Kirch’s Grin Fades as Anti-Murdoch Barricades Go Up

11 December 2001

Joke of the month at Kirch Gruppe’s Munich headquarters was the reported intention of Rupert Murdoch to launch a takeover bid for the German media giant – dismissed as “pure speculation without any basis in fact”. This weekend the smirks vanished.

Instead, the alarms are now clanging, barricades are under erection and a distinct change of mood is abroad. “KirchGruppe is taking the current attempt very, very seriously,” admitted a senior insider.

Leo Kirch himself took charge of the defence over the weekend, having previously assumed that Kirch Gruppe’s shares were inviolable to attack as they are not freely traded on the stock exchange. He had, however, overlooked a significant chink in his armour: the 22% stake held by Murdoch’s BSkyB in Kirch's pay-TV business, Premiere World. This Kirch has undertaken to buy back from Murdoch on demand - a potentially fatal factor.

Master strategist Murdoch, aware that Kirch is hard hit by the current adspend slump, has reportedly been leaning on German bankers not to lend the cash-strapped group another deutschmark. At which point, if he chooses, Murdoch can demand Kirch makes good its obligation to buy the BSkyB stake for E1.5 billion ($1.34bn) – a demand that could bring down Kirch Pay-TV, triggering an avalanche capable of engulfing the entire Kirch Gruppe.

Unlikely? They don’t think so in Munich. Nor does a certain Sydney-based fund manager who prefers to remain anonymous. He opined it “highly likely” that the 70-year-old tycoon, who became a father for the fifth time last month, is equally eager to prove his virility in another arena after his failure to clinch DirecTV.

News source: BBC Online Business News (UK)