Kirch makes own Highlights real

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COLOGNE, Germany -- Octogenarian media mogul Leo Kirch has made a key play in his long-term game plan to merge German rights group EM.Sport Media and Swiss-based Highlight into a European sports licensing production and broadcasting giant.

On Monday, Kirch's KF15 sold another 11.3% of Highlight to EM.Sport, boosting the company's stake in the Swiss group to 37.6%. In exchange, EM.Sport will pay Kirch 34.9 million euros ($55 million) in cash plus 4.3 million in company shares, boosting Kirch's share of EM.Sport to 17.1%.

Today's agreement makes Kirch EM.Sport's largest single shareholder and, pending regulatory approval, clears the way for the Bavarian dealmaker to push for a de facto merger between the EM.Sport and Highlight.

While EM.Sport is officially buying up Highlight, it is Highlight's Kirch-loyal executives who are calling the shots. Bernhard Burgener will keep his job as Highlight CEO while adding the title of chief executive of EM.Sport Media.

Current EM.Sport head Werner Klatten will jump to the company's supervisory board, taking up the post of deputy chairman and will take on Burgener's duties as Highlight board chairman.

Highlight chief financial officer Antonio Arrigoni will join Burgener, taking up the CFO position at EM.Sport. Rainer Huther, currently head of sport operations, has been named deputy CEO at the German group.

It is unclear what Monday's deal will mean for Highlight's chief non-sports asset: its majority stake in leading German indie producer/distributor Constantin Film. Several buyers are reportedly circling Constantin but no deal has yet emerged.

The EM.Sport/Highlight shares and executive shuffling is playing out against the backdrop of Kirch's 3 billion euros ($4.7 billion) deal, signed last year, to market the rights to Germany's top Bundesliga soccer through 2015. EM.Sport, which controls German sports channel DSF and leading sports event production company Plazamedia, is a logical partner for Kirch as he moves to produce and package Bundesliga coverage and sell it off to German broadcasters.

But Premiere, the pay TV group currently airing Bundesliga matches, has called foul. Premiere wants to produce its own soccer coverage, instead of having to take a pre-packaged show from Kirch. Premiere, which is 20% controlled by Rupert Murdoch's News Corp., has filed a complaint with Germany's cartel office trying to block the move, which it considers anti-competitive.

Shares in EM.Sport plunged more than 5% to 2.68 euros ($4.23) on news of the deal. Highlight stock soared more than 14% to 7.25 euros ($11.54).

EM.Sport shares weren't helped by its year-end results, also published Monday, which showed a 41.2 million euros ($65.1 million) loss for the group, due to the devaluation of its kids-entertainment division EM.Entertainment. EM.Sport has been trying to sell off its kids unit, which includes pay TV brand Junior TV and a massive library of aging cartoon titles, but has so far been unable to find a buyer. EM.Entertainment posted a 50.8 million euros ($80.2 million) loss in 2007.

Stripping out that effect, EM.Sport booked a 9.1 million euros ($14.4 million) profit last year, against 9.7 million euros in 2006. Revenue was up slightly to 230.7 million euros ($364.4 million) from 222 million euros.
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