German Regulators Crack Whip at Axel Springer-ProSiebenSat Deal

The German Federal Cartel Office (Bundeskartellamt) demanded Axel Springer sell tabloid Bild or take one of

ProSiebenSat1’s TV channels out of the deal. Springer tzurned that idea down, according to the Frankfurter Allgemeine Zeitung, leaving the anti-competition office “no possibility but to reject this plan,” leaving the deal in limbo until Springer comes up with a new plan by January 12. The cartel office raised concerns when the deal was first announced about its effect on advertising.

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ProSieben’s stock led the German exchange Friday (January 6), gaining about 3% on a report in Handelsblatt that French Societe Television Française 1 (TF1) might step in, buy a piece and help Springer diversify the shareholding or, perhaps, simply buy ProSiebenSat1.

Axel Springer chairman Mathias Doepfner pledged to not cross-market the television channels and with newspapers and suggested the five Springer-owned TV magazines might be put on the block. There would be no “Bild TV.” Other reports suggest as many as 30 titles could be sold, if that would satisfy authorities. The cartel office is said to be warm to the idea that Springer divest itself of all joint ventures with Bertlesmann but that would pose a different problem, pointed out in the FAZ report. The cartel office foresees a problem in the creation of “a virtual duopoly, with ProSieben on one side and Bertlesmann/RTL on the other.”

The Commission to Investigate Media Concentration (Kommission zur Ermittlung der Konzentration im Medienbereich - KEK) has also dispatched the merger as bad for diversity of opinion. Alex Springer’s titles are noted, as was the late Axel Springer himself, for conservative views.

The KEK proposed an independent board overseeing programming and operations of the television channels. Springer rejected this out of hand, saying the KEK exceeded its authority. Three State regulators – Medienanstalt Berlin-Brandenburg (MABB), Bayerische Landeszentrale für neue Medien (BLM) and Landeszentrale für

Medien und Kommunikation Rheinland-Pfalz (LMK)– also said the KEK overstepped the boundaries, or, perhaps, stepped on somebody’s toes. By 75% majority votes, State regulators can over-ride KEK decisions, virtually assuring serious court time before this deal goes anywhere.

Springer Sues, ProSieben Plots – February 27, 2006

Axel Springer AG has appealed the German Federal Cartel Office ruling that ended its pursuit of ProSiebenSat1. While stating firmly that further talks with ProSieben are not planned, Axel Springer needs legal assurances that the Cartel Office will not block other possible acquisitions with the same reasoning. Without that assurance “growth through acquisitions in Germany would hardly be possible,” read the company statement.

Should the Duesseldorf appeals court rule against Axel Springer the company’s next - and final - step would be to the German Supreme Court. With that outcome fairly unclear, Axel Springer is widely expected to look outside Germany for acquisition targets.

ProSiebenSat1 – a little fatter from settling the termination clause in the dead Springer deal – is regularly floating expansion ideas. CEO Guillaume de Posch referred to an expected bid for Bundesliga rights in an interview with Der Spiegel. He did not rule out acquisitions but the new strategy – now that selling out is off the table for the moment – is adding to current offerings; certainly football and, maybe, a comedy channel

ProSiebenSat Moves On, Cartel Office Moves to RTL – February 13, 2006

German broadcaster ProSiebenSat does not rest in the shade. After the death of the deal with publisher Axel Springer a mere two weeks ago, financial betting parlors see more money changing hands if and when lead investor Haim Saban decides to spin the wheel of fortune.

International Networks, a distributor of non-US TV channels to American cable operators, announced an agreement (February 9) to market ProSiebenSat.1’s Welt (World) channel, a German-language international channel. It may never attract subscribers by the millions but it will be a never-ending reminder to Wall Street and prospective buyers that there’s a great big European television broadcaster looking for bidders.

Already Bear Sterns raised its price estimate (February 10) and WestLB upgraded the stock to “add” from “hold,” reported by Forbes (February 9).

“Most of then firms have a lot of faith in Haim, and think he’ll know what to do,” said an un-named source to Reuters.

Meanwhile, the German cartel office announced opposition (February 6) to RTL’s purchase of remaining shares in news channel N-TV held by CNN/Time Warner. Competition in television advertising would decrease, said the cartel office, the same argument used to kill Axel Springer’s deal for ProSiebenSat.

Axel Springer – ProSiebenSat1 Deal Dead – February 1, 2006

German mega-publisher Axel Springer gave up its quest for television, the life-long dream of its founder, according to Bloomberg and Reuters

Regulators, it seems, posed too many restrictions for completing the €4.2 billion deal which would have presented the first real competition to Bertelsmann AG. Both the cartel commission and the media concentration authority rejected the take-over. Springer and ProSieben “came to the conclusion that in light of the numerous economic and legal uncertainties, a possible appeal or a possible application for a ministerial permit would have resulted in unacceptable risks for all parties involved,” said a Springer release.

The media concentration authority’s ruling might have been over-ruled by a vote of the 15 German State media authorities and several indicated both approval of the deal and disapproval of the media concentration authority’s authority. The cartel commission’s ruling could only be over-ruled by the economy ministry.

Springer’s stock dropped on the news as ProSiebenSat’s rose. Conventional wisdom expects Springer to throw its money into investments outside Germany, where and when being the question. The same conventional wisdom expects a break up of ProSieben, either through a sale to a buy-out and break-up specialist like KKR or CEO Hiam Saban might sell off bits and pieces himself. Saban has been talking to everybody in the media and money business, according to Reuters sources, but is “not committed” to selling.