Private Equity Giant KKR Buys Herbert Kloiber's Tele Munchen Group

Herbert Kloiber

The German mini-major owns stakes in TV channels, runs a theatrical distributor and has a huge German rights library.

In an announcement that will send shockwaves across the European media industry, private equity group KKR said Thursday it has acquired Herbert G. Kloiber's Tele Munchen Group (TMG), one of Germany's and Europe's leading independent media companies.

Fred Kogel, a German industry veteran, will take over as CEO of Tele Munchen Group. The company is currently run by president Herbert G. Kloiber and his son, managing director Herbert L. Kloiber. The younger Kloiber will continue to serve as managing director of all core business units of TMG.

KKR said it hoped to expand TMG to become a “leading independent audio-visual content platform” catering “to every aspect of the value chain: production, licensing and distribution” while addressing “structural changes in media market by focusing on premium content from Germany.”

TMG is among the largest and most established media groups in Europe, with a huge rights library, stakes in television networks in Germany and Austria, television and film production operations and a theatrical distribution arm, Concorde.Together with Walt Disney/ABC International Television, TMG controls a third of German commercial channel RTL 2 and has a 85 percent stake in Odeon Film, a publicly listed German production company. In addition to Concorde, whose recent releases including Lars von Trier's The House that Jack Built, TMG controls German TV channel Tele-5, home entertainment group Concorde Home Entertainment, production company Clasart and world sales division TM international.  

But recent shifts in the industry — particularly the decline in licensing revenues for U.S. films and television series, TMG's core business — have hit the company hard.

“I am proud of what we have achieved at TMG in the past four decades,” said Herbert G. Kloiber, managing partner of TMG. “Following much deliberation, I have decided to place my life’s work into the hands of KKR and thus to ensure that TMG, with its wonderful employees, may continue to grow and succeed.”

KKR's acquisition of TMG is expected to close in April, pending regulatory approval. Financial details of the deal were not disclosed.

Kloiber acquired TMG — then a small, Munich-based production company that specialized in German TV movies and classical music concerts — back in 1977. Over the decades he turned it into one of Europe's biggest, and most vertically integrated, media empires. The company holds stakes in two major German commercial TV channels —RTL 2 and Tele 5 — has television and film production operations and, with Concorde Filmverleih, runs one of Germany's leading independent film distribution companies. At its peak, following the acquisition of German theatre chain CinemaxX (which TMG later sold to Vue), the company employed some 1,800 people and booked pro forma revenues of €520 million.

But the heart of TMG has always been the licensing business. Kloiber — whose entry into the entertainment business came via his godfather, legendary classical conductor Herbert von Karajan — cut his teeth at Beta Film, the TV rights group then owned by legendary German mogul Leo Kirch. After falling out with Kirch, Kloiber set out on his own, replicating the Kirch model of buying rights to European and U.S. films and series and selling them on — mainly to German public television channels. His first success came with German rights to French Louis de Funes comedies.

When, back in 2002, the Kirch Group collapsed under a mountain of debt, TMG replaced it as Germany's largest rights dealer.

But the recent shift in the television business — driven by the rise of Netflix and the decline of U.S. series on German TV — left TMG exposed. Unlike German competitors — including the revamped Beta Film, producer of high-end series Babylon Berlin and Medici; or Munich-based Constantin, whose original IP includes the Resident Evil and Mortal Instruments franchises — TMG remained heavily dependent on licensing revenues for shows it did not make or own.

The company's productions — including the recent miniseries reboot of The Name of the Rose, starring John Turturro and Rupert Everett — accounted for just a small fraction of the group's business.

KKR is no stranger to the German market. In 2006, the company, together with fellow private equity players Permira, bought struggling German broadcast network ProSiebenSat.1, eventually cashing out their stake in 2014.

Five years later, ProSiebenSat.1 faces many of the same structural challenges that TMG does. The TV giant this week unveiled a major overhaul, involving changes to top management and corporate structure, as it tries to shift from its focus on U.S. series and films to German original productions for its networks and nascent VOD services.

In its post-acquisition pitch, KKR made a similar suggestion that TMG can be refashioned as a “audio-visual content platform” serving “the entire value film set to cinema and TV.”

Philipp Freise, member and head of the European technology, media and telecommunications industry team at KKR, said the group planned to build out TMG through future acquisitions.

“Hand in hand with experienced industry executives — first and foremost Fred Kogel, the new CEO of the platform — we will build a platform in the content market that will advance the German entertainment industry through creativity, innovative ideas and passion,” he said in a statement.

KKR said Herbert G. Kloiber would support the “further development of the platform” as a close advisor to TMG and member of the advisory board of the new platform. He will also stay on as a member of the excecutive board of Odeon Film until the company's annual shareholders meeting in July.