MediaFinance94

www.mediafinance.com Contents Issue 94 April 13 2006 Decision looms at VNU VNU is to clear all other items from the agenda when shareholders meet next week to discuss the E28.75 a share offer currently on the table from private equity consortium Valcon. If rebel shareholder Knight Vinke is successful in preventing Valcon getting the 95% approval it needs then, leaderless, VNU shares could easily fall back to their pre-offer level of around E23. Private equity has been frustrated in recent weeks by rising shareholder expectations even as more and more funds are flowing into the asset class: could it be tempted to loosen its purse strings? Europe 2 3 3 3 4 5 5 6 6 7 7 9 9 10 10 10 10 11 11 11 12 12 12 13 13 14 14 14 Mandate table 29 line up for DTT in Finland PSG sold by Canal Plus No deadline yet for Emap sale Editis buys book distributor Bertelsmann banks appointed Global round up of telco IPTV Unity bond struggle through GreenTV Stockbyte snapped up Setanta out of TV3 race Mediaset, TI deny marriage Telegraaf readies for Sky Radio 2Waytraffic plans AIM listing Bloomberg to get brainpower boost Orkla ‘gradually moving’ TPI runners down to two Prisa lining up E1.5bn facility Codere launches bond Saudi Research launches IPO Games software funded Veronis wraps Granada Learning Ten Alps buys magazine publisher Endemol for Millionaire format? GMG keeps its own counsel Twenty buys Dataforce ScreenFX plans capital raising US outdoor advertisers to retrench? The rise of Mecom Not to be put off by its failure to buy the Rhones Alpes papers from Socpresse earlier this year, David Montgomery’s investment vehicle Mecom last week emerged victorious from the auction to buy Limburg Newspaper Group from De Telegraaf. The deal marks the first time Mecom has managed to acquire a newspaper business on its own and as such represents a shift in the firm’s investment strategy. While some bankers have questioned whether the E200m Mecom is paying for the Limburg papers was too high, sources there say the underlying Limburg business, and the quality of its management, make for an excellent long term investment. German TV under scrutiny Uncertainty is widespread among TV platforms in Germany. Without Bundesliga rights and unwilling to try out a wholesale model as opposed to its current retail one, satellite pay TV platform Premiere faces an uncertain future come September, when rival Unity Media starts broadcasting football through its own distribution channels. Meanwhile, ProSiebenSat.1 finds itself under the microscope following comments by a NBC Universal executive that it would make addition to its international portfolio. Bankers say no approach is likely in the short term, but Haim Saban will be all too aware of the dangers online advertising poses to traditional linear broadcasters in the long run. East Europe 15 15 15 16 Six DTT licences in Czech Rep Springer starts second newspaper Kommersant: IPO or sale? Five TV licences in Serbia Grey dollar offers growth potential Desperate to find growth markets, some publishers are looking to profit from the biggest demographic shift in developed economies: the rapid greying of the population. Bertelsmann’s Direct Group has plans to turn its successful music and book clubs, which boast 35 million members globally, into a social network for older people. New economy visionaries agree: US-based Jeff Taylor, founder of job site Monster Worldwide, has a startup in stealth mode called Eons Inc, which targets those in the 50+ age group with news, games and entertainment. Funding comes from Taylor, Monster and VCs General Catalyst Partners, Sequioa and others. Asia 16 17 17 17 17 18 18 Austar to refinance Warburg Pincus tries print media Sahara One to raise US$50m Baby TV launched Thomson partners for legal media Yahoo denies Korean sale UBC raises funds Look out for league tables Whilst you’re all hopefully enjoying a well-earned Easter break, the Media Finance team will be putting the finishing touches to our leagues tables for 2005. Honours will be awarded to those at the top of their game for media bond issuance, public equity placement, loan arranging and M&A advisory over the last Calendar year. 18 18 19 19 20 Americas Televisa hires Allen & Co. Bonds prove popular for Viacom DeMarseCo launched VC funding league table Company profile: Cellcast preps for Search the digital archive at www.mediafinance.com For help or password information, contact renato.leite@telecomfinance.com Europe 2 What’s up? LARGE M&A DEALS IN THE PIPELINE Company 3i All3Media Alpinvest et al Canwest Celador Chorion CTC Media EMAP Guardian Media Group Latitude Lion Capital Magix Maiden Mergermarket Group Orkla Media SDU Telefonica Telegraaf TPI Trader Media East UBM Video International VNU VNU World Directories Yell Event Chorion bid (UK) IPO/sale (UK) VNU bid (NL) sale of TV3 stake (Ire) sale of Millionaire TV property sale process IPO sale of French assets strategic review (UK) sale (UK) sale of Glass’s (UK) IPO sale (UK) strategic review (UK) sale (Nor) sale (NL) sale of TPI (Sp) sale of Limburg newspapers (NL) sale by Telefonica strategic review (CEE) sale of various magazines (UK) IPO (Rus) sale (NL) independent valuation (NL) TPI bid (Sp) TPI bid (Sp) Adviser / arranger UBS UBS ABN AMRO, Citigroup, JPMorgan, Deutsche Hawkpoint Partners LongAcre Rothschild Deutsche Bank UFG, Morgan Stanley Citigroup, BNP Paribas Merrill Lynch LongAcre JP Morgan DKW Rothschild Hawkpoint Partners Deutsche Bank Fortis BNP Paribas ING SG Morgan Stanley, Longacre LongAcre? UBS Brunswick Credit Suisse Rothschild Morgan Stanley, Credit Suisse Deutsche Bank, Goldman Sachs DEBT PIPELINE 3i Alpinvest et al Codere Est Republicain Formula 1 Prisa Talpa Media TMG TPI Trader Media East Unity Media UNMANDATED/RUMOUR MILL Chorion bid VNU LBO debt E150 bond issue Socpresse debt finance Rumoured Recap Sogecable buy out financing (Spa) E123m syndicated loan Sky Radio debt finance sale staple financing E250m debt package E1.35bn FRN GE Commercial Finance Citi, Deutsche, JPMorgan, Lehman, ING, ABN Credit Suisse, Morgan Stanley Credit Mutuel RBS Citigroup ING, Fortis, Rabobank ING SG BNP Paribas, WestLB Citigroup, Deutsche Bank, Goldman Sachs Editis Emap France bidders Endemol bidders Orkla bidders Sportfive Viacom, Clear Channel refinancing sale process launched PE approaches rumoured sale process launched IPO bank possible European exits Media Finance Issue 94 April 13 2006 ©2005 Thompson Stanley Publishers Ltd Europe Austria 3 CHANGING MEDIA Content delivery: 3G mobile firm 3 is to supply user generated 3G content to ITV and Five. The BBC and ITV have begun a six month pilot in London of HDTV over DVB-T BSkyB has announced plans to introduce a new set top box to allow delivery of its channels via IPTV as part of a soft launch of its Sky Net service. A number of people in the UK are currently unable to subscribe to Sky as their dwelling does not have a clear line of sight to Sky’s satellites. Untangling DRM: Walt Disney is to make certain high rating ABC shows such as ‘Lost’ and ‘Alias’ available for free on the internet via its website, abc.com. Programmes will be screened in widescreen format and made available the morning after their initial screening. Programmes will be able to be fast forwarded, rewound and paused but will include adverts that cannot be skipped. Advertisers including P&G, Toyota, Unilever and Cingular have already signed up to the new revenue stream. The BBC is negotiating with Apple to lengthen the seven-day rights window it currently enjoys for showing programmes via its own websites in order to distribute them over iTunes. Pop culture: UK advertising agency Saatchi & Saatchi has manufactured its own girl band in a bid to influence the hearts and minds of young audiences. betandwin raises capital Listed online betting firm betandwin.com Interactive Entertainment AG issued 1.4 million new shares – of which 1.3 million are for performance related stock options for management, and 100,000 are deferred payment to Norway’s Spinn Invest AS in connection with the purchase in 2003 of Playit.com. The auction of the vacant radio frequency 94.2 MHz in the city of Graz has reportedly attracted 11 contenders, including Radio Arabella, Radio Harmonie (Styria Medien), the Fellner brothers, Radio Energy, Radio Maria, Welle 1 Salzburg, Truckradio and local broadcaster WKK. The frequency was occupied by Radio Nostalgie. Finland 29 line up for DTT 29 companies have expressed an interest in utilising capacity on the country’s first digital terrestrial network following a first round of bidding. Successful bids will be allocated capacity on both an existing multiplex and a new multiplex scheduled for launch in the next few years. Swedish broadcaster SVT has already bagged two channels on the new multiplex. Other bidders are BBC World Distribution Ltd, C More Entertainment, Discovery Communications, MTV Networks, National Geographic Channel, Turner Broadcasting, Viasat and The Walt Disney Company. The deadline for full applications is May 2. In a separate announcement Finland has awarded its DVB-H multiplex to TDF’s Digita unit, seeing off TeliaSonera, Elisa, and Telemast Nordic, a unit of France’s Towercast. for the role it is taking in the revival of French football hooliganism. The disposal by Canal Plus brings the French football league more into line with the UK where media companies that invested in Premiership clubs in the 1990s in the hope it would bring them access to rich pay per view revenue streams, have now for the most part sold out. Only ITV remains: it still holds 10% stakes in Arsenal and Liverpool, but is likely to sell them at a loss as it continues to focus on its core business. France NO DEADLINE YET FOR EMAP SALE The disposal of Emap France moves on, with a draft IM having been circulated to bankers, though sources say no deadline has yet been set for first round bids. BNP Paribas and Citigroup are running the sale for Emap. Apparently a staple financing package put together BNP Paribas has slowed things somewhat owing to the due diligence process. “Emap aren’t testing the market like DMGT did with Northcliffe, this has been in the offing a long time and they’re coming out now as we speak,” commented one potential buy side adviser. To date though the sale is still at the point where every one is naming everyone else as potential buyers. Mondadori of Italy has been making a lot of noise, but its lack of a track record in international acquisition strategy puts it at a disad©2005 Thompson Stanley Publishers Ltd PSG sold by Canal Plus As predicted in MF 93, Canal Plus and its group of investors have sold football club Paris St. Germain to a group of investors including Butler Capital Partners and Morgan Stanley and a real estate fund jointly owned by Eurazeo and Colony Capital, for E41m. Alain Cayzac, an existing director at the club who will now take over its running, is also a shareholder. PSG was an obvious choice to become the first French football club to be taken private by financial investors: it used to be one of the top two clubs in France along with Marseille but has lost form in recent years and today it is best known Media Finance Issue 94 April 13 2006 Europe vantage in terms of credibility. Meanwhile Lagardere, Bertelsmann’s Gruner+Jahr and Axel Springer all crop up in the press on a regular basis along with just about every PE firm active the space. Lagardere has just monetised its stake in EADS however and is looking to make a big acquisition. “Some of the key trades have anti trust constraints and concerns, in particular where the TV listings market is headed. Private equity has similar issues about growth, which depends on the business’ ability to launch new titles,” commented one observer. 4 THIS FORTNIGHT IN NUMBERS %age of 2006: %age of 2005: web publishers charging for online content in 37% (AOP) web publishers charging for online content in 63% (AOP) Growth of UK out of home advertising market 2005: 7% (ScreenFX) UK not for profit contract publishing market 2005: £344m Mintel/APA Est. UK not for profit contract publishing market 2009: £531m Mintel/APA port his bid in place of a Russian one. The seller is Raymond Lakah. Gaydamak has plans to invest in the title both in print and online, including launching an international edition. Newspaper group Le Figaro is reportedly closing its regional supplement Figaro Lyon, the last of four such titles launched in the 1980s. Vincent Bollore is said to be targeting a September launch for his free daily newspaper Direct Soir. The 48 page newspaper will be distributed from 16:30 daily, with a circulation of 500,000, half in Paris and the balance in large regional cities. The launch budget is reported to be around E10m. The editorial resources of the Direct 8 television channel will be injected into the newspaper project. EDITIS BUYS BOOK DISTRIBUTOR Book publisher Editis, a unit of private equity firm Wendel Investissement, has bought 100% of the capital of Groupe DNL (Diffusion Nationale du Livre). The deal is subject to approval from trades unions and the regulator. Editis is already active in book distribution via its Interforum operation. Through purchasing DNL it moves into the wholesale book distribution business – DNL serves some 3,900 supermarkets. Groupe DNL comprises three companies DNL Distribution, DNL Rhône Alpes and RDL, employing 150 staff altogether. The acquired business is run by Xavier Tougeron, who will remain in charge. Revenues of these properties was E55.25m in 2005 with a growth rate of 4% in recent years. Editis had turnover last year of E776.1m, an 8% on the previous year, with profits rising 20%. Editis is said to have a budget for acquisitions of some E150m, made available by Wendel, with targets including European countries outside France. TV/FILM/RADIO TV channel Direct 8, launched in March by Vincent Bollore on France’s DTT platform, is to sign a contract with Eutelsat Communications for free-to-air satellite broadcast in France, but also to move into the international market. The five year deal covers two channels which can be received by 2.8 million households with suitable satellite dishes in France, and 40 million households elsewhere in Europe, the Middle East and north Africa. Groupe Industriel Marcel Dassault announced it has passed the threshold of 5% shareholder in film producer Gaumont, holding 6.93% of the capital and 8.45% of the votes as of December 19 2005. US institutional investor Arnhold & S Bleichroder similarly announced last September that it had passed the 10% limit, holding 10.19% of the capital and 6.54% of the votes. GAMES Beleaguered games maker Infogrames has succeeded in its bid to extend the repayment of the E23m outstanding on its medium-term bank loans and the interest, worth approximately E13.4m, on the company’s 2006-08 bonds. Those interest repayments are now due on June 15 whilst Infogrames must still pay interest of around E4.6m on its 2009 convertible bonds. The company, which is rumoured to be being advised by Lazard, is still looking at possible refinancing options as well as potential asset sales. ONLINE/DIGITAL Interactive marketing agency Business Interactif has bought e-mail marketing specialist iBAse for E9.7m, payable 70% in shares and 30% in cash. iBase has a database of 15 million e-mail addresses. Business Interactif acquired Webperformance last autumn, also a specialist in e-mail databases. BI forecasts 2006 revenues including the effect of these two acquisitions of E27m. For the record, Goetzpartners advised the shareholders of mobile TV specialist Wonderphone in its recent sale to Japan’s Index Corporation. The total consideration is up to E90m. ©2005 Thompson Stanley Publishers Ltd NEWSPAPERS The buyer of troubled evening newspaper France Soir was to be decided on April 12 by the bankruptcy authorities, the tribunal de commerce de Lille. The most likely buyer seems to be Russian businessman Arcadi Gaydamak, as long as he substitutes a French bank guarantee to supMedia Finance Issue 94 April 13 2006 Europe Global round up of telco IPTV projects KPN is to launch its IPTV services on May 1, CEO Ad Scheepbouwer told the recent AGM. Buena Vista International Television and France Telecom signed a multi-year VoD agreement allowing access to the former’s new and archived film portfolio through the French telco’s Wanadoo broadband and MaLigne TV IPTV services. Israel’s Imagine Communications, a company in stealth mode which is developing technology promising to deliver improved quality TV over the internet, raised a US$4.5m first round of funding via VC Carmel Ventures. China Netcom is to start IPTV services on May 17, World Telecommunications Day. ZTE Corp is installing IPTV equipment for 50,000 subscribers in Beijing. Oddly, it seems that the government has yet to issue a licence to China Netcom. Currently the sole IPTV licence is held by Shanghai Media Group, and public broadcaster CCTV is expected to win one. Polish telco Telekomunikacja Polska and Canal+ Cyfrowy signed an agreement to provide the latter’s TV programmes through broadband internet. Indian telco MTNL has reportedly contracted with Israeli firm Optibase to deliver its IPTV solution. MTNL is expected to roll out triple play services in the Mumbai and Delhi markets. MTNL’s video partner is Time Broadband Services Ltd. The Palestinian Broadcasting Corporation (PBC TV) signed up with JumpTV as its exclusive internet broadcast partner for the international distribution of its content. JumpTV’s global IPTV network streams live signals from 5 broadcasters in 60 countries via its web site. Subscribers can access their preferred channels through any internetenabled device. Geneva-based ITU announced it is setting up a focus group on IPTV, to work on international standards. The ITU acknowledged that standards work is ongoing in many different places, including ITU, but said it is responding to an industry call for it to push forward and coordinate global standardisation effort in the field. Goldstone Technologies Ltd, a Hyderabad, Indiabased technology solutions provider, plans to launch IPTV services targeting the non-resident Indian community. It is partnered with Singapore’s SPL Innotech Pte Ltd. The investment in the venture is estimated at Rs250m. NRIs will be able to subscribe for a monthly payment and a set top box. Goldstone has assembled a library of 2,500 films. Chilean triple play provider VTR launched digital television services nearly two months ahead of schedule, and plans to invest a further US$445m in the service between now and 2009, local reports said. The investment to date was US$255m. Pioneer Telephone Cooperative, a rural phone company based in Oklahoma, is testing new equipment that can send IPTV services wirelessly to TVs. If the program succeeds, it could hasten telecoms’ entry into the TV market. The kit is being supplied by Ruckus Wireless NTELOS Inc., a Waynesboro, Va.-based integrated communications provider, has selected SkyStream® as its video headend partner for its new IPTV service over Fiber-to-the-Premise (FTTP) that will serve its Virginia ILEC footprint. Germany No sale at Pro7 Despite the fact that NBC Universal international president Frederick Huntsberry told reporters that he sees ProSiebenSat.1 is an attractive target to expand his European business, sources close to the German network say no moves are imminent. Following the debacle of its failed sale to Axel Springer earlier this year, rumour has engulfed the station. Sources close to German Media Partners, its owner, say the company is still more likely now to opt for a recapitalisation some time Media Finance Issue 94 April 13 2006 in the future rather than rush in to another sale process. “There is nothing imminent and certainly not by NBC,” said one banker. The German anti-trust office is already regretting its earlier actions (when it barred Axel Springer from taking it over) but the business is doing fine by itself.” Other sources have commented that, while Pro7 is currently in rude health, Haim Saban and his co-investors will be keeping a wary eye on the rate at which advertisers shun linear TV channels in favour of the internet. BERTELSMANN BANKS APPOINTED Bertelsmann has appointed advisers relating to its expected sale and debt programme, according to sources. The company is in the process of evaluating its options regarding rais©2005 Thompson Stanley Publishers Ltd Europe ing the c.E5bn it needs to buy the 25% stake currently owned by its partner, GBL. The most likely course of action is thought to be a limited asset disposal programme accompanied by a recapitalisation of its balance sheet. As well as having a long-held mistrust of public markets, the controlling Mohn family are also said to look unfavourably at selling parts of their empire either, which limits the group’s options somewhat. Selling the 50% share in Sony BMG and its music catalogue could make the best sense though. Even if Sony were not to have the appetite to buy its partner out, its presence as a strategic shareholder would serve as comfort for any financial investor looking to buy in. It is not clear what roles advisers have been appointed for, if indeed they have, though Citigroup and JP Morgan’s names have been rumoured by bankers to have at least been in discussions with the firm. 6 GREENTV The world’s first TV channel aimed at environmental issues, green.tv, has launched with the help of UNEP. The channel is being distributed as a podcast on iTunes , wher it has secured a complimentary front page listing courtesy of Apple. The channel will offer films NGOs, community filmmakers, public sector bodies and companies with a firm interest in protecting the environment. It will have seven channels covering: air, land, water, climate change, people, species and technologies, in each of which there will be a feature, a news item and a children’s story. With the look and feel of a global TV channel, green.tv will combine this with the best elements of the internet, giving users access to online chatrooms and the ability to watch video on demand, UNEP said in an official release. the setting up of a TV production company, which will produce footage of Bundesliga and 2 Bundesliga matches from next season. This arrangement means that the DFL is terminating the current deal with Fair Play Productions, which has produced the content historically. Free-to-air broadcaster ProSiebenSat.1 is setting up an online shopping channel in partnership with TV auction specialist 1-2-3.tv. The channel — ProSieben Auktionshaus – will be broadcast weekdays by both broadcasters, with a focus on electronic goods. The Bavarian media authority BLM extended the licence of the local cable TV operator in Bad Steben to March 2014. The operator is FAG Fernseh-Antennen-Gemeinschaft Bad Steben eV. The content includes local information, a radio station (Radio Euroherz) and films. Mobile TV broadcasts based on DMB technology could begin in two thirds of Germany in May, following the granting of a licence from the Bavarian and Sachsen-Anhalt media authorities in recent days. Mobile service by debitel is expected to kick off the process by offering broadcasts from Mobiles Fernsehen Deutschland GmbH (MFD). Other regions that have approved DMB broadcasts are Berlin/Brandenburg, Hessen, Mecklenburg-Vorpommern, Nordrhein-Westfalen, Sachsen, Saarland and Thüringen. MFD plans to offer four TV and two radio channels, and will be in time to cover the all-important World Cup matches this summer. The federal cartel office in the event cleared the takeover by RTL of news channel n-tv without conditions. RTL is buying out the 50% stake held by CNN. Deutsche Telekom’s T-Systems Media&Broadcast sold its shortwave radio transmission facility in Jülich facility to UK-based charity Christian Vision. The facility has 100kW analogue and digital (DRM) transmitters with wide international reach. T-Systems will continue to operate the facility ©2005 Thompson Stanley Publishers Ltd UNITY BOND STRUGGLE THROUGH Cable operator Unity Media’s private placement of E1.35bn 7-year senior secured FRNs has met with muted response, trading down following its issue. Pricing on the offering, the second-largest high yield issue this year to date, is understood to have been flexed slightly to 287.5bp over three month Euribor following a strong bookbuilding period. However, this seemingly proved unpopular with some investors and the FRNs have subsequently traded down to 99.25 – 99.5 from par. The bonds are to refinance existing debt as well as fund certain working capital and operating needs. Unity, which was formed by the merger of rival operators Ish and Iesy, currently has E215m of 8.75% senior notes due 2015, E235m of 10.125m senior notes due 2015, and US$151m of 10.375m senior notes due 2015 as well as around E230m of bank debt. The refinancing also included a E130m revolving credit facility. Citigroup, Goldman Sachs and Deutsche Bank were joint bookrunners on the issue. Freshfields Bruckhaus Deringer advised Unity and private equity sponsors Apollo Management and BC Partners. Don Guiney, a partner at law firm Freshfields, commented: ‘This was an interesting transaction to work on as it was a refinancing of a senior credit facility with high yield - in other words debt but with pure capital markets characteristics.’ Meanwhile the German football league (DFL) is understood to have an option to acquire 10% of the capital of Unity Media’s subsidiary Arena Sportrechte und Marketing, which holds Pay-TV rights to Bundesliga matches. The option is reported to be linked to fixed and variable elements in the price to be paid by Arena for the rights, and comes into play if the variable element is too low. Arena is expected to pay DFL some E300m in the first season. TV/FILM/RADIO The board of the German football league DFL approved Media Finance Issue 94 April 13 2006 Europe until end-2007, when Christian Vision will take over operations. Private equity firm Spütz AG has reportedly bought the outstanding shares in Cologne-based TV production company Hurricane which it did not already own. Spütz acquired its initial Hurricane stake through its ownership of Digame. Part of the purchase is through a capital increase of 2 million new shares, boosting Hurricane’s capital from E14m to E19m. A new TV and radio production company, Bremedia Produktion GmbH, has been set up by Bavaria Film (51%) and public broadcaster Radio Bremen (49%). The venture will be run by Martin Moll and Gerhard Schneider. The new company is not limited to production for Radio Bremen alone, and will seek outside customers. It is expected to have annual sales of E15-20m. CEO of Bavaria Film, Dr Dieter Frank said this is a good example of a long term public/private partnership. e-m-s new media is reportedly selling its 52% holding in DVD/video rental business 3L Filmverleih in order to concentrate on its core activity in home entertainment. The rental business lost E2.3m on turnover of E1.6m. e-m-s new media’s overall turnover in 2005 was E18m, on which it lost E0.3m. 7 with Connect Media Marketing GmbH. The site offers 50 titles grouped in four “shops” – Spring presents, wellness, travel, and the World Cup 2006. Connect Media hopes to replicate the model in other parts of Germany, with other partners. Wallstreet:Online AG has acquired 50.1% of the capital of performance marketing firm Firstlead GmbH. It is responsible for selling advertising space for the online portals of a number of newspapers including Hamburger Abendblatt, Ddp.de, and Wallstreet-Online.de. It generates leads for brokers and financial advisers. Ireland Stockbyte snapped up Stockbyte, a photographic imaging firm has been bought by Getty Images in a deal worth E110m. Stockbyte is based in Kerry and counts Time Magazine, BBC, Saatchi & Saatchi and AOL as customers. it employs 30 people at its headquarters in Tralee. Prior to the sale, the target company and its subsidiary were jointly the largest provider of royalty free images to Getty and had an estimated 10% share of the global stock photo market with sales of over US$50m. ONLINE/DIGITAL Bertelsmann is working on plans to convert its music and book clubs into a virtual community for older people, said reports. This will provide an online forum for like-minded “seniors” to shop and swap material. The clubs, run by Direct Group, currently boast over 35 million members around the world. For Bertelsmann such a venture marks a new attempt to grapple with the online market. Internet services agency Pixelpark has acquired a 51% stake in marketing and PR company Schindler Parent & Cie. The Meersburg-based company had 2005 revenues of E8m. For Pixelpark this marks one of its first investments in offline business, and in the advertising/marketing world. Multimedia software developer Magix AG priced its shares in its 13 times oversubscribed IPO at E16.40. The listing was managed by Dresdner Kleinwort Wasserstein, with colead JP Morgan Cazenove. The issue comprised 1.35 million new shares and 3.24 million old shares, raising E87m, and creating a free float of 42%. The company valuation was E208m. Proceeds are to be invested in its online services and content, as well as R&D. Founders Jürgen Jaron and Dieter Rein remain the largest shareholders with 45.8%, and together with management retain over 50%. Private equity firm 3i, which invested in 2000, was a seller, but retains 11.2%. Publisher M. DuMont Schauberg has set up an online subscription sales portal called Magazzo in cooperation Media Finance Issue 94 April 13 2006 SETANTA OUT OF TV3 RACE Setanta has pulled out of the process to buy TV3 according to reports in the Irish press this week, which claim the valuation of the business has climbed to the region of E250E300m. Canwest’s 45% stake was originally talked about being worth around E90m-100m. The process still hinges on ITV, which has preemptive rights over the business. Whether ITV exercises this right as it considers leveraging up to reward shareholders in the aftermath of last month’s private equity bid is another matter. The other two serious bidders are said to be Doughty Hanson, possibly with Carlyle, and UTV. BSkyB and Advent International were mentioned in the press as having made initial bids for the business. Hawkpoint is running the sale for Canwest. For background on this process, visit our archives at www.mediafinance.com. Strong advertising growth in the Irish radio market helped Emap’s Today FM grow revenue by 11% last year. Revenue at the station came in at E15.1m for the year to September 30 2005 compared with E13.6m the previous year. Operating profits grew 22% by E3.6m to E4.4m. Last month, MediaFinance reported that at least two radio stations, East Coast and Country were currently up for sale and that another, WLR of Waterford, would be were it not for the founding partner refusing to sell his 30% stake in the business. ©2005 Thompson Stanley Publishers Ltd Europe Mecom buys Limburg papers On top of its acquisition of a stake in SBS and its outright purchase of Sky radio from News Corp last December, Dutch media conglomerate Telegraaf Media Groep (TMG) has racked up its third deal in three months, this time selling its Media Group Limburg (LMG) business to David Montgomery’s Mecom investment firm. ING ran the auction for the seller, Numis advised Mecom. Sources close to the auction report that Mecom won the auction on price rather than any anti-trust issues, for example printing and freesheet joint ventures LMG is involved in, that had been considered possible barriers to an acquisition by local media groups. The next closest rival in the process was believed to have been the joint bid by Belgian firm Concentra and NDC. Other bidders linked to the deal were Wegener, another local player, plus a Dutch private equity firm. LMG assets: 8 Leading media group in the southern Dutch province of Limburg Dagblad de Limburger (2005 circulation c. 149,000 copies) Limburgs Dagblad (2005 circulation c. 55,600) De Trompetter, weekly door-to-door freesheet circulated throughout Limburg and in the Eastern part of Noord-Brabant province Peripheral assets including magazines Chapeau !, Nummer1 and WeekendGezet, plus local TV and radio interests. Financing the deal ing an outright acquisition. Under the first banner, Mecom has built up a reasonably sized stake in Scottish Media Group, although a senior source at the company said that neither Mecom nor SMG expected this situation to develop into a full blown takeover. Under the second investment model, all Mecom’s previous deals have been accomplished with a partner; either 3i, with which it bought Local Press in Ireland in 2004 or Veronis Suhler Stevenson, with which it currently bought its Berlin and Hamburg assets. The Limburg purchase marks a departure in this sense as it is the first time Mecom has bought 100% of a business on its own, although it is unlikely to be its last. “You can never say never, but it is our intention to operate our businesses as operational media concerns: we won’t look to invest for short term gains, but for the long term benefit of our shareholders,” said a senior source at the company. The source also stated that Mecom intends to retain LMG’s existing management team and that, while some more cash could be made available for add-on acquisitions, most of the upside in the business would come from organic growth. In terms of organic growth, the source said that the group would operate entirely independently of Mecom’s other investments in Germany and did not expect there to be any synergies between the businesses. Mecom in the future Mecom is paying an aggregate E200m on a cash and debt free basis. To support the acquisition and its recent purchase of Hamburger Morgenpost, the company in late March placed 300 million new shares through broker Numis Securities at 45p each, a 5p discount to its market price, to raise £145m net of expenses. Mecom last raised a E120m facility through Barclays and WestLB but this was related to its joint purchase with Veronis Suhler Stevenson of Berliner Verlag and the Hamburger Morgenpost, which are being held in an entirely different company to LMG. Given the Limburg price tag is around £140m, and it is also in negotiations to buy regional titles of Groupe Industriel Marcel Dassault in France for E250m, a new fundraising effort seems inevitable. The Mecom Strategy Aside from concentrating on unilateral acquisitions, Mecom is taking a broad view on future strategy. While its attempt late last year to buy the regional publishing assets of Socpresse in France may have ended in defeat, the group still maintains that any EU territory outside the UK represents a potential target market for the group (indeed, it is currently active in France, see below). “Besides our historic interests such as SMG, our mainstream activities are focused on Continental Europe: we don’t rule anything out and with the current enlarged size of the European Union, that’s a significant platform. We currently have live opportunities we are examining and we would hope to do something else this year,” said the source. Mecom to resume trading on AIM? Mecom’s publicly stated goal is to invest in mainland European publishing and related media assets by either taking an activist shareholding in listed companies, taking businesses private with the help of private equity or mak- Mecom’s shares were suspended on 19 January following the announcement that it was discussions regarding the potential acquisition of the regional publishing assets of Groupe Industriel Marcel Dassault for E250m. This comprises regional titles in Dijon, Chalonne, Lyon and Grenoble This suspension is ongoing and is expected to continue until mecom either completes both acquisitions or announces cessation of either or both processes. Media Finance Issue 94 April 13 2006 ©2005 Thompson Stanley Publishers Ltd Europe Italy 9 its bid fail. Knight Vinke’s strategy involves selling 30% of the business, renaming it and selling some divisions. Meanwhile, bankers on the buy side have become increasingly despondent of Valcon’s chances of late, with most fearing that both sides’ positions have become so entrenched, it may now be impossible to find commonality without one side giving serious ground. Valcon’s offer expires May 5 and needs 95% approval. Knight Vinke owns a very vocal c.2% of the business. Credit Suisse is adviser to VNU, Rothschild has delivered an independent valuation and Evercore Partners is advising VNU’s supervisory board. Valcon, comprising Alpinvest, Blackstone, Carlyle Group, Hellman & Friedman, KKR and Thomas H. Lee Partners, is advised by ABN AMRO, Citigroup, JP Morgan and Deutsche Bank. Mediaset, TI deny marriage Mediaset and Telecom Italia have both denied they are planning to merge. The speculation was leaked as Italy, whose PM Silvio Berlusconi is Mediaset owner Fininvest’s major shareholder, went to polls in a general election amid signs that his Forza Italia would lose power, thus eliminating political problems related to any merger. Despite small cross shareholdings that are almost a way of life in Italian big business, both companies have only ever worked together as supplier and customer. Were any merger talk to turn out to be true however, it would mark the first time an incumbent telco had merged with a leading TV player and could make an interesting experiment into the practical application of convergence on a grand scale. The media regulator AGCOM kicked off a consultation exercise to define rules for making mobile TV based on DVB-H technology available across Italy. The consultation documents are available at www.agcom.it/provv/c_p_DVB-H/intro_DVB-H.htm. Telecom Italia Media (TI Media Broadcasting) and MTV Networks collaborated to launch MTVFlux, an interactive multimedia service which can be received on television, via the internet on PCs, and mobile telephones. The channel is broadcast in analogue format at present, but will be available on DTT soon. Independent television company Digital Television SpA has acquired 100% of the share capital of Parla.it. This will allow Digital Television to add VoIP services to its current product of IPTV over ADSL. The company has some 30,000 subscribers to its services in the Florence and Palermo (Sicily) areas. The seller of Parla.it was France Telecom, and the sale price was estimated at some E10m. TELEGRAAF READIES FOR SKY RADIO Following the conclusion of the auction of its Limburg Media Groep business to Mecom for E200m, Telegraaf Media Groep (TMG) is on the verge of being able to assume control and ownership of Sky radio, the radio station it bought from News Corp in January. The asset is currently under the control of its financial adviser and partner in the transaction, ING, pending either a relaxation of Dutch media ownership laws or the event whereby its market share of the Dutch newspaper market dips below 25%. While this is unlikely even with the sale of the Limburg papers, sources say a particularly strong performance by Algemein Dagblad (AD), the new newspaper of the PCM / Wegener joint venture that was launched last September could effect such an event. If TMG’s market share still remains above 25%, sources close to the company say that ING will syndicate ownership of Sky radio among other banks so that no one entity has a controlling stake. TMG’s strategy is to build a cross-media business with less reliance on the home market. To this end, it recently bought a 20% stake in SBS. However, with the group having done three deals in the past three months (SBS, Sky Radio and the Limburg disposal) TMG watchers expect the company to take a breather from M&A in the short term. The Limburg sale is expected too close by the end of May. Teasers on the forthcoming sale of SDU by Fortis Bank have been distributed, say sources, ahead of a formal launch of the sale process in the coming days. The government owned asset – which consists of the Netherlands’ company database and a less glamorous securities printing business. The business has been on the block several times before and no banker yet has expressed surprise that the current process has slipped from February, when the process was first thought to begin. SDU is owned 80% by the Ministry of Finance and 20% by Wolters Kluwer, has annual turnover of around E130m and could sell for around 2-2.5 x turnover, sources say. A sale was first mooted in 2003. ING is advising SDU on the sale. See our archives at www.mediafinance.com for background on this process. ©2005 Thompson Stanley Publishers Ltd Netherlands VNU delays AGM The continuing dispute between VNU management and shareholders over the bid currently on the table from Valcon, the private equity group, has resulted in the firm delaying its AGM for two months as it seeks a resolution. The delay was made after shareholders had already registered proxy votes ahead of the planned April 18 meeting. Valcon has tabled an offer of E28.75, though shareholders led by Knight Vinke say the company is worth more. Before the current process was launched, shares were around the E22-E23 mark. Management at the firm remains strongly behind Valcon’s offer and are said to have no plan B should Media Finance Issue 94 April 13 2006 Europe 2WAYTRAFFIC PLANS AIM LISTING 2waytraffic, the interactive content firm set up by two exEndemol executives in 2004, has raised £24.3M on an initial public offering on London’s AIM market. Investec managed the offering, which gives the company a market cap of around £107.9m. The company, which was admitted to AIM April 7, makes most of its money from partnering with traditional broadcasters on offering interactive services, most notable premium rate phone calls. Based in Hilversum, the company has sold formats to 17 countries and currently has over 40 employees internationally. Clients include SBS6 (Netherlands), TV Denmark, TV2 (Hungary) and TVN (Poland). The company said in its registration documents that the proceeds of the listing would be used to fund both organic and inorganic growth. It is already active in the M&A space, having last month acquired Dutch interactive IPTV enabled business HIP TV. Local telco KPN is to take a majority equity position in ON, a narrowcasting platform. Founding shareholder Heineken will take the remaining minority stake. The platform delivers video content to bars and other hospitality venues. The deal is similar to one in the UK two years ago, when retail TV specialist Avanti Screenmedia took over Diageo’s in-pub entertainment network from the drinks company. It also underlines KPN’s ambition to become a multimedia business rather than mere telecom company, as is the vogue among telecom incumbents in the current climate. 10 region, perhaps confirming most bankers’ view that the outcome, should a trade buyer end up with the assets, will have a distinctly Scandinavian feel to it. For its part Orkla and its adviser Deutsche Bank have made it clear that the business could be sold in its entirety or piecemeal depending on what would be more lucrative. This could suit some parties, for example Egmont with which it has a magazine joint venture. One of Orkla’s most prized assets will be its Danish newspaper business, which is a market leader in the country. FAST BUYS KOPEK Fast Search & Transfer, a developer of enterprise search technologies and solutions, has acquired Kopek AS, a developer of a secure online content access platform for an undisclosed sum. “This acquisition extends FAST’s ability to offer customers new ways to distribute and monetize their digital content, and enables consumers to conveniently access personal and public content from any device,” said Ali I. Riaz, president of FAST. Portugal Do Amaral distances Media Cap from PT bid Pais do Amaral, chairman of Grupo Media Capital, has ruled out involving the company in his planned bid for the country’s incumbent telecom operator, Portugal Telecom. Do Amaral is expected to bid with six private equity shops, including KKR and Blackstone, for the business, which is currently also being stalked by local industrial conglomerate, Sonae. Among its diverse business interests, Sonae has internet and pay TV assets. As part of its defence strategy, PT has appointed Citigroup and Merrill Lynch, alongside existing advisers UBS and Merrill Lynch to explore strategies for its media business. Should do Amaral succeed in buying PT, integrating PT Multimedia business into Media Capital could make compelling logic for a future deal. Spanish media group Vocento is talked about as a likely buyer of Cofina, the media group which last year bought a strategic stake in Lusomundo Media from PT Multimedia. Cofina is a listed entity. It has been investing in Spanish technology group Avanzit, and now holds 11.57%. BLOOMBERG TO GET BRAINPOWER BOOST Bloomberg is to acquire Brainpower, a provider of investment data to investment managers, for E33m. The price reflects a premium of 20% over Brainpower’s Friday 7 April’s closing price and 42% premium to the firm’s average price over the last four weeks. Brainpower had revenues of E7m in 2005 and a net loss of E1m. Brainpower’s three founders – who own just over 50% combined – have announced their support for the takeover, which requires 85% shareholder approval. Norway Orkla ‘gradually moving’ The sale of Orkla Media has been described as ‘gradually moving forwards’ this week by one banker involved in the process. What this means is that Information memorandums have been circulated, and some buyers are in the process of appointing advisers. At least two London based private equity outfits - including the ever present Mecom are known to be looking at the business, plus all the usual local trade plays. With the exception of Icelandic investor Dagsbrun, all the trade buyers are said to be from the same Media Finance Issue 94 April 13 2006 Spain TPI runners down to two Only two bidders, Yell and the Apax-Cinven-owned World Directories business, are left in the running to buy Telefonica’s 59.9% stake in TPI, the Spanish telephone ©2005 Thompson Stanley Publishers Ltd Europe Saudi Research launches IPO Saudi Research & Marketing Group opened subscriptions for its IPO on April 8, with the offer closing on April 17. On offer are 24 million shares at SR46 each, following a share split, available only to Saudi nationals. This is claimed to be the first IPO of a media group in the Arab world. The IPO is led by Samba Financial Group, which is also financial adviser. SRMG is active in publishing, advertising, printing and distribution. It claims to be the largest publishing house in the Arab world, producing 15 publications in Arabic, English (Arab News), Urdu and Malayalam. It has expanded through acquisitions, including Hala Press in Riyadh and a stake in Moutamarat Company with Dubai Holding. SRMG had net profit of SR181.4m in 2005, up 290% on 2004, on sales of SR1.2bn. The share capital was recently raised to SR800m. Among new projects is a plan by a subsidiary Saudi Research & Publishing Company to print the Arriyadiah sports newspaper in Germany beginning June 1, to provide coverage of the Saudi team in the World Cup. The paper will be distributed in all German cities that host World Cup matches. Executives were also quoted saying they plan 11 to launch a UAE edition of Arab News to meet demand in the Gulf area for an English language daily. Arabian Broadcasting Company, part of the Avanti Consulting Group, is set to launch a 3D television channel in September, said local reports. Branded ABCD, the channel can be viewed on ordinary sets in 2D or with special glasses to gain the 3D effect. The channel will be broadcast on Nilesat, initially targeting the Arab world but extending later to Europe and Asia, Avanti CEO Dr. Issam Daoud was quoted saying. The channel has studios in London and Monaco, with another due to open in Dubai this year. The company is producing content for the special format, beginning with coverage of muslim religious festivals. The owners hope to have an IPO on the London stock exchange within three years. Oman’s second TV channel will be launched before the end of 2006, said Information Minister Hamed bin Mohammed Al Rashdi. The station will focus on youth content, with coverage of local sport and social events, as well as showcasing Oman to the outside world. directories business, as Seat PG, Pages Jaunes and a buyout consortium consisting of Carlyle and KKR have all dropped off. BNP Paribas is running the sale for Telefonica. World Directories is advised by Morgan Stanley and Credit Suisse while Yell is advised by Deutsche Bank and Goldman Sachs. Apax and Cinven have appointed ex-PRISA official Ricardo Diez-Hochleitner to front their bid for TPI, widely seen as an important development. Firm bids are due on April 21. Telefonica has indicated that if offers from either party fall below E2bn, it reserves the right to begin discussions with other interested parties, or abandon the sale. PRISA LINING UP E1.5BN FACILITY Prisa, currently in the midst of a battle with RTL for Portugal’s Grupo Media Capital, is believed to be lining up a E1.5bn loan. Debt bankers have suggested that Prisa is in the process of mandating banks and that its current facility to back the acquisition of pay TV operator Sogecable could be rolled into the new debt. Citigroup advised and is providing financing for the tender offer for Sogecable. Local bank Caja Mardid is reported to be one of the banks mandated for the E1.5bn loan. linked to buying out various shareholders as Codere’s largest shareholder, the brothers Jesús and Joaquín Franco, are reported to have sold their 41% stake to the other leading investor, the Martinez Sampedro family, whose holding is to rise from 35% to 76%. Along with sales from other minority shareholders, including 2.5% sold by financial investor ICG, Sampedro’s holding rises to 80%. According to reports, in total 28.3 million shares are to change hands at E17 to E23.5 per share depending on when the deal is completed, with six million being new shares via a capital increase. The Franco brothers are selling 18 million shares. Financial investor Monitor Clipper holds convertible bonds, which could account for up to 16% of the capital on conversion. Codere operates in Spain, Italy and Latin America, with EBITDA in 2005 of E76m on revenues of E378m. It operates casinos, bingo halls, slot machines and race tracks. Undeterred by his last minute failure to buy the Socpresse titles at the tail end of last year, Jose Maria Bergareche, CEO of Vocento, has said he wants to spend E750m on acquisitions this year. TV production company Multipark has a new investor in the form of Boomerang TV. Its other shareholders are Telemadrid and Caja Madrid. Multipark also announced the appointment as director general of Tony Gratacós, who joins from Walt Disney Televisión Iberia. Pay TV operator Sogecable implemented on March 31 ©2005 Thompson Stanley Publishers Ltd CODERE LAUNCHES BOND Leisure group Codere is raising E150m in a 10 year straight issue via Credit Suisse and Morgan Stanley, and a E135m PIK loan via Credit Suisse. The bonds are rated B2/B. The bond issue is a tap on the E325m 8% issue of 2005. Proceeds are Media Finance Issue 94 April 13 2006 Europe the capital increase approved earlier in the month by the AGM to pay for the acquisition of the 14.5% not already owned by it in Canal Satelite Digital from Warner and Dalbergia. This involves the issue of 3.3 million shares, raising the capital by 2.41% to 133.6 million shares, each of E2 nominal value. The operator also reported that its free-to-air channel Cuatro boosted its audience share in March to 5.6%, making it the fastest growing Spanish channel. It has a target to reach 7-8% this year. Analysts at Inverseguros raised their target share price to E35.50. The digital terrestrial TV multiplex owner in the Catalan area, Emissions Digitals de Catalunya (EDC), began broadcasts to an estimated audience of four million viewers. Four channels are available, including Td8 (previously Citytv). 12 and Hellman & Friedman are thought to be still in the running. JP Morgan is selling the business for Lion Capital. Glass’s made an ebitda of around E38m, suggesting a reported valuation of E500m represents a not unattainable target for the seller. Bankers report budding interest for M&A-focused online news service MergerMarket, currently the subject of a strategic review by Hawkpoint. MergerMarkets is owned 24% each by Beringea and New Media Spark, the rest by founders and management. Early reports said the company – which collects news from around the world and bundles it with its own proprietary content, could go fetch £150m, although this figure has been questioned by some bankers. “It is quite easy to get excited by the high margins, but where is the barrier to entry? When you look at it, is more of an aggregator. When the market turns, it is hardly must-have data,” said one sceptic. Sweden CONSUMER PRESS Games software funded Terraplay Systems, a developer of software that allows multi-player online games, has raised US$3.2m in a round of VC funding. Investors included Cisco, IT-Provider, Nordic Venture Partners and VPSA. Terraplay’s offering includes community tools, in-game micro billing, asset download and multiplayer connectivity for publishers of online games. The additional financing will be used to speed up the rollout of Terraplay’s global gaming network. Hachette Filipacchi is to suspend its women’s magazine, B, from the May edition. The decision affects 20 staff. BBC Magazines is to launch a new title, Dr Who, aimed at the children’s market. The launch is planned to coincide with the beginning of a new series of the hit TV programme of the same name. TV/RADIO TEN ALPS BUYS MAGAZINE PUBLISHER UK Veronis wraps Granada Learning buy at last Veronis Suhler Stevenson’s long running attempt to buy educational publisher Granada Learning from ITV reached a conclusion this fortnight, after it agreed to pay a figure somewhere in the region of £35m for the business. ITV, advised by the Von Tulleken Company, had originally been hoping for a figure in the region of £100m. However, sector specialists say the business is underperforming vis a vis its more aggressive peers in the growing educational media market, hence ITV’s reduced expectations. Other bidders are thought to have included Pearson and HgCapital. VSS will wrap the business, which predominantly publishes school textbooks, with its other educational portfolio businesses: Letts revision notes and educational software provider, Sherston Publishing Group. ITV will most likely use the spare change to put towards its planned balance sheet restructuring. Bankers familiar with the ongoing sale process at B2B car data firm Glass’s Guides say a result should be reached in a few weeks. Bridgepoint, Candover, Montagu Private Equity Media Finance Issue 94 April 13 2006 UK independent TV production business Ten Alps has taken the unusual step of buying a contract publishing business, McMillan Scott, as part of an endeavour to reposition itself as a TV publisher as well as TV content producer, andcash in on a sector of the UK media market where advertising is expected to outstrip the market as a whole in coming years. McMillan Scott’s primary customer base is the pubic sector although it has other B2B markets. Of its 300-odd titles, all but 25 are produced under contract for clients. The rationale for the acquisition on the part of the buyer is Ten Alps’ For essential telecoms news subscribe to Please contact Renato Leite Tel : +44 (0) 20 7251 2967 e-mail: Renato.Leite@telecomfinance.com ©2005 Thompson Stanley Publishers Ltd Europe interest in using McMillan Scott’s customer base as it seeks to grow in the public sector internet and digital TV space following its happy experiences producing Teachers’ TV for the government. It is paying up to £12.25m for the business, including a £1.75m earn-out. Average turnover was £26.14m over the last three years, with ebit generally in the region of £1m. Following the acquisition, McMillan Scott will be folded into a new business division at Ten Alps, TV Publishing & Internet, which will also comprise Ten Alps Internet & Digital TV, Ten Alps Live and the group’s marketing operations. The other division, TV & Radio Production, will include the six broadcast production companies making programmes for mainstream channels. The CEO of McMillan Scott, Adrian Dunleavy, has been offered a new contract by his new employers. Financing the deal 13 INGENIOUS LISTS ON AIM Ingenious Media Active Capital, the investment vehicle chaired by Tony Ball and boasting ex-rock star analyst Neil Blackley and Patrick McKenna, founder of Ingenious Corporate Finance, has listed on AIM, having raised £1540m to invest in unquoted companies in television, music, film and interactive entertainment. Shares were placed at 100p by Bridgewell. Ingenious had wanted to raise £250m but apparently cut back its target after investors indicated they wanted to see all the group’s funds invested within a year. and a subsequent repositioning of by CCCL chairman Paul Smith towards film and radio production. Celador has been restructuring for some time, having recently closed its year old Kids TV unit and folded its music and events arm into Celador Productions. The Who Wants…format has been sold to over 100 countries worldwide. LongAcre is managing the sale. TWI, the sports content producer and distributor has bought Darlow Smithson Productions (DSP), a producer of mainly factual programming. Financing for the deal comes from TWI’s parent, IMG. TWI’s growth strategy is centred upon its becoming a mainstream producer of (non-sport) content. DSP produces around 100 hours of programming per year and makes an annual turnover of around £20m. Channel 4 has signed up to ITN for another five years in a new contract worth in excess of £100m. Leeds United Football Club has acquired spectrum on MXR’s Yorkshire Multiplex from GMG Radio, with which it plans to launch its own club-themed DAB radio station. Al-Jazeera will launch its English language news channel in June. UBM’s ongoing clear-out of non core assets saw it this week selling its Cardiff TV studio complex, Culverhouse Cross, to ITV for £18.7m. ITV has previously been leasing the site from UBM. Ten Alps has resisted the temptation of using its cash on hand to fund the purchase, a sensible move considering the current level of M&A opportunities among TV producers. Instead, it has opted for a credit line from the Bank of Scotland initially for £13.62m but capable of flexing up to incorporate the needs of meeting the earn-out arrangement. The company has also conditionally placed 7 million new shares via co-brokers Collins Stewart and Canaccord Adams at 65p per share, raising £4.55m before expenses. Collins Stewart advised on the transaction. Proof that there remain plenty of acquisition prospects out there for UK TV producers comes this month courtesy of RDF Media, which has entered into an agreement to buy Presentable, the Wales-based production business known for its Late Night Poker show on Channel 4 and more recently other poker TV content for Five and Challenge TV. RDF is buying 100% of the company for £6m, initially made up of £2m (half cash, half paper) and a potential £4m earn out. The sellers are husband and wife team Chris and Megan Stuart. Note Ten Alps opted to raise fresh debt to fund its McMillan-Scott business in order to keep some powder dry in its existing facilities in the event it too made any other sizeable acquisitions. NB: RDF’s shares have taken a hit this fortnight, following a negative report on the sector by Numis Securities and the departure of creative director Stuart Murphy after three months. Not to be deterred, John de Mol used the opportunity to increase his stake in the business. NEWSPAPERS GMG KEEPS ITS OWN COUNSEL Following its board meeting two weeks ago, no news has leaked out regarding the outcome of a recent strategic review conducted by Merrill Lynch of Guardian Media Group. The company hired Merrill earlier this year to lead a review, prompting excitement from bankers that a sale of its flourishing Auto trader business or other newspaper and local radio assets might be on the cards.” They have a board meeting every month, I guess we’ll just have to wait for this month’s to hear if there is any news,” commented one banker. Another said: “This sounds like the BBC all over ©2005 Thompson Stanley Publishers Ltd ENDEMOL FOR MILLIONAIRE FORMAT? Endemol has thrown its hat into the ring to buy the popular Who Wants to be a Millionaire format. The seller is Complete Communications Corporation, parent of Celador Productions and Celador International. Should the sale process end in a successful exit for the firm, what looks to be on the cards is a management buy out of both subsidiaries Media Finance Issue 94 April 13 2006 Europe again: lots of excitement but then nothing ever came of it.” The Guardian Media Group, owned by the Scott Trust, has a mission to guarantee the independence and viability the Guardian newspaper in perpetuity. Transport for London (TfL) has launched a tender process to distribute a new afternoon free sheet on its station network. The new title will go head to head with the city’s major paid for title, Associated Newspapers (DMGT)’s Evening Standard. Publishers have until April 21 to register an interest. The most likely parties would be Northern & Shell, owner of the Daily Express among other titles, and News International, publisher of The Times and The Sun. Northern & Shell is said to have developed a title, Londoni in its media lab already while News had to mothball its own attempt three years ago after failing to secure distribution. The current tender became possible following an OFT investigation and the subsequent reaching of an agreement with Associated Newspapers to relinquish its exclusive rights to morning and afternoon distribution on the network. Sources have confirmed that DMGT has no plans to make further disposals of its Northcliffe regional newspaper assets following last month’s sale of the Aberdeen Journals business for £132m (16 x times ebitda). For the record, Greenhill and Freshfields advised on the sale. WH Smith has unveiled a plan to demerge its newspaper and magazine distribution business from its core retail business. 14 US OUTDOOR ADVERTISERS TO RETRENCH? One interesting piece of gossip to have come out of banking circles over the past fortnight is the possibility that US outdoor advertisers Viacom and Clear Channel may be contemplating an exit from the European market. “The big US outdoor advertisers are slightly under pressure at the moment, “commented one banker. “It is all to do with the fact that there is not anything wrong with their Western European assets but more to do with the fact that their US businesses are so much more profitable. In Europe, outdoor advertising is structurally a much lower margin business and couple this with the fact that it is JCDecaux’s own back yard, competition is intense.” Add to this the fact that Maiden has just been acquired by another aggressive US player Titan, and competition could be about to become even more intense. The structure of the out of home advertising business in US is different in that the billboard operator controls the permit rather than the landowner, thus taking away a lot of the leverage enjoyed by landlords in Europe. Competition is also believed to be less fierce in the US. Not all bankers are convinced that a retreat is on the cards though. “There are no indications from either company and I am very doubtful,” said one. Either way, this summer could prove to be a critical juncture for Viacom, whose ten-year contract to run advertising on the London Underground comes up for renewal. The need to hedge against any losses here was the primary reason the firm retained an interest in buying Maiden earlier this year. in the UK at the moment and after a heavy year of network build out, has around 20 malls now in operation. This figure should rise to 30 by the end of the year, CEO Dave Clarke told MediaFinance, although with audited footfall of 340 million per year (by comparison, the London Underground gets 900 million per year), the company already has critical mass, he says, with revenues in the first quarter already overtaking those for 2005. ScreenFX’s mall business aims for shoppers to dwell on the screen for 2-10 secs and therefore is aimed at reinforcing national advertising campaigns. Clarke told MediaFinance the market was growing at 87% per year, much faster than other traditional outdoor and TV media. The train business is more targeted at providing content to a captive audience – usually the ABC1s that TV finds hard to reach, and is currently being rolled out on one regional train operator. Screen FX owns its own advertising sales operation. Clarke told MediaFinance the innate value of the company is in its network scale plus the length of its contracts – which typically are 6-10 years. This makes it difficult for established media players to enter the market. Clarke also said he believed the market was in need of consolidation and that, once investors had been delivered proof that ScreenFX’s revenue lines were meeting expectations, the company might contemplate making acquisitions. Vincent Bollore has increased his holding in Aegis once ©2005 Thompson Stanley Publishers Ltd ADVERTISING/MARKETING SERVICES TWENTY BUYS DATAFORCE Ofex-listed Twenty Plc has acquired marketing services business Dataforce for US$11m cash. The deal is being financed via the proceeds of a recent capital raising exercise that will see the company also move on to the larger AIM market. Livingstone Guarantee advised the seller, which initially received ten offers, three of which were invited onto a shortlist. Dataforce’s business involves a full range of services from business intelligence to call centres and clients include Heinz, Tesco, Inland revenue and the UK Royal Navy. Twenty will use the acquisition as a first major step on a data-focused buy and build strategy. Twenty first joined Ofex in June 2005 after it closed a private placement with the help of then adviser, St Helens Capital. SCREENFX PLANS CAPITAL RAISING Outdoor advertiser ScreenFX is looking to raise £3m via a share placement to fund the accelerated rollout of its super mall advertising network and other initiatives such as train TV and health clinic TV. The issuance will be by way of 300,000,000 shares at 1 pence each. Seymour Pierce is managing the offering. The company is currently targeted the 50 or so ‘super malls’ Media Finance Issue 94 April 13 2006 East Europe Czech Republic 15 closed sum. 15Min launched last September and has built up a circulation of 85,000. It is published five days a week in Vilnius and Lithuania’s second city, Kaunas. Schibsted already has interests in Lithuania, through its 67% holding in magazine publishing group group Zurnalu Leidybine Grupe, and 51% stake in newspaper, LT. Six DTT licences The media regulator RRTV issued six digital terrestrial TV licences. Each is valid for 12 years, and allows national coverage. The population of the Czech Republic is 10 million. The digital switch-over is set for 2012, when analogue broadcasters will automatically receive digital licences. New licensees are Televize Febio (which belongs to a Czech film producer), Ocko (ultimately owned by Germay’s Rheinisch-Bergische Druckerei & Verlagsgesellschaft GmbH), Barrandov TV (which belongs to film studios AB Barrandov Holding AS), Z1 (a unit of local financial services group J&T Finance), TV Pohoda; and Regional Television Agency, a consortium of Czech regional TV companies. The new broadcasters will compete with existing free-to-air channels TV Nova (Central European Media Enterprises), Prima TV (RTL) and public broadcaster Czech TV. Both TV Nova and Prima TV bid in the recent auction and failed to win licences. Poland Springer starts second newspaper German publisher Axel Springer, not content with owning Poland’s top selling newspaper Fakt, plans to launch on April 18 another daily title. The national (“super-regional”) newspaper is called Dziennik. The target audience is young, educated readers who are interested in Polish, European and international coverage. Russia Kommersant: IPO or sale? Georgia-based oligarch Badri Patarkatsishvli is considering an IPO for the Moscow daily newspaper Kommersant, although it is rumoured that energy giant Gazprom may buy it. A value of US$150-160m is cited for the newspaper, although in press reports Patarkatsishvli is said to have a target of double that. Gazprom Media is an ally of the Kremlin, and has been steadily extending its ownership of media assets. It owns television station NTV, radio station Echo Moscow, and the daily newspaper Izvestia. Motor Presse Stuttgart was to launch on April 5 a Russian edition of its Maxi Tuning automobile magazine. Estonia Local telco Eesti has bought a 51% stake in internet portal Serenda for US$3m. Serenda is the owner of online community site Rate.ee, the country’s biggest social network with 360,000 registered members. Lithuania Nordic publishing house Schibsted has bought a 99.99% stake in the free Lithuanian daily paper 15min for an undisContinued from previous page - Europe more, indicating his ambitions at the firm are still alive and well. Bollore’s stake in Aegis now stands at 26.03%, after he raised it from 25.8%. Huntsworth has completed the sale of its marketing services businesses to Media Square for £63m. Visit our archives at www.mediafinance.com for background on this. anything up to US$250m. Game developer Lionhead Studios has been acquired by Microsoft. ONLINE/DIGITAL Online DVD rental market leaders Lovefilm and Video Island are to merge. The 50-50 partnership will have 400,000 subscribers. The new entity will be called Lovefilm although Video Island’s CEO, Simon Calver, will assume control of the merged group. Combined sales last year were 25%, with growth being reported from moves into Europe (so far limited to Scandinavia) plus white label operations for customers such as Tesco, ITV, MSN, Sainsbury’s and WH Smith. Lovefilm’s majority shareholder, Arts Alliance Media, has secured a long term contract with the new firm to provide it with VoD and electronic sell through services. ©2005 Thompson Stanley Publishers Ltd GAMES US mobile game publisher Glu has acquired its UK counterpart iFone for an undisclosed sum. iFone, based in Manchester, had revenues of £11m in 2005 but expects to make £25m this year. Post merger, Glu’s own revenues should grow by around 30-40%, according to the company. Glu was widely reported as being in play itself recently but is now expected to pursue a stock market listing with a value of Media Finance Issue 94 April 13 2006 Asia Australia China 16 Austar to refinance Pay TV provider Austar United Communications Ltd is expected to appoint banks to arrange an A$600m refinancing in the coming weeks. The facility will replace its existing A$290m facility, which includes elements of term loan, revolver and working capital facility, and was arranged by Deutsche Bank and JP Morgan. According to reports, Austar is looking for a seven year tenor. The Packer family’s Publishing & Broadcasting Ltd made an offer to buy 25% of racing industry media firm ThoroughVisioN Pty Ltd. Merrill Lynch is adviser to TVN, which is owned by horse racing clubs. TVNs’ board has recommended acceptance of the offer, which values the whole company at A$100m. John Fairfax Holdings Ltd would like to buy regional newspapers when cross media ownership rules are relaxed, CEO David Kirk told reporters. West Australian Newspapers Holdings Ltd could be attractive, said sources. Another target for expansion is two digital TV licences, where the government plans to auction spectrum next year. Podcasting investment US-based Charles River Ventures announced an investment in Beijing-based WangYou Media, a blogging, podcasting and social network company. The VC is investing just under US$5m. This is its first investment in China. Leading online game peripheral service provider TKgame announced that it obtained a US$5m second round investment from Hong Kong investment fund management company Asian Groove HK. Proceeds will be used to build an internet game park. The company has two main products – one is a communcations platform allowing gamers to communicate with each other, and the other is a research tool allowing gamers to find local information. Radica Games Ltd., a maker of electronic games and accessories, hired Navigant Capital Advisors LLC to explore strategic alternatives which include the possible sale of the company. In 2005, Hong Kong-based Radica posted net income of US$10.5m, compared to US$3.5m the year before. Sales rose 31.9% to US$162.8m. Mobile music content provider Hurray! Holding Co Ltd is to launch a US$15m buyback of ordinary shares and/or ADRs. The buyback will be funded from the company’s US$76m cash pile. Continued from previous page - East Europe The circulation is 18,500 with a cover price of Rbs80. The magazine is produced under licence by Russian publisher, Game Land. Russia plans to have nationwide digital terrestrial TV by 2015, said telecommunications minister Leonid Rejman. This ambitious as the country’s existing analogue TV network is far from comprehensive. According to reports 1.7 million of the 140 million population receive no TV at all, and 65% receive only four channels. The state plans to subsidise digital set top boxes. Serbian law limits foreign investors to 49% of a broadcast company, with local investors holding the balance. While this should have excluded RTL, whose local subsidiary is majority foreign owned, local reports said the German broadcaster will be allowed to bid. Also in contention are a dozen parties including News Corp’s Fox International, Central European Media Enterprises, Cyprus-based Sygma Television, and Pro 5 from Romania. Serbian private TV stations are also interested. In particular Belgrade-based TV and radio broadcaster B-92 is thought sure to win a licence. There are said to be several hundred private broadcasters, most lacking a licence. The state-owned broadcaster RTS is to be established as a public broadcasting operation on the West European model. Serbia Five TV licences on offer Slovenia The media regulator Radio-Transmission Agency is holding a contest for five national TV broadcasting licences, with applications from local and foreign companies due last week. Additional local TV licences are on offer for the capital Belgrade and surrounding areas. The licences are to be awarded by July. Media Finance Issue 94 April 13 2006 Bertelsmann affiliate Gruner + Jahr launched a Slovenian edition of its magazine Geo. The monthly title has a circulation of 20,000 with a cover price of E3.30. The bulk of the 148 pagination will be editorially sourced from G+J’s Hamburg HQ. ©2005 Thompson Stanley Publishers Ltd Asia The Hong Kong Office of the Telecommunications Authority has set up working parties with the two anologue TV broadcasters ATV and TVB to plan for the introduction of digital terestrial TV in 2007, said reports. Beijing is keen for the widest possible introduction of DTT ahead of the 2008 Olympic Games. One problem is that China has still to decide on its technology standard for DTT. The analogue switch off in Hong Kong is set for 2012. Zero2IPO, a financial information service aimed at VC and private equity has closed a US$1.5m first round of funding. Investors include American Pacific Ventures, Startup Capital Ventures and Authoris Capital. 17 plus media support to JobStreet.com. The move reflects TV18’s push into online business, where it already owns moneycontrol.com, commoditiescontrol.com, poweryourtrade.com and ibnlive.com. It has invested in startup yatra.in along with venture capital investor Norwest Venture Partners. Adlabs Films, part of Anil Ambani’s Reliance group, is reportedly considering spinning off its burgeoning radio business into a separate company. Adlabs Films was successful in bidding for FM radio licences in the recent auction, where it won 45 licences. It bid in the auction via a vehicle called Adlabs Radio Private. Adlabs Radio is run by Tarun Katial who joined from Sony Entertainment Television. Adlabs Films’ other businesses are multiplex cinemas and post production. India Warburg Pincus tries print media Indonesia Private equity firm Warburg Pincus is to pay US$33.3m for a 7% stake in Dainik Bhaskar group, publisher of Hindi market leader Dainik Bhaskar and Gujarati daily Divya Bhaskar. This is Warburg Pincus’ first investment in print media in India. Ambit Corporate Finance is adviser to the seller. Dainik Bhaskar is teaming up with Zee to set up an English language newspaper. Baby TV launched Baby TV and Dori Media International GmbH signed an agreement with DBS broadcaster PT Matahari Lintas Cakrawala (Indovision) to launch Baby TV, the television channel dedicated to infants and toddlers. The advertisement-free channel will be broadcast 24 hours. The programmes are geared towards learning, activity, fun and parent-child interaction. The channel is produced in collaboration with leading child psychologists and infant development experts. Baby TV is currently available on over 25 different platforms in 15 countries across Europe, the Middle East and Africa and is expected to be launched in Indonesia in Bahasa Indonesia language in May 2006. The agreement is for 10 years during which Indovision will pay Baby TV and DMI a proportion of any income derived from the channel. Dori Media recently launched another channel in Indonesia – Televiva Vision 2 – a dedicated Telenovela TV channel. SAHARA ONE TO RAISE US$50M Sahara One Media & Entertainment Ltd is expected to raise up to US$50m through an issue of equity or debt in the international markets, said reports. Meanwhile Aircel Televentures Ltd, a company owned by NRI investor C Sivasankaran, is taking a 14.98% stake in Sahaa One at a cost of Rs1.2bn. He is believed to have taken financial advice from Ernst & Young. Aircel’s investment is understood to be via a capital increase, which will leave the founders with 73%. Bennett Coleman & Co Ltd will have about 6%. Sun TV Ltd set the price at Rs875 per share for its IPO of 6.9 million shares, for a total of Rs6.3bn or about US$134m. The price was at the top end of the indicated range in face of a 47 times oversubscription. The IPO comprised new shares, diluting the promoter Kalanithi Maran to 89.99%. The UK’s BBC announced it would like to find joint venture partners for planned Hindi and Urdu news channels. The broadcaster is to launch a 24 hour Arabic channel in 2007, to be followed by similar ventures in the Indian languages. The Television Eighteen Group is taking a 50% stake in online job site JobStreet.com India Pvt Ltd, a unit of Malaysian recruitment company JobStreet Corp Bhd. The MoU is reported to require TV18 to pay US$2m in cash Media Finance Issue 94 April 13 2006 Japan Thomson partners for legal media Legal, tax, and accounting publisher Shin Nippon Hoki Shuppan KK and Thomson Corporation signed a JV agreement establishing Westlaw Japan KK, a business that will develop an online service expressly for the world’s second-largest legal information marketplace. Shin Nippon Hoki Shuppan is Japan’s biggest provider of print-based legal information. ©2005 Thompson Stanley Publishers Ltd Americas USA 18 US$4bn worth of notes but strong demand, in part due to attractive spreads, led to the arranging banks increasing the issue. Bookrunners were Bank of America, Citigroup and JP Morgan. The three-part bond comprises: US$1.5bn five-year notes, yielding 1.1 percentage points over Treasuries, US$1.5bn ten-year notes yielding 1.47 over Treasuries, and US$1.75bn of thirty-year bonds yielding 1.95 over Treasuries. Proceeds are expected to be used for share buybacks and to repay some of the US$12bn debt signed last year prior to the Viacom – CBS split. Greater Media has launched a US$350m seven-year revolver via Banc of America and RBS. The facility will replace the company’s existing revolver, which is also US$250m. Greater Media is the parent company of 19 AM and FM radio stations in Boston, Detroit, Philadelphia and New Jersey; a modern printing plant and a group of weekly newspapers in central New Jersey; and several telecommunications towers throughout the United States. Broadcaster and publisher Media General is to finance its impending acquisition of four NBC Universal owned TV stations by issuing US$100m worth of new bonds as well as tapping its existing US$1bn revolver. Media General is paying approximately US$600m for the four stations, WNCN in Raleigh, North Carolina, WCMH in Columbus, Ohio, WVTM in Birmingham, Alabama, and WJAR in Providence, Rhode Island. In addition to turning to the debt market, the company plans to raise around US$150m by selling four of its CBS-affiliated stations. Coconut Palm Acquisition Corp., of Boca Raton, is buying Equity Broadcasting Corp. of Little Rock, Arkansas, in a deal valued at US$267.4m. Following the deal, CPAC will change its name to Equity Media Group with Larry Morton, equity’s president, continuing as CEO and president of the new business. Televisa hires Allen & Co. Grupo Televisa has hired Allen & Co to advise it on its bid for Univision Communications. The appointment is significant as Televisa produces the telenovelas that have been so critical to Univision’s success. Hence the Mexican firm is in strong demand among private equity players looking to lock it into distribution agreements beyond 2017 when Univision’s current agreement with Televisa ends. Also, Univision was founded by the grandfather of current Televisa chairman Azcarraja Jean, and sold by his father in the 1990s. The company has been controlled by A. Jerrold Perenchio, an LA-based billionaire, for the past 14 years. The significance of private equity is that, as a non-US firm, Televisa can only acquire a 25% stake in the business. Any deal is likely to be structured so that Univisions’ 62 TV stations are separated off from the two broadcast networks, cable channel music division and internet properties. Other bidders for Univision include a private equity group comprising Goldman Sachs, TPG and Tommy Lee plus strategics News Corp, Time Warner, Disney and CBS. However a private equity deal is deemed the more realistic outcome for several reasons, not least Disney’s current digestation of its large Pixar purchase and Time Warner’s planned mega share buyback. If it gets pulled off, a sale of Univision to private equity would rank as the third largest takeover of its kind, behind RJR Nabisco and last year’s take over of car hire firm Hertz. BONDS PROVE POPULAR FOR VIACOM Viacom successfully sold bonds to the value of US$4.75bn to a receptive market, its first offering since its split from CBS in the new year. Initially the plan had been to offer around Continued from previous page - Asia Thailand Korea UBC raises funds Pay TV operator United Broadcasting Corp is raising US$300m via Calyon. The funding package comprises a US$100m-equivalent loan in baht over 5-1/2 years; a US$90m 7 year loan; and a US$110m 7 year loan. The facility will refinance a US$291m loan arranged late last year by Calyon and others, as well as provide funding for corporate purposes. UBC was the target of a share buyback from telecom company True Corporation via its subsidiary KIN Thailand Ltd which ran to March 16. At that date True held 98.3% of UBC. In December True reached agreement with controlling shareholder MIH to acquire the latter’s holding. UBC will be delisted on April 7. ©2005 Thompson Stanley Publishers Ltd Yahoo denies Korean sale Yahoo Inc officialy denied local reports that it is in talks to sell its wholly-owned South Korean arm Yahoo Korea Corp to SK Telecom. Such a sale could command a price of W100bn, or over US$100m. The entity negotiating to buy the asset is said to be SK Communications, and part of the payment would be in shares. SK Communications was created from the Korean assets of Lycos, which SK Telecom bought in 2002. Media Finance Issue 94 April 13 2006 Americas VC FUNDING LEAGUE TABLE Company Amp’d Claria Mediavast Eons Revver Reel FX YouTube PicksPal Meetup Cine-tal Systems Function Content rich MVNO web personalisation platform online picture agency senior-citizen aimed online venture video sharing site visual film effects streaming video Sports gaming site social networking HD video and cinema products Sum raised, lead investors & miscel. US$106m US$40m, Softbank, Rogers Comms., etc. US$11m, 3rd round US$10m, Sequoia co-led US$8.7m, DFJ led, series B US$8m, Pharos Capital led round US$8m, Sequoia led US$4m, 2nd round, US$6m raised to date US$2m, ebay undisclosed, first round 19 Equity is also a leading operator of Spanish-language stations in the country. It is the second largest affiliate group of Univision Communications Inc., with 22 affiliates in Spanish-language markets and television stations in eight of the nation’s top 55 Hispanic markets. Comcast is to partner with Disney to create a new cable TV and internet horror network featuring films and TV titles from the Sony and MGM vaults plus content from Comcast’s video on demand service. The service scheduled to launch October 31. Time Warner CEO Dick Parsons has signalled the group may dispose of smaller assets in order to maintain its position on its key business areas. This would suggest bulking up at Time Warner Cable once the Adelphia transaction is closed. Recent assets sales have included a stake in AOL plus the sale of its book publishing business. Fantasy Sports for US$3.85m cash and plans to use the acquisition to incorporate both firms’ NASCAR gaming products into a combined, super slick offering. Silverstar Holdings was the seller. Medio Systems, a mobile search start up, has bought online advertising business Webrelevance to enhance its ability to target, serve and manage mobile ad campaigns. Financial details were not disclosed. DEMARSECO LAUNCHED VC outfit Austin Ventures has teamed up with exBloomberg executive Elisabeth DeMarse to form DeMarseCo, an investment company, with plans to invest US$50m to build up an information services business both organically and through acquisition. Ms. DeMarse, who was most recently CEO of Nasdaq listed online information service BankRate, will serve as CEO of the new company. Austin Ventures principal Craig Milius said in a statement the new company would not discriminate between digital information, traditional media and new media in its search for new investment projects. The primary focus will be on US firms however. Canadian newswire CCN Matthews has acquired MarketWire, the third largest distributor of press releases in the US, for an undisclosed all cash sum. The two business will be run separately in order to comply with US and Canadian regulatory regimes, but combined will lay claim to the biggest North American footprint for media distribution. VNU Marketing Information, has acquired Decisions Made Easy (DME) an international company dedicated to helping consumer-packaged goods manufacturers effectively manage, analyze, present and act on their sales and supply chain data through the use of its software and services. Financial terms were not disclosed. Latin America: The Bolivia government is to buy 5% of the Venezuelan national TV network, Telesur, according to the Bolivian government agency. Telesur, which launched last year, is 51% owned by Venezuela, 20% by Argentina, 19% by Cuba and 10% by Uruguay. ©2005 Thompson Stanley Publishers Ltd NEWSPAPERS Three parties have been invited to conduct due diligence on the Philadelphia newspapers the Inquirer and the Daily News - currently being sold by McClatchy in order to fund its purchase of Knight Ridder. The groups are MediaNews of Denver, Yucaipa, which has the backing of unions, and a group of local businessmen led by Brian Tierney. The Yucaipa bid has enlisted Robert Hall, former publisher at the group to provide commercial ballast. ONLINE/DIGITAL AOL has changed its legal structure from that of a corporation to a limited liability company. AOL also officially changed its name from America Online to AOL. Online picture agency Mediavast, operator of Wireimage.com and Filmmagic.com among other sites, has raised US$11m out of a targeted US$15m in its third round, and fundraising continues. Time Warner and Baroda Ventures participated in the round as did newcomer QVT Fund. Liberty Media investee Fun Technologies has bought Media Finance Issue 94 April 13 2006 Special Report Company profile: Cellcast preps for M&A Interactive entertainment business Cellcast expects to make at least one acquisition in 2006, co-founder and CEO Andrew Wilson has told MediaFinance. Cellcast, which listed on Aim in September, operates 8 channels on the Sky Digital platform, offering live interactive content such as gaming, reverse auctions, dating and psychic advice. It is currently rolling out this content onto other platforms such as broadband, mobile, Freeview and out of home terminals plus other markets such as India, the Ukraine, China and the US. It also derives revenue from other broadcasters to which it licences its technology, such as Fremantle, for which it is providing voting services for its planned Middle Eastern version of Pop Idol, which is to be broadcast to over 22 territories. Wilson told MediaFinance that in the UK, which this year accounted for 97% of the group’s £13. 2m revenue, growth would mainly come from new platforms rather than the Sky Digital platform, where he said the company was more or less competing against itself, having grown its offering from one rented time slot when it launched in 2002 to its 8 current channels. Of the new platforms Wilson said Freeview, where real estate has a greater scarcity value, offered the best prospects for growth when it launches services with its partner Top Up TV. Launch should happen as soon as the licensing process is wrapped up, hopefully this quarter, cofounder and COO Bertrand Folliet said. In terms of out of home terminals, Cellcast is working with two partners that currently have 22,000 terminals under management in the UK, most of which are in pubs and clubs. The company is beginning a roll out of its live content to 400 of these in the third quarter, and makes to glean £3 of revenue per machine per week per game. The plan is to have a number of games on every machine. In terms of foreign markets, the company currently has operations in Ecuador, Argentina, Ukraine and India plus most recently China and the US. Most content in these territories has been market tested in the UK and requires little adaptation for the home market, hence keeping investment costs down. Folliet says the company usually follows one of two business models, either partnering with a network on a per-programme basis in return for a share of revenue or seeking deeper relationships with new or established operators. This second model is the chosen path in the company’s key target markets, Russia, Brazil, USA, India and China. Folliet said that most programme ventures became profitable within the first few months. 2006 plan According to CFO Emmanuelle Foy, Cellcast is targeting revenues of £26m in 2006, 60% (£16m) of which will come from the UK and the firm should make ebitda of £2.1m. Capex for the year should come to £1.2m, £700,000 of which should be used building the overseas business, the rest for R&D and sales growth in the UK, including developing Media Finance Issue 94 April 13 2006 20 new formats and pitching broadcasters with programming ideas. Having raised c.£5m from its Aim listing, organic growth can be funded from internal resources but acquisitions will likely be paid for by raising new money. Wilson said any acquisitions would be made with the intention of gaining expertise in sectors that could help enhance Cellcast’s existing multi channel strategy. Trading update Having listed in September at 71p, Cellcast’s shares have rallied since January when they dipped below 60p. Shares were trading at 86p on April 4, the day after results were announced. The company made a loss for the year of £700,000 on revenue of £13.2m. Need to know….? the last time a company borrowed? who was the financial/legal adviser? valuation benchmarks on M&A deals? The MediaFinance digital archive contains a wealth of valuable data. Simply log onto the web site www.telecomfinance.com with your username and password and use the “Search” facility. Forgotten your username/password? Use the “Forgotten password” facility on the home page or e-mail renato.leite@telecomfinance.com for a reminder. If you require assistance to use the archives, contact Renato by e-mail (above) or on 0207-5533915. ©2005 Thompson Stanley Publishers Ltd Special Report IPTV The Emperor’s New Entertainment by Alexander Cameron, managing director, Digital TX Ltd The ghost of the dotcom years continues to haunt the technology world, even though the commercial propositions of a new era of startups in the converged media sector appear considerably more disciplined and grounded in conventional business wisdom than their predecessors. Raising money for a technology business right now isn’t easy, especially if you’re involved with highly disruptive concepts like IPTV, as I am. I’m not an accountant, corporate guy or investment banker, but I am an entrepreneur who is regarded as authoritative and visionary by his peers. Finance is an alien world to me which has meant a steep learning curve, but it has also allowed me to be able to look in from the outside objectively. The very first I learnt about people who work in finance is that they are, quite surprisingly, very, very blunt. I had been told to expect modesty, talking in terms of credits and debits and perfectionism. What I found was something else entirely, and it certainly shook me. One of the problems with being someone involved in developing technology products and services is that it’s very easy to fall in love with your idea and get caught up in your own hype. Technical types tend to have a unique inability to simplify or explain their ideas in basic terms that laymen can understand. Converting your wonderful new venture into numbers on a spreadsheet is a challenging but essential discipline that few in our world ever learn, let alone get right. You will always find resistance when a bubble could potentially be burst. Savvy readers will already have hype-alarms ringing all over the place at the mention of IPTV, and rightly so. Scepticism is very important, yet there is a curious anomaly which I find more disturbing than fascinating when I read through the industry press – not a day goes by without news of another absurd tech venture that has just gained tens of millions of dollars of venture capital, despite the product being utterly hopeless. I have no idea what some of these investors are having their drinks spiked with, but if I could march a band of angels to the cash machine in the same way that some of these startups seem to be able to just turn up with a business plan based on hot air and extract money from fools whom are apparently so easily parted from it, I would be a very happy man indeed. I would go so far as to say that the vast majority of really great ideas I have learnt about never got the help that they needed, and hence faded away into the ether. IPTV is a classic example, but also an incredibly inspiring one. We are witnessing something quite rare and rather beautiful – a technology that has caught the imagination of so many people that it is has been strong enough to have enough momentum to swim against the market tide. All the signs point to very stormy waters – Homechoice on sale, KIT closing down, gorillas such as Sky and BT entering the marMedia Finance Issue 94 April 13 2006 21 ket, but still the wave continues to fight its way through. The fire has been lit and innovation is relentless. ISPs and telcos in the UK are bleeding from everywhere in 2006. Margins are dropping, supplier pricing increasing and markets are very near to saturation point. The idea of ‘triple play’ service bundling (i.e. broadband, phone and TV), a la cable, has become an attractive option for many, and a panacea for some. Video is a natural progression for those companies already offering both connectivity and telephony over copper lines. If only the underlying economics were as encouraging as the sales potential of the commercial proposition. Triple play is clearly an exciting idea, and compelling for many consumers. But there will always be another step to climb onto, the next being so-called ‘Quad-play’ where mobile connectivity is added, and whatever comes after that ad infinitum. The fundamental problem is that the third part of the deal, TV, is radically different from the rest as although the mechanism that drives it uses the same connectivity, its success depends on content. The costs of providing video-centric services are enormous, and the returns are minimal. That usually spells disaster in most financiers’ minds, but telecoms companies need to do something to keep their momentum going. Only the top five ISPs in the UK who can collectively claim over 60% market share of broadband connections in the UK can truly afford to create and run their TV platform. The other few hundred are left to squabble over the remaining crumbs. DSL in itself is a horrid business to be in, with even some of the biggest players suffering heavy losses. With TV, there is firstly the prohibitive infrastructure cost (anything up to US$2,000 per subscriber, not including SAC) as video requires bandwidth to be a commodity and the delivery network to be quality-controlled. Anyone who has ever rented a BT Central pipe knows that we’re a long way from that. Centralised delivery of content (e.g. video on-demand data centres) also requires considerable capital expenditure on rapidly-depreciated technology. However, assuming you don’t take the relatively easy route of just distributing a Freeview set-top box made in China re-branded with your own ISP logo (and amortising the negligible cost across the lifetime of the customer’s account), you soon get to the nightmare that is content licensing. The simple fact is that content owners know that the only reason customers will choose your platform is if you have the content they want, whether that is the latest movies or the football. As you’re already down tens of millions of pounds from your capital expenditure on infrastructure and marketing, the very last thing you want to do is pay large up front payment guarantees to arrogant move studios who ©2005 Thompson Stanley Publishers Ltd Special Report aren’t convinced you have a big enough audience for them to do the deal in the first place. Your revenue share deal will almost certainly be heavily in the licensee’s favour, leaving you a miniscule margin when it comes to trying to recoup. Designing IPTV and triple play services is beyond the scope of this article, but we will touch on a few crucial points. Content acquisition requires economies of scale for any reward. Video on-demand and pay-per view do not pay very well, and real-world experience can show you why the US cable model of 4-6 movie purchases a month is fundamentally flawed. There, in a normal deal, an operator takes less than 40% of the title’s price, which at normal Blockbusterstyle rates (£3.75 per rental), is around £1.50. Analysis so far shows that the mean average number of VoD purchases per year (not month) is around six. In year one, you will be lucky to make £9 per customer. Your turnover will be rather impressive, your cash flow very volatile, and your operating profit, negative. The moral of the story is that video on-demand by itself, or even any other interactive entertainment service for that matter, is not able to sustain a viable IPTV platform. A mass-market service to compete with the likes of Sky requires a fundamental change in approach (complete with a good ‘angle’ to differentiate itself), backed up with a combination of services – a rounded ‘multi-play’ scenario if you like. The alternative is to focus on a specific market niche, promoted to social, cultural or demographic groupings, such as Bollywood, adult entertainment or a vertical market such as hospitality. Popular, high-value broadcasters will often charge you to carry their broadcast signal (e.g. MTV), and 3D video game farms require massive space for computing resources. There are more costs to consider than those of video content on-demand, and lots after them as many rights holders still haven’t figured how to make money from their digital archives. The kickback against content owners we are now seeing in the telecoms world is worrying but entirely predictable. Broadcasters such as Sky and the BBC are doing all they can to offset video distribution costs for download services by pushing traffic to the edge of the access network with secure peer-to-peer delivery technologies, such as Kontiki. This reduces their own infrastructure costs (but not removes, as a central ‘seed’ grid is required), but does very little for an ISP. Rightfully, network operators are ever so slightly fed up with being given such limited flexibility with content rights by the same people using their networks to make money from their customers for free. A mistake often made by investors looking at the newly converged telecoms-entertainment industry is to write off potentially lucrative opportunities because risk is too high. This problem is far more profound in the UK, as opposed to the US where investors are more aggressive in their outlook and less timid when it comes to taking risks. 22 This issue is a particularly painful one for entrepreneurs, as there will always be those for whom the earth is flat and for whom Sky will reign over the heavens and earth undisturbed for all eternity. Market predictions will always be the best guess, cash requirements will always be woefully inadequate and a whole list of reasons will be available for why something will never sell. So what is the solution for video provision? The UK is geographically dense, has the most developed digital TV market in the world, and has a broadband industry that has developed through, and is based almost entirely on, the resale of transit across the incumbent telco’s copper network. I believe it to be a wholesale model – one that does for entertainment what BT Wholesale has done for broadband. And it’s no throwaway whim or careless comment. I’m betting my company on it. The feedback from ISPs in the field is that they just won’t get to market without having access to a ‘white label’ or wholesale model for both infrastructure and content, and it’s easy to see their argument. From an investment perspective, it’s an easy business case with successful precedents, such as Virgin Mobile, Video Island and more. Wholesaling offers a different dynamic that is not without its very own problems, so we should not be naïve and assume it is perfect. It has been considered before and is being planned by many different parties as we speak, but never implemented successfully due to the massive capital expenditure needed up-front and the difficulties in negotiating re-sale (sub-licensing) rights for premium content. I believe we have solved the problem so we have the underlying magic or ‘secret formula’ to make it work very effectively. The demand we are seeing from potential ISP customers and content owners is extremely encouraging and offers considerable weight to the case for a new paradigm of service deployment. Offering a so-called ‘white label’ IPTV system in a box in recognition of the demand for it unfortunately doesn’t do the job that needs to be done though, as greater factors are at work in the IPTV world that need addressing with it. There is a law of thermodynamics that says the part of a system with the most flexibility ends up controlling the system. IPTV as a technology, and as an industry, needs to develop organically into a natural alternative to the three main digital TV platforms, and that will take some time. I don’t believe that duplicating cable TV over copper phone lines is the right thing to do, as Video Networks have so painfully discovered in the last few years. My vision is of an aggregated platform whose differentiating characteristic is its openness and its receptiveness to innovation and third party integration. But how well I explain that to the people controlling the money will be admittedly a lot more variable. Alexander Cameron is managing director of Digital TX Limited, an IPTV/VoD consultancy based in London. He can be contacted by email at alex.cameron@digitaltx.tv. ©2005 Thompson Stanley Publishers Ltd Media Finance Issue 94 April 13 2006 Networks BT Entertainment CEO Andrew Burke has left, months before the company plans to launch its BT Vision IPTV and video on demand service and amid rumours of disagreement in the BT camp over how to pursue their entertainment strategy. It is understood Burke will not be replaced as CEO but that responsibility will pass to Dan Marks, CEO of TV services at BT TV. Meanwhile, Karl Bistany, the man who advised UEFA on the sale of its UEFA 2008 football TV rights, has been hired by BT in a consultancy capacity to advise it on its move into pay TV on demands programming. Along with Bistany, BT also hired Freeview general manager Lib Charlesworth as marketing director, Sky’s head of pay per view Karen Saunders and head of broadband at Disney, Anthony Carbonari. David Smith, former chairman of T&F Informa, will assume the role of executive chairman at Granada Learning, the educational publishing business acquired this month by Veronis Suhler Stevenson from ITV. UKTV CEO Dick Emery is to retire after eight years in the job. Mobile entertainment company Mobile Streams, which was linked recently to an IPO via Bridgewell, has hired Chris Rovtar as senior vice president. Rovtar has held senior positions at Paramount Television, Universal/MCA Television and MTM Television plus founded two media start ups, College Broadcast TV Network and Video Pop. The Wall Street Journal Europe’s editor, Raju Narisetti, has resigned, apparently to launch an English language online business journal in India. CEO Selma Kappel has been ousted at German kids’ TV firm TV Loonland in favour of Simon Flamank currently serving the firm as a consultant, following a disagreement between Kappel and the board over the company’s direction. The company has also announced that its largest shareholder, Dr Michael Briem, is to join the supervisory board of the company. Dharmash Mistry has been appointed MD of Emap’s new digital media division, Emap Performance. The new division combines the firm’s broadband, mobile and interactive strategies under one central structure. Jérôme Clément has been re-elected president of Arte France for a further term of five years. Clément has served in the post since 1991, a rare achievement for a European public broadcaster chief. He will also remain the head of Arte GEIE (Arte France and Arte Deutschland GmBH) until the end of 2006. In addition to the forthcoming launch of Belarte in September 2006, which will bring a Belgian flavour to the channel, Clement is also planning on launching a Spanish version of the channel in 2007. Macquarie has poached Shaun Gregory from Emap as Media Finance Issue 94 April 13 2006 23 chief executive of its UK Radio Holdings business. He was formerly MD of national brands at Emap Radio. Macquarie won its first UK radio licence last year. Sara Nathan and Ian Hargreaves have been reappointed Non-Executive Directors to the board of Ofcom with immediate effect. The reappointments, by the Secretary of State for Culture, Media and Sport, Tessa Jowell and by the Secretary of State for Trade and Industry, Alan Johnson. Nathan’s reappointment will end on 31 December 2007, whilst Hargreaves’ terms runs until December 2008. Ofcom content Board member Kath Worrall has been appointed Chairman of the Fairness Committee – the committee responsible for the discharge of Ofcom’s functions in relation to fairness and privacy complaints. David Ellender, currently Managing Director of Fremantle International Distribution (FID), the distribution arm of FremantleMedia, has been appointed CEO FremantleMedia Enterprises. He also joins the company’s Operating Board. SES Astra hired Wolfgang Keuntje, ex-head of T-Online, to run its Project Dolphin in Germany. This will set up a paid-for digital satellite TV platform, which will offer broadcasters enhanced services and functionality. Project Dolphin will be responsible for marketing the encrypted service and selling smart cards. TVNZ Chairman Designate, Sir John Anderson, has appointed Rick Ellis Chief Executive. Ellis, who takes up the position mid-May, replaces Ian Fraser, who resigned in October of 2005, citing a loss of confidence in the TVNZ board. Star, the News Corp subsidiary based in Hong Kong, has appointed Paul Aiello to the newly created role of president. Reporting to CEO Michelle Guthrie, Aiello will be responsible for developing strategic and business directions for the company while overseeing corporate functions including business development, strategy and implementation, STAR ventures, government affairs and corporate communications. AMERICAS Jonathan Fram, an ex-general manger of media at Bloomberg has joined Seattle VC Maveron as its seventh partner. Playboy Enterprises has named Steve Smith as managing director, Playboy TV International. Gill Pritchard is taking up the New York-based role of senior VP for BBC America and BBC Worldwide’s newmedia division. Pritchard was previously head of strategy for BBC Worldwide in the UK. ©2005 Thompson Stanley Publishers Ltd Subscriptions Telecom Finance monthly newsletter paper copy with £995/US$1,790/E1,595 online archive access & weekly email alerts Satellite Finance monthly newsletter paper copy with £985/US$1,770/E1,580 online archive access & weekly email alerts Editor: Reporters: Marketing: Oliver Cann Ed Ansell Chris Thompson Monika Gora Publisher: Subscriptions: Chris Thompson Paula Drage Media Finance paper copy with online bi-weekly newsletter £625/US$1,125/E995 archive access *VAT@17.5% applicable for UK customers Multiple users This service provides any of the above publications via PDF for distribution across either your organisation’s corporate intranet or directly to multiple users with full archive search facility and weekly email alerts. 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