Italians Come to Court Calling their Beloved “Beautiful”

Michael Hedges May 19, 2005

Endemol churns out reality TV shows like Nestlé churns out chocolate bars. Mediaset’s chairman is “very interested.”
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Reality shows still rule the world-wide TV production and syndication business. And Endemol remains king. Last Friday Mediaset chairman Fedele Confalonieri used every endearing term in the Italian vocabulary to woo Telefonica chairman Caesar Alierta. According to the Spanish daily Cinco Dias, he told a media conference Endemol would be a “beautiful acquisition.”

Mediaset Group is Italy’s largest TV operator and produces about half its own programming. The company purchased from Endemol Italia 50% of the soap opera production company Mediavivere, which they operate as a joint venture for Mediaset programming. Mediaset also owns 50.1% of Telecinco, a leading Spanish TV group.

During the Italian election campaign in April, Prime Minister Silvio Berlusconi’s family business Fininvest sold 17% of its stake in Mediaset, retaining control. The move was widely seen as political expediency when conflict of interest became a campaign issue. The Italian daily Corriere della Sera reported that PM Berlusconi and Spanish PM Jose Luis Rodriguez Zapatero agreed that Mediaset would sell 15% of its stake in Telecinco to facilitate an acquisition of Endemol. 

Endemol is owned by Spanish telecom Telefonica SA which has announced plans to float an IPO in the production company within the next year. Telefonica purchased Endemol from founder John de Mol for €5.5 billion in 2000. The company produces or licenses local production of reality TV shows from Big Brother, Fear Factor and Fame Academy to Brainteaser, The Match and Ready Steady Cook.

Telefonica, the largest telephone operator in Spain and Latin America, is restructuring and shedding non-core units, like many telecom and media businesses. The company is under pressure in both Spain and Brazil from Vodaphone in the mobile phone market.

Endemol is considered a non-core business. In reality, Telefonica chairman Caesar Alierta knows Telefonica over-paid. And it wasn’t his deal so there’s no love lost on the entertainment business. Alierta’s predecessor, Juan Villalonga, made the deal for Endemol when dot coms were all the rage and Telefonica wanted to bulk up its internet business with multi-platform content. Villalonga was fired four months after cutting the deal when the Spanish government, which owns Telefonica, feared that all the non-core businesses would be outside their ability to control.

In 2004 Telefonica purchased BellSouth’s mobile phone units in ten Latin American countries for €4.7 billion, closing in the first quarter of this year. 

Talk about Endemol’s future began last September with a suggestion that floating a minority stake might fix a value. Time Warner, according to Media Guardian, fired off a letter to Alierta in October offering €2 billion. Alierta turned up his nose. In February the chairman denied interest in listing Endemol on the London exchange. At the same time, the Financial Times reported that Merrill Lynch had been hired to fix a floatation date.  Several private equity companies have been suggested as possible suitors: usual suspects Apax, Candover and Cinven.

On March 1st Alierta announced to investors that he planned to sell a minority stake, but keep a majority. Floating shares would bring a higher value than an outright sale. The Financial Sunday Express cited anonymous company sources suggesting the floatation could be worth as much as €3 billion.

Netherlands-based Endemol has production or business units in two dozen countries and employs over 3000. Its’ 2003 reported revenue was €914 million. A float on the London exchange would benefit Endemol UK’s chairman Peter Bazalgette and other senior UK managers who collected shares and options when Endemol merged with Bazalgette’s production company Bazal.

If the price is even near the amount Telefonica paid, sighed Confalonieri, he would be broken hearted. The suitor, so far, hasn’t spoke directly to either the beloved or its patron.

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Telefonica to Endemol : You Can Have It Back - January 10, 2007

Endemol is buying back Endemol France from Telefonica in a deal that looks like a gift. More than half the reported transaction (€450 million in total value) will be paid out over four years, dependant on performance.

Telefonica’s free float of Endemol in November 2005 did not include Endemol France. The Spanish telecom has made crystal clear its intention of shedding its 75% holding in Endemol.

Mediaset back away from a deal, reportedly with Endemol founder John de Mol, to buy up the Dutch company’s shares. Too expensive, said the Italian broadcaster in media reports Tuesday (January 9). Underscoring the inevitable, John de Mol purchased a 5% stake in Endemol.

De Agostini Spa, major Italian publisher, film producer and owner of 40% of Spain’s Antena 3, announced a deal to acquire control of production company Magnolia TV. CEO Lorenzo Pellicioli, who becomes Magnolia TV CEO, casually mentioned an interest in Endemol. But, he said, it’s too expensive.

Telefónica Weighs Endemol Suitors - June 26, 2006

Oh, how dandy it must be, to own the star of reality TV.

Spain’s Telfónica paid dearly for reality TV producer and format license holder Endemol. But, the cry “not a core business” was heard from the board-room. Suitors are circling if not exactly jumping through hoops.

Mediaset – Berlusconi’s cash cow now that he doesn’t have the State of Italy - has been courting but only if a deal can be made with Endemol founder John de Mol, who left the company after Telfónica made him a billionaire in 2000, according to Reuters. De Mol is said to be interested in getting back into the TV business.

Apax Partners – owners of Hit Entertainment – are also interested in putting up £1 billion for the 75% stake. Private equity companies don’t court. They simply arrive with a suit-case full of money, saying “Take it or leave it…and, by the way, get out of the way.” Apax recently lost out in a bid for ITV.

Who’s to say if reality TV is at the end of its product cycle? For thousands of broadcasters around the world, Big Brother knock-offs will continue to spin cash for Endemol for another generation. Mediaset’s Chairman Fedele Confalonieri clearly recognizes that the future – in a broadcasters perspective – is smart people able to create the next new buzz. Financial investors like to spin for immediate cash.

On June 21, Confalonieri said, “There was nothing to it,” according to Dow Jones. Two days earlier, he told Reuters he was interested but “nothing is underway.”

Telfónica is said to be looking for €1.75 billion. Media.Guardian reports that Sony, News Corp and Time Warner are also “looking.” Most observers expect the final dance by the end of this year.