ProSieben's new owners aim to surpass RTL


COLOGNE, Germany -- The new owners of ProSiebenSat.1 have set their sites on making the German TV group "Europe's No. 1 broadcaster."

Private equity giants Kohlberg, Kravis Roberts & Co. (KKR) and Permira Advisors, which signed a €3.1 billion ($4 billion) deal Thursday to acquire 50.5% of ProSiebenSat.1 from Haim Saban's German Media Partners, plan to merge the German broadcaster with pan-European network SBS Broadcasting.

"Our goal, clearly, is to become the No. 1 broadcaster in Europe, ahead of the RTL Group," Johannes Huth, head of KKR's European operations, said in a conference call with journalists Friday.

KKR and Permira acquired SBS last year in a deal valued at €1.7 billion.

SBS already is Europe's second-largest broadcaster but the company is considerably smaller than Bertelsmann-controlled RTL. While RTL has channels in Germany, the U.K., France and Spain, SBS has a presence only in Europe's smaller markets: Scandinavia, Benelux and Eastern Europe.

ProSiebenSat.1 is Germany's leading commercial broadcaster, controlling five free-TV and two pay TV channels and a roughly 45% share of national TV ad revenues.

Huth said a merged ProSieben/SBS will focus on acquiring channels in the "developing markets" of Central and Eastern Europe.

The rapidly expanding television landscape in the former Eastern Bloc will be the future battleground for Europe's mega broadcasters. RTL also has been aggressive in the region, buying stakes in TV channels in Russia (REN TV), Croatia (RTL Televizija) and Hungary (RTL Klub).

Permira and KKR plan to sell SBS to ProSiebenSat.1 once their takeover agreement is approved by German anti-trust authorities, something the companies said they expect in first-quarter 2007.

Permira and KKR agreed to pay Saban and his investors €28.7 ($37.6) a share for ProSiebenSat.1 common stock, which has voting rights, and €22.4 ($29.3) a share for non-voting preferred shares.

As required by German law, the companies also will have to make a buyout bid for the company's remaining stock. But Huth said KKR/Permira does not plan to squeeze out minority shareholders and intends to keep ProSiebenSat.1 as a public company.

Shares in the German TV group were up slightly in late afternoon trading at €23.5 ($30.7). KKR and Permira on Friday said they plan to keep management at ProSiebenSat.1 in place, with CEO Guillaume de Posch and CFO Lothar Lanz at the helm.

The companies said growth will come through expansion and synergies between SBS and ProSiebenSat.1, including pooling acquisitions of U.S. films and television series, and co-producing in-house formats. ProSiebenSat.1's Lanz said there were "absolutely no plans" to cut jobs as part of the takeover.

Saban and his partners, which include Thomas H. Lee, Bain Capital, Hellman & Friedman, Providence Equity, Quadrangle Group, Putnam Investments and Alpine Equity Partner, took control of ProSiebenSat.1 in August 2003, paying €7.5 a share for 72% of the company's voting shares and 36% of its capital. The group moved in after the collapse of German media conglomerate and ProSiebenSat.1 shareholder KirchGroup forced a sale of the broadcaster.

"When we bought ProSiebenSat.1, the company was on the brink of bankruptcy," Saban said. "Just three and a half short years later, the situation is obviously very different."

In September 2003, operating (EBITDA) profits at ProSiebenSat.1 were €181 million. In September, that figure had jumped to €452 million ($591.1 million). The company's market capital has gone from €1.44 billion in 2003 to €5.1 billion ($6.67 billion) this year.

Saban, who made his fortune selling children's TV series "Power Rangers," actually benefited from Germany's tough anti-trust laws in the ProSiebenSat.1 sale.

German Media Partners had agreed to sell ProSiebenSat.1 to German publishing house Axel Springer for €2.5 billion but media watchdogs blocked the deal. Less than a year later, Saban and Co. sold the same company for half a billion more. "I love the German anti-trust authorities," Saban joked.