Northern & Shell buys Five for $160 mil

RTL unloads broadcaster for a loss

COLOGNE, Germany -- European broadcast giant RTL Group has sold troubled Brit broadcaster Five Group for 125 million Euros ($160 million) to Northern & Shell, the publishing group owned by local mogul Richard Desmond.

Desmond, who also owns Britain's Express Newspapers, hammered out an agreement with RTL boss Gerhard Zeiler earlier today. The price tag for Five is just slightly more than the £100 million ($154 million) most insiders had expected him to pay.

But it is still a hefty discount on the £247.6 million ($430 million) RTL paid for 35.4% of Five just five years ago. At the time, RTL hoped to make Britain's smallest free-to-air channel competitive with ITV, Channel 4 and the BBC. The British TV ad market has since collapsed and digital channels have fragmented the viewing audience. While Five had a 6.6% share of the overall British audience in 2004, it now stands below 5%.

Given the state of the British TV business, RTL probably got the best deal it could. Desmond's bid was reportedly more than double the nearest competing offer. Gerhard Zeiler acknowledged that a bounce back in advertising in the first half of this year helped boost the asking price for Five.

"We saw a window of opportunity to realize a transaction based on a fair evaluation of Five," he said in a statement announcing the deal. "The disposal is in line with RTL Group's strategy of being number one or two in each of our markets."

Five is nowhere near the top two spots in the British business and is unlikely to get there soon. Desmond hasn't yet laid out a new game plan for Five but the mogul, whose worth is estimated at around $1.5 billion, has indicated he wants to invest in TV content and bolster Five's programming slate with more entertainment offerings. Some have suggested Desmond may tap the celebrity news expertise of Northern & Shell's celebrity title OK! and turn Five into a Brit version of E! Entertainment.

That would take time. Five's current license, which runs through 2014, requires it to air a set proportion of news and current affairs programs every year. Desmond has reassured Brit media regulator Ofcom that he will hold to those commitments.

U.K. regulators are unlikely to block the deal, since even with Five, Desmond's overall share of the British media market will still be relatively small. But the mogul is a controversial figure in Britain. He made much of his money in porn -- first with adult magazines and now with erotic pay-TV channels. Critics fear he could turn Five into tabloid TV. Not that the channel is all that high minded now. It's schedule is dominated by reality shows, Australian soaps and the "CSI" crime franchise.
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