Permira preps for ProSieben bid

Selling stake in Premiere; Mediaset eyes other acquisitions in Europe

European industry watchers continued to debate the fallout from an initial round of bids for Germany broadcaster ProSiebenSat.1 going into the weekend.

Private-equity group Permira said Friday that it is selling its 8.4% stake in German pay TV company Premiere in a move analysts are linking to its interest in ProSieben. Sources familiar with the situation said Permira submitted a nonbinding bid for the group last week.

In the meantime, after its rejection in its bid to take control of German broadcaster ProSiebenSat.1, Italy's Mediaset on Friday defended its bid and indicated that it will continue to look for possible acquisition targets elsewhere in Europe.

Permira, with private-equity group KKR, already controls pan-European broadcaster SBS Broadcasting. A ProSieben takeover by Permira, which controls five free-to-air channels in Germany, would create Europe's second-largest TV group, behind Bertelsmann- controlled RTL Group.

But Permira isn't the only potential suitor. ProSieben's owners, led by Haim Saban and also including several private-equity groups, reportedly have received about 10 nonbinding bids, with formal negotiations expected to begin within days.

With Mediaset eliminated from the process, ProSieben's owners now are most likely to sell to other private-equity players.

Permira announced it was selling its Premiere stake — all 6.9 million shares — to institutional investors. Permira controls the stake through a holding company with German banks HVB, BayernLB and BAWAG.

Dealers in Frankfurt said Friday that the shares were being sold at €12.70 ($16.30) each, valuing the stake at €87.9 million ($112.3 million). Premiere shares have been steadily climbing during the past three months.

Permira's sale capitalizes on a recent upsurge in Premiere's stock, which has gained 44% in the past three months. But shares of the pay TV group are worth less than half of what they were a year ago, when the company was trading at more than €25.

Saban has been trying to sell the broadcaster for more than a year. A deal with publishing giant Axel Springer fell through in January after media regulators threatened to block it. To avoid a similar regulatory conflict this time, sources close to Saban said the mogul is courting investors with few German media assets, and Permira's sale of its Premiere stake was therefore seen as strengthening its position.

Permira declined comment Friday. A Premiere spokesman said "it is a perfectly normal step" for a private-equity company to sell its shares.

Speculation about a possible link between Mediaset, Italy's largest private broadcaster, and ProSiebenSat.1 swirled for several days before shareholders rejected the bid because of political concerns tied to former Italian Prime Minister Silvio Berlusconi, Mediaset's largest shareholder and a polarizing figure in Germany.

"The problem is that Berlusconi links political power with media power," Germany's Social Democratic Party leader Kurt Beck was quoted in the Italian press as saying after Mediaset confirmed that its bid had been rejected. "That is already problematic in Italy, but it would not work at all in Germany."

On Friday, Mediaset issued a statement that defended its bid as one that was "professional, serious and well-balanced" and that would have "created value for shareholders on all sides."

The company acknowledged that it was ProSieben's right to reject the bid and said that in doing so it proved that the company was not evaluating its options based on business, as Mediaset did, but rather on political concerns.

"If that is true, we would not in any case be interested in becoming part of the company," Mediaset said.

Analysts said Mediaset would have to look elsewhere for expansion opportunities. "The ProSiebenSat.1 bid was problematic from the start, but investors were still hoping (Mediaset) would enter the German market to offset limited growth prospects in Italy," said Giacomo Listi, a media analyst with ABS Securities. "The company is still going to have to look to expand outside of Italy somewhere. But the problem is that there are not many realistic opportunities available."

In its statement, cash-rich Mediaset also acknowledged as much.

Meanwhile, UBS analyst Daniel Kerven on Friday maintained his "buy 2" rating on ProSieben shares but removed them from a list of key sector picks.

Scott Roxborough reported from Cologne, Germany. Eric J. Lyman reported from Rome. Georg Szalai in New York contributed to this report.
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