UK private equity firm Permira has completed the financing arrangements for its takeover of German pay-TV company Premiere. Premiere filed for insolvency in May, following the collapse of KirchMedia, the Kirch empire’s free-TV broadcasting and rights unit.
Funds advised by Permira are to take a 65 per cent stake in the Munich-based broadcaster, slightly lower than the anticipated 70 per cent stake. Bayerische Landesbank and HypoVereinsbank will each acquire a 10 per cent interest, while Austria-based Bank für Arbeit und Wirtschaft (BAWAG) will own 3.5 per cent of the business. The banks are effectively taking their respective stakes as compensation in exchange for part of E750m of loans made to Kirch prior to the group’s collapse. Management, led by CEO Georg Kofler, will receive an eleven per cent stake.
The new shareholders will provide Premiere with equity of up to E220m. The company’s new business plan predicts that the investment will take the business through to breakeven some time in the first half of 2004. By the end of 2003, Premiere, which is already the biggest pay-TV operator in Germany and Austria, is aiming to have 2.9m subscribers, up from the current level of 2.6m.
Premiere has been given access to long-term bank loans worth E150m to finance ongoing operations. The deal also allows for the settlement of outstanding loans granted by the banking consortium (Bayerische Landesbank, HypoVereinsbank, BAWAG) to the now insolvent KirchPayTV. A convertible bond offers the banks the possibility of obtaining ‘substantial repayments’ from Premiere’s commercial success on a step-by-step redemption schedule, which will begin when Premiere generates profits or disposes of any parts of the company.
Premiere is the first of Kirch’s major assets to be sold since the German media giant was declared insolvent in April 2002. KirchMedia’s 25 per cent stake in Spanish commercial broadcaster Telecinco is being sold by Dresdner Bank, which currently holds the equity as collateral, while Kirch’s 52 per cent stake in German free-to-air broadcaster ProSiebenSat, is also up for sale.
The Premiere deal is subject to German regulatory approval, although Permira does not foresee any difficulties. Thomas Krenz, managing director of Permira, said he was optimistic about the future of subscription-based television in Germany. “The new business plan is based on realistic assumptions. We are confident that with its excellent management team, Premiere will be moving into profitability.”