Kirch makes own Highlights real

Merger with EM.Sport in sight; Constantin in play

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 ($55 million) in cash plus 4.3 million in company shares, boosting Kirch's share of EM.Sport to 17.1%.

The 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 CEO of EM.Sport Media.

EM.Sport head Werner Klatten will jump to the company's supervisory board, taking up the post of deputy chairman. He 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 the 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.

Additionally, EM.Sport published year-end results Monday, which showed a €41.2 million ($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 ($80.2 million) loss in 2007.

Stripping out that effect, EM.Sport booked a €9.1 million ($14.4 million) profit last year, against €9.7 million in 2006.