Telefonica SA has announced yesterday that it has agreed to sell its 75 percent stake in Dutch television producer Endemol for $3.56 billion, hinting at its departure from the content business as it resumes its aggressive international acquisition strategy. The stake in Endemol, creator of the reality TV format and hit shows ‘Big Brother’ and ‘Deal Or No Deal’, will be acquired by a group that includes the company’s co-founder, John de Mol, through investment vehicle Cyrte Fund. He has joine4d hands with the private-equity arm of Goldman Sachs Group and Silvio Berlusconi controlled Italian broadcaster Mediaset SpA.
Silvio Berlusconi has inked his largest deal since stepping down as Italy’s prime minister, as his Mediaset broadcasting group confirmed that it had won the auction for Endemol. The consortium of Mediaset, its Spanish subsidiary Telecinco, Goldman Sachs Capital Partners and John de Mol’s Cyrte investment fund had offered €25 per share for one of Europe’s most successful television producers. Under the arrangement of the agreement, the consortium must launch an offer for the remaining 25 percent as soon as possible at a price of at least $33.72 a share, including dividends of $.61 per share.
In spite of the nominal premium to Endemol’s share price after a fervent run-up during the extremely competitive auction, Mediaset had made the highest bid. However, sources said that the difference in price between the three final bids was not huge, but Mediaset paid a little more than the rest.
Berlusconi’s Milan-based Mediaset group is one of the largest television producers in Spain and Italy. As Prime Minister, Berlusconi, was widely perceived as an active ally of President George Bush and Tony Blair and was also seen as a supporter of the Iraq war. During his reign as prime minister he was accused of using his media group for political hypocrisy. Acquisition of Endemol will enable Mediaset to develop outside its existing business interests and at the same time building up its in-house production division.
On the other hand growing clout of Mediaset has raised concern in Italy over the scale of Berlusconi’s influence on the media. The government is speculating to encourage competition among broadcasters and is taking into consideration to enact a legislation to restrict advertising sales and limit the broadcast frequencies that can be used by a single network. According to the proposal of the bill, an individual network will not be able to control more than 45 per cent of the television advertising market. In these circumstances, Mediaset is expected to loose at least a third of its sales if the law is passed.
Analysts consider it a constructive effort for Mediaset which is blamed for being too unreceptive on outside expansion. Increased diversification and internalization is strategically beneficial especially when the domestic market is not doing well. However, some executives at Endemol are concerned the deal could endanger the company’s independence amid reports major changes are planned after the takeover.
Image
