Friday February 23rd, 2001
By Sabine Bub and Marijn van der Pas
German media group Kirch said on Friday it was on the verge of securing financing that will enable it and debt-laden partner EM.TV & Merchandising to buy another 25 percent stake of Formula One holding SLEC.
"The financing will be completed by Saturday," Kirch spokesman Hartmut Schultz told Reuters.
German media company EM.TV holds a call option to buy the SLEC stake for close to $1 billion from racing mogul Bernie Ecclestone, who currently owns half of SLEC, which holds the broadcasting rights to Formula One until 2010.
Last week, Kirch acquired 25.1 percent of EM.TV's voting rights and almost half of the troubled company's 50 percent stake in SLEC.
Kirch has said it would also back a loan to enable EM.TV to exercise the option, which would leave Kirch and its partner controlling 75 percent and Ecclestone 25 percent of SLEC.
Ecclestone and the International Automobile Federation (FIA) are opposing the purchase, which requires the approval of the FIA's general assembly.
The presidents of 157 motor sports organisations from 118 countries form the FIA's general assembly. Each country holds one vote.
Earlier on Friday, the Wall Street Journal cited unnamed sources as saying that at least four banks had denied Kirch a loan to finance the additional stake because Ecclestone has said he would veto the rescue deal between Kirch and EM.TV. The paper said Kirch needs to complete the financing on Saturday.
One London-based analyst said: "I've always been very distrustful that Kirch will come up with the goods but there are always banks out there that will lend money against assets."
Analysts said that a number of banks already had large exposure to EM.TV, including Credit Suisse First Boston, WestLB and Lehman Brothers.
But Kirch may have other ways of raising the money. A source close to Kirch said the group would gain around one billion marks ($464 million) from the sale of a 51 percent stake in television decoder maker Beta Research to Deutsche Telekom.
The German cartel office said on Friday it would extend the review period for the deal to July 25 from February 26. The two companies had asked for the extension as the ongoing sale by Telekom of its regional cable network would remove a major obstacle to the Beta deal.
Deutsche Telekom said on Friday it had agreed to sell majority stakes in six regional cable TV companies to a partnership based around U.S. media investment vehicle Liberty Media.
Opposition of Three
Ecclestone and Max Mosley, the head of the FIA, are reported to be opposed to Kirch upping its stake in SLEC together with EM.TV.
Mosley has said that he would like to see a consortium of five leading Grand Prix car makers purchase a stake in SLEC.
Kirch owns the only pay television station in Germany, Europe's largest television market and German newspaper reports have suggested the media empire might use the Formula One races to prop up the ailing channel.
"We must be sure that whoever controls the television rights can fulfil all the obligations of the current contract," Mosley told Italy's Gazzetta dello Sport newspaper on Friday.
"And I ask myself whether Kirch, a man of pay-TV, is capable of doing so. We must talk about it but my impression is that the general assembly, which will make the decision, is not in favour of his coming in," he said.
Patrick Faure, the head of Renault Sport said on Thursday it was out of question that Formula One racing would be broadcast over pay-television channels.
German car magazine Auto, Motor und Sport earlier this week quoted Ecclestone as saying he had been asked by a consortium of five leading Grand Prix car constructors to look into the possibility of an alternative racing circuit.
Mosley said this is unlikely to happen: "I do not believe in such a hypothesis," he told Gazzetta.
By 1535 GMT, shares in EM.TV were up 3.3 percent to 6.20 Euros while the Neuer Markt Nemax 50 index was down 4.8 percent.
The share is trading about 95 percent below its 120 euros all-time high, following a collapse in the share price triggered when the debt-laden former Neuer Markt star slashed earnings forecasts late last year.