Private Equity News & Analysis

EM.TV accused of lying

Shareholders say Haffa's media business misled investors about its performance and controlling structure.

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German media group EM.TV faces prosecution from a shareholder group which has filed a criminal complaint with the Bavarian authorities, the Financial Times reports this morning.

The group is accusing EM.TV’s management of lying about its performance and controlling structure in an attempt to maintain its share price. EM.TV restated its results and dramatically reduced its 2000 profit forecast last December after accumulating mistakes in consolidating the accounts of its acquisitions.

In 1999, EM.TV CEO Thomas Haffa acquired 45 per cent of TMG, a Bavarian rival, and went on to buy the Jim Henson Company, creator of the Muppets, in February. A 50 per cent stake in SLEC, the foundation that manages the rights to Formula One races, followed a month later. The deals were worth a combined E 5.9bn in cash and shares at the time they were announced.

Last month it became clear that Bernie Ecclestone, a majority shareholder in SLEC, had an option to force EM.TV to buy a further 25 per cent of SLEC for $1bn. The news prompted a rescue bid from Kirch Media, which is now offering $550m in cash and its stake in a children programme joint venture in exchange for half of EM.TV's stake in SLEC and a 25 per cent voting right in EM.TV.

Last week it was reported that a consortium including Hellman & Friedman, the US private equity house, and Morgan Grenfell Private Equity, a unit of Deutsche Bank, was planning to bid for EM.TV. This seems less likely now as Morgan Grenfell executives are believed to be at odds over further dealings with the beleaguered media company.

Morgan Grenfell sold its stake in SLEC, the Formula One racing company, to EM.TV in March 2000 for a 12.5 per cent shareholding in EM. The private equity firm is believed to have made a paper loss representing more than 10 per cent of its $2bn European Partners IV fund which had invested in the transaction. Morgan Grenfell executives are said to have considered taking EM.TV to court last year, but failed to do so as the magnitude of its losses caused disagreement on how to best go about a rescue exercise.