It was summer, and Hollywood media mogul Haim Saban and German publisher Mathias D?pfner could not have looked happier. On Aug. 5, Axel Springer, the publishing powerhouse D?pfner heads, announced that it would buy out the Saban-led private equity consortium that picked up most of the voting shares of German TV group ProSiebenSat.1 Media two years earlier. D?pfner was delighted at the prospect of creating a media group with combined sales of more than $5 billion. Saban was no less thrilled: He and his backers would be quadrupling their original investment, taking in nearly $3 billion.
Four months later, neither man is rejoicing. The biggest media deal in Germany in years is facing unexpectedly tough scrutiny from antitrust authorities, and there is a distinct possibility that it may founder. If it does, Saban and his private equity partners, including Bain Capital, Hellman & Friedman, Providence Equity Partners, Putnam Investments (), and Thomas H. Lee Partners, aren't likely to find another buyer willing to meet the deal price. "Springer was prepared to pay a strategic premium. Other buyers would be unlikely to pay as much," says Jan Krone, who heads the media economics department at Freie Universit?t Berlin. None of the parties involved in the deal is commenting, pending the antitrust decision.
Don't shed too many tears for Saban and his crew, though. They have already made out well from their $1.6 billion investment in the German broadcaster. Saban's hand-picked managers have revamped it into a lean, mean broadcasting machine. Pretax earnings rose to $383 million last year, a nearly 70% increase over 2003. And the share price has more than doubled since the consortium bought in.
Still, a collapse of the Springer deal would bring pain all around. For one, it would tarnish Saban's reputation as a consummate dealmaker. He made his name by building up the Fox Family Worldwide Inc. children's programming network, which he sold to Walt Disney Co. () in 2001, pocketing $1.6 billion. For Springer, a failed deal might spell the end of a long-standing dream of moving into TV. "It would be a strategic fiasco for D?pfner and a disaster for Saban's credibility," says one experienced Germany-based media investor.
Many industry watchers believe the acquisition still stands a good chance of getting greenlighted by the antitrust office, which is set to rule by Dec. 27. Still, in a preliminary assessment of the deal issued late last month, authorities raised a host of concerns.
Why the fuss? After all, a combined Springer/ProSieben would still be about a quarter the size of the other giant of the German media scene, Bertelsmann. But Springer owns Bild, Germany's largest-circulation newspaper. And many fear the combination of Bild and ProSiebenSat.1's four TV channels will be too influential and dominate the ad market.
Under the terms of the original agreement with Springer, Saban & Co. could simply walk away from the deal if the acquisition is not O.K.'d by March. They could then launch a fresh search for a buyer. TF1, France's biggest commercial broadcaster, already has signaled its interest. Giants such as General Electric Co. () and News Corp. () that are looking to gain a foothold in Europe's largest advertising market might also step forward.
The betting, though, is that if the Springer deal falls through, Saban and his backers will opt to hang on until there are signs of a recovery in the ailing German ad market, which would boost ProSieben's valuation. Much depends on Germany's still-feeble economy. So it could be some time before Saban cashes in on his prime German investment.
By Bettina Wassener