Thumbs up on ProSieben sale

KKR, Permira equity funds get EC green light

BRUSSELS -- Equity fund groups Kohlberg Kravis Roberts and Permira were given the green light by the European Commission on Thursday to take over ProSiebenSat.1, Germany's second-largest television broadcasting group.

The deal, which values the German media conglomerate at €5.6 billion ($7.4 billion), was cleared after the EC concluded that there were no antitrust risks from the takeover. "The commission concluded that the transaction would not significantly impede effective competition," the European Union's executive body said in a statement.

The EC's decision came down on the same day that ProSiebenSat.1 posted record pretax profits of €386.7 million ($506.7 million) in 2006 on income of €2.1 billion ($2.8 billion), the company announced Thursday. That represents increases of 10.3% and 5.8%, respectively, over 2005's results.

The company's performance was slightly below analysts' expectations, according to German media reports. Dow Jones Newswires had predicted a turnover increase of 6.4% for 2006.

The upswing in the German ad market contributed mightily to the bottom line, but the nonbroadcasting activities of multimedia subsidiary SevenOne Intermedia also helped to "speed up the growth of the group" as a whole, according to a statement by CEO Guillaume de Posch.

Permira, based in the British Channel Islands, and New York City-based KKR jointly control the Dutch SBS TV group, which is mainly active in the Nordic countries, the Netherlands and Belgium. Permira also controls All3Media, a U.K. TV production outfit and distributor of TV rights.

Berlin-based ProSiebenSat.1 operates five TV channels in Germany (ProSieben, Sat.1, Kabel 1, N24 and 9Live), mainly financed by advertising. It also controls about 45% of Germany's €3.8 billion ($5 billion) television advertising market. The takeover would allow KKR and Permira to extend their footprint in national TV broadcasters into the German free-TV market.

SBS is already one of Europe's leading broadcasting groups, operating commercial television, premium pay channels, radio stations and related print businesses. The merged entity is expected to compete against the RTL Group, part of the Bertelsmann media empire.

The EC investigation showed there were no horizontal overlaps between ProSiebenSat.1 and SBS. Nor were there concerns about the vertical relationship between All3Media and ProSiebenSat.1 for the supply of TV content, since there is a negligible volume of sales in Germany.

KKR and Permira have said they would pay €28.7 ($37.7) per common share and €22.4 ($29.4) per preference share to buy a 50.5% stake from a group led by U.S. media mogul Haim Saban. They will pay German Media Partners €3.1 billion ($4 billion) cash for the stake, and have launched a share offer to acquire the rest of the publicly traded shares.

ProSiebenSat.1 CEO de Posch said at a press conference in Munich that his company planned to take over KKR and Permira's Dutch broadcasting group SBS after due diligence proceedings beginning in the second quarter. De Posch said the two broadcast groups would be "excellent complements" for each other. SBS is strong in central and northern Europe as well as in the "especially attractive growth markets" of Eastern Europe, he added, and there would be "synergy effects" in terms of programming.

Bonnie J. Gordon in Munich, Germany contributed to this report.


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