SBS for some E3.5 billion ($4.7 billion) and is close to completing due diligence, according to German weekly Euro am Sonntag.

The report states that up to 120 employees will be laid off, most of them at ProSiebenSat 1’s Berlin-based channel Sat 1. ProSiebenSat 1 and its other four channels are based in Munich. The group has some 3,000 employees in both cities.

A spokeswoman for ProSiebenSat 1 declined to comment. Sat 1, which showcases primarily German-produced fare, has suffered a string of flops in recent months that has resulted in an overall drop in market share and sinking ad revenue.

ProSiebenSat 1’s management is reportedly disturbed by the planned personnel cuts after overseeing major cost-cutting measures initiated in recent years.

The German broadcaster is to finance the takeover of SBS through credit. Details of the merger are expected to be released this month.

SBS, which owns channels in the Netherlands, Scandinavia and Eastern Europe, posted gross earnings of $271 million last year on revenue of $1.3 billion. Permira and KKR bought the broadcaster in 2005 for $2.5 billion. This year they paid $4 billion for ProSiebenSat 1, which posted 2006 net profits of $316 million on sales of $2.7 billion.

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