Broadcasters Thrilled To See New Owner

Michael Hedges December 17, 2012 Follow on Twitter

Media investment strategies have certainly shifted. Private equity and venture money goes where it always does, straight for the door as soon as it can. There’s a time for it. And a time for operators to take their place.

Discovery Communications will acquire the last major piece of SBS Broadcasting in a deal worth €1.325 billion, the company reported (December 14). ProSiebenSat1. Media Group has now exited broadcasting outside Germany. Private equity funds managed by Kohlberg Kravis Roberts and Permira are likely to soon exit ProSiebenSat, their money largely intact.

The acquisition of 12 television and 19 radio channels in Norway, Denmark, Sweden and Finland, some highly rated, is subject to requisite regulatory approvals and is expected to close in the first quarter. Discovery Communications also announced last week a strategic investment in French broadcaster TF1, becoming a 20% shareholder in Eurosport, TF1’s pay-TV channels and content production arm. “While some other companies have been pulling back recently and closing down international channels,” said Discovery CEO David Zaslav, “Discovery has continued to invest.” The final number is short of the €1.4 billion asking price.

First arriving in Denmark and Norway as European broadcasting privatized and foreign investment was encouraged, Harry Sloan, who borrowed about US$5 million, founded Scandinavian Broadcasting Systems in 1991. Fifteen years of expansion into Scandinavia, the Benelux and Eastern Europe paid off when private equity fundraisers Kohlberg Kravis Roberts (KKR) and Permira bought the company for US$2.55 billion in 2005 and a year later bought ProSiebenSat1.Media for US$3.3 billion, merging it all together in 2007. Mr. Sloan went on to be Chairman of MGM Studios until 2009. He recently resurfaced as California finance director for the failed Mitt Romney presidential campaign.

Those huge acquisitions saddled KKR and Pirmira, holding controlling interest in ProSiebenSat through the Levena Holdings vehicle, with huge debt. Part of that will be retired by funds from Discovery Communications and more by converting non-voting preferred shares into common stock, thus easing an exit. ProSiebenSat off-loaded Dutch broadcast channels to Talpa Holding and Sanoma Corporation and Belgian assets to Sanoma and Corelio for just under US$1.8 billion in April 2011. Bulgarian radio and TV assets were sold to a local operator at the end of 2011. ProSiebenSat continues to operate radio and TV channels in Romania.

Local reaction in Scandinavia to the arrival of Discovery was cautious but positive. “It’s not a disaster,” said media house Mediacom (Sweden) television buyer Patrick Wallin, quoted by Dagens Media (December 14). “The advantage of a media company as owner is one of strategy, that they have a long term plan and know something about the market.” The losing last round bidder for the Scandinavian assets was another private equity company, Providence Equity Partners. Modern Times Group (MTG) is believed to have dropped out of the bidding early.

“This is a happy day,” said TVNorge CEO Harald Strømme, quoted by Kampanje (December 14). “We are very excited to have Discovery as owner. This is one of the leading and fastest growing media companies, and it is a company that has tons of international experience. In addition, there are very content focused and have a lot of good content to offer. Discovery is also a long-term owner. All this means is that we are thrilled.”

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