Media Deals Still Touch And Go

Michael Hedges May 9, 2011 Follow on Twitter

A great revival in media mergers and acquisitions seems ever so much closer. Financial markets are still fat with cash as are the big global media groups. Yet huge deals, big enough to rearrange the dinner table, remain just a shout away.

The big international media deal attracting recent attention was billionaire investor Len Blavatnik buying Warner Music Group (May 6) for  €2.3 billion (USD 3.3 billion. GBP 2 billion). Mr. Blavatnik is widely expected to bid for another music company, EMI, perhaps with a plan to merge the number 3 and number 4 music companies into something bigger. The music industry just hasn’t managed to solve its ‘digital’ problem but spreadsheets seem to be improving through cost cutting.

ProSiebenSat.1 Media off-loaded its Dutch and Belgian television holdings (April 19) from the 2007 SBS Broadcasting acquisition. Finnish media house Sanoma put together a group of investors including John de Mol (Endomal – Big Brother) for Dutch assets SBS 6, Net5 and Veronica TV. For the Belgium television channels, Sanoma joined with several investors including the Corelio media house. The deal value was reportedly €1.23 billion.

The private equity firms controlling ProSiebanSat.1 Media – KKR and Permira – are ticking closer to an exit moment but not for the lowest bidder. RTL Group reportedly walked away from the Dutch and Belgian assets because of price. In its strategic review, ProSiebenSat.1 Media was ready to exit the Nordic SBS television assets but the last standing bidder, Modern Times Group (MTG), didn’t want to move higher and ProSiebenSat.1 Media decided to hold, for now, its radio and television assets in Norway, Sweden and Finland. There are today, as one industry executive noted, lots of sellers but few buyers.

MTG was mentioned as possibly advancing its stake in Russia’s CTC Media. Russia’s Alfa Group reportedly “offered” its 25% stake to MTG (April 27) for something less than €1 billion. A tiny problem with Russia’s media ownership laws, which set a 50% maximum for foreign investors, makes that deal unlikely. A shareholders agreement between Alfa Bank and MTG, valid until 2014, sets a mutual right of first refusal if either partner wants to exit. MTG already holds a 38% stake in CTC Media. Other investors are of the financial variety, including JPMorgan Chase. MTG is not likely to go forward with the CTC Media investment without a local Russian partner, said Kommersant (April 29).

The more likely candidate is National Media Group (NMG), which is quickly becoming Russia’s largest media house. NMG owns First Channel, First Baltic, First Worldwide and others. It also owns a 70% stake in Ren TV, 50% stake in newspaper Izvestia and 100% of sales house video International. Like all Russia’s big media houses, NMG is owned by a well-connected billionaire. NMG Chairman Yuri Kovalchuk is also chairman of Bank Rossiya. Alfa Group is controlled by billionaire Mikhail Fridman. Minority shareholder in Ren TV, RTL Group, exited Russian production house Content Union and signed an option agreement for its Ren TV stake with NMG last year.

Peanuts in one sense but billions in another was Turkey’s Dogan Media selling two newspapers (April 20) for about €50 million. Dogan Yayin Holdings, Turkey’s biggest media owner, has had certain disputes with the government and reducing its media footprint might be a solution to that problem. Dailies Milliyet and Vatan were sold to local investors. Dogan chairman Aydin Dogan has Goldman Sacs cautiously looking for buyers for flagship daily Hurriyet. The long rumored sale of television channels Star and Kanal D to, perhaps, RTL Group, Time Warner or the aforementioned KKR seems less and less likely as time passes. The suggested starting bid for the television channels – limited to 50% foreign ownership under Turkish law – has been in the €1.2 billion range.

Potentially the biggest European media deal of the year, News Corporation’s bid to take total control of pay TV BSkyB, remains in the negotiating stage. BSkyB is a raging success and, logically, its share price has soared since Mr. Murdoch offered about €9 billion for the 61% stake News Corp doesn’t already own. Mr. Murdoch secured government approval, though not yet official, with the usual pictures and audio tape. News Corp COO said he wouldn’t over-pay.

Meanwhile, over in the world of new media, a rumored Google-Skype or Microsoft-Skype or Facebook-Skype deal could be worth €2 billion or more. And that much anticipated Facebook IPO next year? According to the Wall Street Journal (May 1), owned by News Corporation, it could bring €100 billion.

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