Buy Out Firms Buy Out SBS Broadcasting

Michael Hedges August 25, 2005

After fifteen years, 16 television stations, 21 pay TV channels and 11 radio networks Harry Sloan delivered for SBS Broadcasting (SBS) investors, selling the company to leveraged buy out firms Kohlberg, Kravis & Roberts & Co.(KKR) and Permira Advisors Ltd for an estimated €1.7 billion. Sloan founded the company with start-up television stations in Denmark, Norway and Sweden.
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Among those SBS investors are John Malone’s Liberty Global. SBS stock has more than doubled in the last two years. The company was first listed on the US NASDAQ exchange in 1993. Investors will receive €46 per share.

SBS owns television, cable and radio operations in Belgium, Denmark, Finland, Greece, Hungary, the Netherlands, Norway, Romania and Sweden.

KKR is based in New York and Permira in London but KKR acquired in the spring the services of Clive Hollick, former CEO of United Business Media (UBM) for the London office. Lord Hollick’s last deal with UBM was the purchase of UK radio broadcaster The Wireless Group.

Billing itself as one of the world’s oldest leveraged buy-out (LBO) firms, KKR has been attracted to media for more than 20 years. Golden West, Storer Broadcasting, Primedia and, more recently, PanAmSat are among KKR’s investments. Storer Broadcasting became Storer Communications and KKR sold it to Comcast and TCI/Liberty Media, owned by the aforementioned John Malone.

Permira Advisors represent several buy-out funds and the thread that seems to connect them with KKR in this deal is satellites. In January Permira participated in the acquisition of Intersat. In April 2004 KKR purchased PanAmSat.

In the investors conference call all parties reiterated that the new owners are “long term players.”  The buyers also stressed the significant growth – and potential for more – in Scandinavian and Central European media. CEO Markus Tellenbach keeps his job while Harry Sloan becomes an advisor with about €27 million in the old bank account. The company will be liquidated and distribution of proceeds and options is expected in November.

Wall Street rumors of a possible sale started August 12th. A Dutch publication, Betten Beursmedia News, reported August 15th that John de Mol’s Talpa International had approached SBS. Other sources suggest the SBS board made the decision to liquidate very recently and Viacom and News Corp. had also expressed interest.

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Yorin FM Torture Over for RTL – January 5, 2006

SBS Broadcasting and RTL Netherlands announced (January 4) a purchase agreement transferring Dutch radio station Yorin FM to SBS.

No terms were disclosed but Dutch observers suggest a “substantial” sum. RTL Netherlands – then operating as Holland Media Group – purchased the Yorin FM franchise at auction in 2003 for €33 million, likely to be exceeded in the terms.

The SBS Broadcasting press release indicates no programming changes “in the short term” and “most” employees will be retained.

Shortly after obtaining the Yorin FM franchise, RTL Netherlands hired several well-known Dutch presenters and revamped the overall format leading to a respectable 5% market share (persons 13+). It’s been downhill since.

Competition on the Dutch radio airwaves has been fierce and expensive. News Corporation – owner of the Sky Radio franchise – opened bidding late last year with the Telegraaf Media Groep (TMG) offering about €240 million for the Dutch radio license. SBS Broadcasting has also been a suggested bidder, now doubtful under the constraints of Dutch media law.

SBS Broadcasting already owns television channels and publications in the Netherlands. Yorin FM is its first Dutch radio station, which becomes part of the companies “cross media strategy,” according to the press release.

RTL Netherlands continues to operate several television channels and RTL FM.

News Corp Plans to Sell Sky Radio - August 25, 2005

Rupert Murdoch’s News Corp may be getting out of the European radio business, according to an article in the Times (of London). Referring to an email sent to employees, Sky Radio Ltd the Dutch radio company owned by News Corp., the company has received “expressions of interest” from potential buyers and those would be given “due consideration.” News Corp also owns the Times.

Sky Radio Ltd owns Sky Radio Netherlands, Sky Radio Denmark and Sky Radio Hessen (Germany).

The Times article mentions that Mr. Murdoch is rather put off by radio broadcasting, concerned that digital music players will draw away listeners. This contrasts, somewhat, with other reports that News Corp, at the very least, expressed interest in buying SBS Broadcasting as recently as two weeks ago. Perhaps the bidding price got a bit steep.

Audience figures for Sky Radio in the Netherlands, noted as a music juke-box format without DJs, have sagged over the recent two years.