EM.Sport, Highlight merger nears

Kirch engineers stock exchange

BERLIN — Media mogul Leo Kirch moved a step closer to creating a European sports licensing, production and broadcasting giant on Monday after selling a further stake in Swiss media group Highlight Communications to his Munich-based licensing company EM.Sport Media.

EM.Sport obtained an 11.3% stake in Highlight from Kirch’s firm KF15, boosting its overall share in the group to 37.6%. In exchange, Kirch received E34.9 million ($55.2 million) in cash and 4.3 million company shares, leaving him with a 17.1% stake in EM.Sport.

EM.Sport picked up a 26.3% stake in Highlight from Kirch last year in a similar cash-and-stock deal that included an option for a further increase and left Kirch with 11.6% in EM.Sport.

The latest deal, which remains subject to approval by German and Austrian antitrust watchdogs as well as German media regulators, leaves Kirch EM.Sport’s biggest single shareholder by far and clears the way for a “unification” of Highlight and EM.Sport.

While EM.Sport is taking over Highlight on paper, it’s Highlight’s top brass that will be running the show as they take the helm at EM.Sport.

As part of the companies’ fusion, Bernhard Burgener, Highlight’s CEO and chairman of the board, will replace EM.Sport’s chief exec Werner Klatten in September. Burgener will remain Highlight CEO, but Klatten will take Burgener’s post of chairman at Highlight as well as that of deputy chairman on EM.Sport’s supervisory board.

EM.Sport said the moves would “intensify and accelerate the unification of the two companies” and “guarantee a unified and efficient management structure for the purposes of bringing together the two media houses.”

Alongside Burgener, EM.Sport’s management board will include Rainer Huether as deputy CEO and Antonio Arrigoni, who takes over as chief financial officer, a post he held at Highlight.

“Step by step, we are approaching a strategically wise objective,” said Burgener. “Sports and entertainment are two significant growth sectors of the media industry, and we are systematically pursuing their expansion with the intensified unification of this corporate group. We have now made further significant progress toward reaching this objective.”

With Kirch in control of national soccer rights, EM.Sport is likely to play a major role in the coverage of top league Bundesliga matches beginning in 2009.

Kirch is looking to produce and license ready-to-air Bundesliga coverage, for which EM.Sport’s sports production division Plazamedia would be the logical choice. The unit has long produced Bundesliga coverage for pay TV platform Premiere.

The plan has met with opposition from Premiere, however. Premiere, which is 20% owned by Rupert Murdoch, the feevee’s single biggest shareholder, has filed a complaint with Germany’s cartel office charging that pre-produced and packaged Bundesliga programming is anti-competitive and violates Premiere’s right to provide independent sports coverage.

EM.Sport shares dropped more than 6% to $4.19 on Monday while Highlight saw its stock jump nearly 9% to $10.90 on news of the deal.

EM.Sport also posted its annual figures, which were seriously dented by a recent devaluation of its EM.Entertainment kidvid unit.

Company posted a loss of $65.1 million for 2007, while overall revenue climbed 4% to $365 million.

EM.Entertainment, which is currently on the block and labeled as “discontinued operations,” posted an $80 million loss.

Net profit from EM.Sport’s core sports operations slipped 6% to $14.4 million.

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