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28 June 2007
ProSieben to buy SBS Broadcasting for 3.3 billion, rivaling RTL
International Herald Tribune
(c) 2007 International Herald Tribune. Provided by ProQuest Information and Learning. All rights reserved.
ProSiebenSat.1 Media said Wednesday that it had agreed to acquire SBS Broadcasting Group of Luxembourg for 3.3 billion, ending a yearlong effort to find a partner. The combined company will have operations in 13 European countries and reach more than 77 million households, creating the largest pan-European rival to RTL Group, the broadcasting company owned by Bertelsmann.
"In slow-growing TV markets such as Europe, companies need to consolidate to gain scale," said Vivek Couto, executive director of the research firm Media Partners Asia, in Hong Kong. "Another driver for consolidation is the move from traditional media to online and digital media."
The transaction, valued at $4.4 billion, will enable ProSieben to gain access to SBS businesses in faster-growing markets like Scandinavia, Hungary and Romania, Couto said.
ProSieben and SBS broadcast a mix of entertainment, sport, news, documentaries and reality TV shows.
Guillaume de Posch, chief executive for ProSieben, said the deal was "all about content," and would allow the company "to produce a broader selection of high-quality programming throughout" Europe.
Posch said the company had the "ambition" to be bigger than RTL, but declined to say when or how he believed this could be accomplished.
The agreement comes almost two years after the German publisher Axel Springer offered 3.5 billion for ProSieben, a deal that was rejected by German regulators in January 2006.
In March, the private equity firms Kohlberg Kravis Roberts and Permira purchased a 50.5 percent stake in ProSieben for 3.1 billion. They acquired SBS in October 2005 for 1.7 billion.
ProSieben said that the new group would have had a combined revenue of about 3.1 billion in 2006, up from the 2.1 billion ProSieben earned alone, and a hypothetical operating profit of 691 million, up from the 484 million that ProSieben actually earned.
Posch said that the combined company expected to save at least 80 million a year by 2010.
"Although the price is a little higher," Daniel Kerven, an analyst for UBS, wrote in a note, "the level of synergies is far greater" than the bank estimated. UBS had predicted SBS would be sold for 3.1 billion.
RTL, the biggest European broadcaster, reported sales of 5.64 billion last year.
The broadcaster is the most profitable unit of Bertelsmann, which is, in turn, the largest media company in Europe.
The transaction was not subject to approval by antitrust or media regulators, and the share purchase agreement would be completed by the beginning of July, ProSieben said.
Investors are waiting to see what two large shareholders will do with their stakes in ProSieben and SBS.
Telegraaf Media Groep, a Dutch company that holds 20 percent of SBS, will record a book profit of around 360 million from the sale of its stake in SBS Broadcasting, the company said.
The group has an option that would give it 6 percent of the ProSiebenSat.1 Group's share capital, or 12 percent of the shares that carry the voting rights, ProSieben and Telegraaf said in separate statements.
Axel Springer holds a 12 percent stake in ProSieben. An Axel Springer official said that the board would discuss the issue when the transaction was closed and then decide whether it to keep its stake unchanged, sell it or increase it.
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