German publisher Axel Springer AG said Friday it would buy broadcaster ProSiebenSat.1 Media AG from a U.S. group for more than $4.4 billion, setting the company up for a showdown with media titan Bertelsmann AG.
The deal, which will combine the country’s best-selling newspaper publisher with Germany’s biggest television company, will nearly double Axel Springer’s annual revenues to 4.2 billion euros ($5.2 billion). Privately held Bertelsmann had revenue of 5.1 billion euros in 2004.
Springer has been trying to expand its reach beyond print. The long-rumored deal will give it the ability to package ProSiebenSat.1’s popular programming, including the U.S. hit series “Desperate Housewives,” with its top-selling national Bild tabloid and other magazines to generate more ad revenue.
Axel Springer’s goal is to be a “serious challenger” to Bertelsmann, Chairman and Chief Executive Mathias Doepfner said at a news conference in Munich.
ProSieben owns the Sat.1, ProSieben, kabel eins and N24 networks in Germany and controls about 45 percent of Germany’s 3.8 billion euro ($4.7 billion) television advertising market. Bertelsmann owns Stern Magazine and the RTL television channel, which has a market share of about 38 percent.
Axel Springer shares rose nearly 3 percent to 99.20 euros ($122.20) in Frankfurt trading, while shares of ProSieben rose 0.7 percent to 14.90 euros ($18.36).
Springer executives said the company would first take a controlling stake in ProSieben and then acquire it outright.
First, Axel Springer — which already holds 12 percent of the ProSieben shares that are not publicly traded — will buy the other 88 percent from the P7S1 Holding LP consortium led by U.S. billionaire Haim Saban.
Springer will also buy the traded preferred shares that the consortium holds, to increase its common share stake to 25 percent, paying 2.5 billion euros ($3.1 billion) for the package. Saban’s consortium will also get a 2.4 percent stake in Springer. Ultimately, Axel Springer said it intends to merge the two companies.
Another 1 billion euros ($1.3 billion) will be paid to smaller shareholders, Doepfner said. Springer will also assume 500 million euros ($615.95 million) in debt as part of the deal.
“We have been saying for a long time that Axel Springer has two strategic growth options: accelerated internationalization of the print business or expansion in the German TV market,” said Doepfner. “With the acquisition of ProSiebenSat.1, we are pursuing a unique opportunity and systematically implementing one of these options.”
Analysts were mixed on the deal.
Screen Digest analyst Guy Bisson said the deal made sense strategically, pointing to other media companies such as Rupert Murdoch’s News Corp. that have TV and publishing units.
But HypoVereinsBank AG said in a research note that Axel Springer’s price was too high given that it wasn’t yet clear how it would merge ProSieben’s TV properties with its own publishing efforts.
Saban’s consortium acquired ProSieben in 2003 in a bankruptcy auction of assets that had belonged to Kirch Group. The consortium also includes Alpine Equity Partners, Bain Capital Investors, Hellman & Friedman, Providence Equity Partners, Putnam Investments, Quadrangle Group and Thomas H. Lee Partners.
Saban, who will stay on as chairman of the TV advisory board, called the agreement “the ideal solution for ProSiebenSat.1.”
The deal is subject to regulatory approval by the German government and its media watchdogs.
Germany’s Association of Journalists urged that the agreement be blocked, citing the effect it could have on reporting in the country. The group’s chairman, Michael Konken, said the combination would lead to an “opinion monopoly.”
Springer was founded in 1946 by its namesake Axel Springer, who built the company into Germany’s most influential newspaper publisher with its flagship Bild leading the way. Springer died in 1985 and the company is controlled by his widow, Friede Springer, who will continue to own a majority of the voting rights in the merged company.