H&F invests in Springer newspaper group

US private equity firm Hellman & Friedman has acquired a 19.4 per cent stake in Axel Springer for E350m from Deutsche Bank in an attempt to capitalise on a recovery in the German advertising market.

Deutsche Bank has sold a 19.4 per cent stake in newspaper publisher Axel Springer to US private equity firm Hellman & Friedman, which will be hoping that the German advertising market picks up soon. H&F agreed to pay E350m for the shares.

'German advertising has fallen a fair bit, but there will be a return to growth,' insisted Patrick Healy, an H&F managing director who led the deal alongside the firm’s CEO Brian Powers. 'We also think it’s a good investment because of its core platform, which has potential for growth both in Germany and outside,' he added.

Axel Springer, which has E2.8bn in revenue, is the largest publisher of newspapers and the second largest publisher of magazines in Germany. Its flagship title Bild is the largest daily newspaper in Europe with a paid daily circulation of almost 4m and a daily readership of more than 12m. Its other titles include Die Welt, Hamburger Abendblatt and Berliner Morgenpost.

The stake acquired by H&F is a residue of the 40 per cent holding originally owned in Axel Springer by media group Kirch, which was forced to hand over its interest to Deutsche Bank early last year when it went into bankruptcy. The stake was offered to Deutsche Bank as security against a £452m loan that Kirch was unable to pay back on time.

Having subsequently divested a 10 per cent stake to Axel’s widow Frieda Springer, Deutsche Bank then attempted to sell the remaining 30 per cent to investors through a secondary offering, only to pull the offer when it became apparent that it would be unsuccessful. It was at this point that H&F was alerted to the possibility of a deal.

'We approached Deutsche Bank in October 2002 and discussed with the parties involved what they wanted to achieve and whether we could provide the value that they were seeking,' said Healy. 'We then entered serious negotiations and conducted due diligence. A lot of other people had kicked the tyres but couldn’t get through to the due diligence stage.'

The deal sees Powers join the Axel Springer supervisory board. He rejoined H&F in 1999 after a previous spell with the business, having spent five years as CEO and managing director of Kerry Packer’s Consolidated Press Holdings in Australia. He is also a non-executive chairman of Australian newspaper company John Fairfax, a business from which H&F exited through the public markets in 1995.

The latest deal will cement H&F’s reputation in the media sector, where it has invested in the likes of Formula One Holdings and Young & Rubicam. It also further boosts its presence in Germany where in August 2003 it participated in German Media Partners, an investment vehicle set up to acquire a majority stake in German TV broadcaster ProsiebenSat1 along with Haim Saban and other investors.

Asked whether Germany has been at the heart of San Francisco-based H&F’s European efforts, Healy implied that the deals made there have been opportunistic in nature. 'The significant thing about Germany from our point of view is the output rather than the input,' he said. 'The opportunities we’ve seen there have been pretty unique because they have arisen as a result of particular difficulties. But I would expect that we’ll continue to look for high quality companies there.'