News Corp. grabs stake in Germany's Premiere


UPDATED 2:04 p.m. PT Jan. 7

Expressing bullishness in an important pay TV market, Rupert Murdoch's News Corp. has snapped up a 14.6% stake in leading German pay TV operator Premiere for 287 million euros ($422 million).

The deal makes the entertainment conglomerate the largest public shareholder in Premiere, which has struggled with strategic issues and its stock price, leading to a recent slew of takeover speculation.

The deal also adds the stake in Premiere to the business portfolio of James Murdoch, who recently was appointed to the post of chairman and CEO of News Corp.'s European and Asian operations, setting him up as the leading contender to succeed his father Rupert (HR 12/8). According to sources, the young Murdoch played a role in bringing about the transaction.

"Pay TV is a core business for News Corp., and it's a category that's thriving across Europe with a multitude of new services and innovations," Murdoch said. "We see enormous potential for growth in Germany and believe the time is right to invest in its foremost pay TV business, Premiere."

News Corp. has repeatedly been rumored to be eyeing a push into the German market.

For example, Premiere once was part of Kirch Holding GmbH, the German media firm once owned by Leo Kirch that ran out of cash in 2002. News Corp. back then was one of the players involved in talks about a rescue of Premiere.

News Corp., which announced the Premiere deal Monday, picked up the stake -- which covers 16.4 million shares -- from German cable group Unitymedia.

The price tag, which works out to 17.50 euros ($25.70) a share, represents a hefty 37% premium to the Friday closing price of Premiere's stock; shares were trading at below 13 euros ($19) before the deal was announced. Afterward they shot through the roof, soaring 22% to 15.60 euros ($23).

Although News Corp. is not immediately planning to raise its stake in Premiere, observers said Monday's deal positions the conglomerate for such a move in the future.

Premiere is Germany's leading pay TV provider, with about 4 million subscribers in Germany and Austria. But its performance so far has lagged behind News Corp.'s other two European pay TV holdings, which both are satellite TV operators.

One is the wholly owned Sky Italia, with 4 million subscribers. The other is the U.K.'s British Sky Broadcasting, in which News Corp. holds a 39% stake and which serves about 8.7 million subscribers.

The Germany deal comes as Premiere is struggling to retain its No. 1 programming asset, the rights to Germany's top soccer league, the Bundesliga.

Premiere lost the rights to Unity in December 2005 but last year agreed to give it a Premiere stake as part of a cooperation deal that ultimately was rejected by the German cartel office.

Unity sold the soccer rights to Premiere in July in a sublicensing deal that runs through the 2008-2009 season.

Earlier on Monday, there had been speculation that entertainment and telecommunications firm Vivendi could make a play for Premiere. A spokeswoman for Vivendi in New York declined comment. Sources said though that the News Corp. deal has been the works for a while.

Scott Roxborough reported from Cologne, Germany; Georg Szalai reported from New York.