A group which includes Morgan Grenfell Private Equity, the private equity arm of Deutsche Bank, is considering bidding for EM.TV, in opposition to the privately owned Kirsch group.
Tele Munchen Group, a media unit which is 45 per cent owned by EM, heads the consortium considering a counter-bid. It also includes US private equity house Hellman & Friedman.
The deal is likely to be structured with TMG offering to take a stake in EM and the private equity firms supplying the cash for EM's 50 per cent stake in Slec, the holding company that owns the Formula One rights, the Financial Times reports.
Morgan Grenfell and Hellman & Friedman are both previous shareholders in Slec and the deal is understood to have the backing of motor racing tycoon Bernie Ecclestone, who owns the other half. The discussions with Kirsch were announced at the beginning of December, but have recently stalled.
EM paid DM3.5bn (£1.1bn) for the Formula One media rights stake from Mr Ecclestone last year. The deal was part of a programme of acquisitions that also included the Jim Henson company, creator of the Muppets. According to the newspaper, EM has noted that it had agreed not to solicit any other offers for the company or its assets until the end of January but that does not prevent buyers making an approach.
Morgan Grenfell Private Equity was to have undergone a management buy-out from Deutsche Bank last year but the deal was postponed indefinitely. The firm's losses at EM were believed to be at the root of the decision. Morgan Grenfell sold its stake in SLEC to EM.TV in March 2000 for a 12.5 per cent shareholding in EM. As EM's share price collapsed, the firm was looking at a paper loss of several hundred million dollars. At the time, the loss was thought to represent more than 10 per cent of Morgan Grenfell’s $2bn European Partners IV fund which had invested in the transaction.