This article was updated at 8:55 p.m.
Kermit the Frog is heading home.
Germany’s EM.TV said Wednesday it’s selling Kermit and his Muppet kin back to the family of the late Jim Henson, creator of the well-known movie and TV characters.
Definitive agreement comes as a big surprise to most observers and caps a year-plus search by the cash-strapped German company for a Jim Henson Co. buyer. Valued at $89 million, terms call for a cash payment of $78 million by the Henson family plus an $11 million sweep of current cash reserves at the Henson company by EM.TV.
Deal — nailed down at 4 a.m. PDT after a whirlwind five-day period of nonstop negotiations — reps something of a windfall for the Henson heirs, who sold the company to EM.TV three years ago for $680 million and are now set to regain it at a fraction of the price.
That’s partly because character rights from the Sesame Street TV show were sold to producer Sesame Workshop two years ago for $160 million.
Need for money
But bargain terms are also traceable to the need for cash at EM.TV, which has been slowly recovering from a near-death experience in 2001. The group has had to shed or shutter many assets acquired by high-flying former topper Thomas Haffa.
“We’ve been sprinting to get this done,” said Brian Henson, son of the Muppets creator. “When they finally said ‘OK, we have a deal,’ I almost fell apart, it was so emotional.”
Jim Henson died unexpectedly 13 years ago this month. At the time, Disney had been finalizing a deal to acquire his company, and though that 1990 deal collapsed, the Mouse House was expected until recently to agree to terms to buy the company from EM.TV.
Ultimately, Disney was scared off by certain regs governing German bankruptcies, which Mouse attorneys advised posed too great a risk to a U.S. acquirer, should EM.TV go belly up.
Classic Media, a character licensing group, was another bidder for Henson. In fact, the Gotham-based company agreed to broad terms of a Henson acquisition just one week ago, with the Henson family jumping into the picture at that point.
Deal broke up
A group led by former UPN topper Dean Valentine also had a previous tentative deal that imploded prior to a definitive agreement, and a management-led buyout mulled in the earliest stages of the Henson auction never materialized.
Brian Henson said he hopes to retain longtime Henson CEO Charles Rivkin but will not be addressing the matter until after the acquisition is finalized.
Brian Henson, sisters Lisa, Cheryl and Heather, and brother John will all serve on a company board after completion of the acquisition, with Brian and Lisa Henson expected to be the most active in day-to-date affairs.
“The board will be very involved in the management of the company,” Brian Henson said. “It’s too early to comment on what we’re going to do going forward. But generally speaking, we plan on developing major strategic partnerships rather than growing internally.”
Henson declined to say if that would include any projects with the Mouse, a partner on some past film, TV and theme-park projects.
“We think Disney is a terrific company, and when we’ve worked with Disney, it’s been very successful,” he allowed.
Projects in the works
Henson served as chairman of the company until resigning the mostly honorary post a year ago, saying he wanted the flexibility to develop outside projects. Some of those unspecified projects are well-progressed and will likely be rolled into Henson productions, he said.
“I’m going to be a very active producer for the company,” Henson said.
A director of several Muppet movies and TV projects over the years, Henson last helmed the 2001 TV miniseries “Jack and the Beanstalk: The Real Story.” In 2002, he exec-produced the successful NBC telefilm “It’s a Very Merry Muppet Christmas Movie.”
Lisa Henson, a former film exec at Warner Bros. and Sony, serves as prexy of Jim Henson Pictures, the Henson company’s film division.
“We were pleased when we sold the company before (but) it has been a difficult few years,” Lisa Henson said. “So, we’re definitely looking forward not only to be investor but an active participant in the company.”
Current film projects
Henson’s film division has three current movie projects: “Good Boy!”, a live action talking-dog movie to be released through MGM; “Five Children and It,” a family pic based on E. Nesbit’s classic children’s book that’s tagged for independent distribution; and “Mirrormask,” a family fantasy skedded for homevid releasing through financing partner Columbia TriStar.
“We would like the company to be producing more than we are in all areas, not just in feature films,” Henson said.
Current production from the lot’s TV department includes a recently introduced Discover Kids skein “Animal Jam,” featuring a mix of live action and puppets, and a 250-episode order of the half-hour U.K. puppet show “The Hoobs.”
“We’ve been watching from the sidelines for the whole year and a half as they’ve been trying to sell the company and it’s been a process that has been obviously very disappointing to us,” Brian Henson said.
Returning the company to family control should greatly revitalize operations, he said. Based on the historic former Chaplin lot in Hollywood, Henson also has offices and creature shops in Gotham and London.
Endeavor partner Ari Emmanuel was a “very important adviser in helping us put this together so quickly,” Henson said. The agent will continue to serve as a consultant on various Henson projects, he added.
EM.TV topper Werner Klatten said the Henson family offered the most attractive bid for the company.
“With the successful completion of the complex sales process, we have completed major steps in the restructuring of EM.TV,” Klatten said. “The proceeds from this sale will secure the company’s liquidity and significantly increase its business opportunities.”
Among those opportunities is a joint bid with retail giant KarstadtQuelle for Kirch sports channel DSF. But those plans could get shot down by Germany’s newest media mogul, Haim Saban, who has also put in his own bid for the web.
Saban also had figured in earlier Muppet bidding. But the entertainment billionaire shifted his interest to more ambitious media acquisitions in Europe.
The Henson sale, which is subject to shareholder approval, will allow EM.TV to pay back the remaining $14 million of a $270 million credit line due this month to its own lenders. Company said it would have almost no short-term financial obligations outstanding, with long-term debt consisting only of a convertible bond due in 2005.