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Endemol Shine Sale Options Narrow With ITV Withdrawal, Industry Shifts

Kaitlyn Herman getting ready to play
Sonja Flemming

CANNES The uncertain fate of Endemol Shine Group was a hot topic at the Mipcom international TV sales conference this week, with insiders telling of jitters behind closed doors at the company even as its distribution team continued to make deals in Cannes.

Mipcom brought together many of the players who had been expected to be in the hunt for the production-distribution giant. But the timing of the sale and the recent track record of companies that have rolled up numerous unscripted production banners has put a chill on the auction. Banijay Group appears to be the primary suitor for the company that’s home to “Big Brother” and a wide range of TV formats and other IP.

It’s thought that Endemol Shine a joint venture of 21st Century Fox and Apollo Global Management had hoped to fetch upwards of $2 billion. But industry sources predicted the sale price would come in below that threshold in the neighborhood of $1.6 billion to $1.8 billion.

Representatives for Endemol Shine and Banijay declined to comment. In Cannes, one senior Endemol exec sought to combat the bad buzz around the sale by asserting that “not many assets like this come up.” The company’s sales team was out in force at Mipcom, announcing deals that included two big China agreements. But insiders said staff members, many of them survivors of the merger of Endemol and Shine, are nervously waiting to see where the cards fall.

ITV, Britain’s biggest commercial broadcaster, dealt the sale process a blow earlier this month when it formally took itself out of the running. ITV had been on a spree of acquiring unscripted production banners during the previous five years as it sought to build up its content side. Under Carolyn McCall, who became CEO in January, the broadcaster is taking a more cautious approach.

“Strategically it made sense, and our shareholders would have expected us to look at it,” McCall told Variety earlier this week. “It would be ridiculous not to look at an adjacency that was that close to us.”

But financial discipline is the order of the day for McCall. “We want to keep a strong balance sheet and to keep an investment grade rating,” she said. “Not putting in a bid for Endemol shows how rational we are about any potential acquisition. If we weren’t rational, you could justify it in a hundred different ways.”

ITV’s share price jumped after it told the London Stock Exchange that it was not pursuing a deal.

With ITV out of the picture, Banijay appears to be the front-runner. The Paris-based production conglomerate made a point of celebrating its 10th birthday this week in Cannes. Banijay CEO Marco Bassetti, a former Endemol executive, would not be drawn on the chances of it entering its second decade with Endemol Shine in the fold. But at a celebration dinner in the hills of Cannes, he was clear in his belief in the value of scale and how it is increasingly necessary in order to retain rights. Banijay’s backers share his vision, he said, and have both the appetite and muscle to get deals done.

It is already the largest independently owned producer-distributor in the market, and has absorbed Zodiak in a major deal that closed in 2016. The privately held group has an estimated revenue of about $1.1 billion.

Besides ITV, RTL-owned Fremantle has made it official that it is not in the running to acquire Endemol Shine. Reports last week suggested that German media giant ProSieben.Sat.1 might join Banijay to make a play, likely through its Red Arrow content division. But Variety has confirmed that the German giant is not involved in the sale.

All3Media and its backers, Liberty Global and Discovery Communications, were also considered potential bidders, as were Lionsgate, Sony Pictures Television and Endeavor Content. But there seems to be hesitation among the usual U.S. suspects at a time of great transition for the industry. The recent track record of All3Media of selling shows in the U.S. has been mixed, making it hard to justify a high acquisition price. ITV is facing the same uphill battle in the U.S. as the largest platforms seek ownership and control of all rights, which makes it hard for the likes of ITV Studios and All3Media to turn a significant profit.

Endemol’s own history of acquisitions has also cast some doubt on whether there’s much untapped potential left in the company founded by famed producer and “Big Brother” creator John de Mol. Endemol was scooped up in 2000 by Spain’s Telefonica for more than $6 billion.

Italy’s Mediaset led a buyout of Telefonica’s interest in Endemol in 2007. By 2012, Endemol was struggling under a crushing debt load. One of its lenders, Apollo Global Management, began buying up that debt and eventually turned it into equity. In 2014, Endemol merged with 21st Century Fox’s Shine Group.

Endemol Shine was initially tabbed to be part of Disney’s $71.3 billion acquisition of assets from 21st Century Fox. But the fact that it is a joint venture with Apollo made it a lower priority and less attractive to Disney, which is focused on its high-wattage content brands as it prepares to enter the global streaming fray next year.

(Pictured: The U.S. edition of “Big Brother”)