Murdoch Mulls Kirch Takeover

07 December 2001

Fresh from his thwarted attempts to pull off the purchase of US satellite broadcaster DirecTV, Rupert Murdoch has reportedly wasted no time in dreaming up another huge deal – with the potential takeover target this time being Kirch Gruppe.

Kirch is the biggest commercial television broadcaster, pay-TV provider and media rights holder in Germany. Its acquisition by NewsCorp would make Murdoch Europe’s most powerful broadcaster and the first non-European to own one of the continent's leading terrestrial TV firms.

However, such an eventuality is some way off. It all hinges on NewsCorp’s 22% stake in the KirchPayTV unit, owner of cash-haemorrhaging platform Premiere World. Murdoch has the option of forcing Leo Kirch, owner of the eponymous firm, to buy back the shares in cash on October 1 2002, for a sum which could total E2 billion ($1.8bn).

Due to enormous debts, Kirch may not be able to find the money. In this event, some NewsCorp insiders think Murdoch will simply try to purchase the pay-TV division; others, however, speculate that the failure to pay could trigger the fall of the Kirch empire, with Murdoch at the ready to negotiate a takeover.

“Rupert has really got the hots for the whole of Kirch right now,” said a little bird close to Murdoch. However, other NewsCorp executives are more cautious. “Kirch has a huge amount of debt,” complained one, before adding somewhat cryptically: “Rupert’s dream is for the banks to get a haircut and then he rides in and turns around the pay-TV business and takes control of the whole thing. It will be hard to do. And perhaps he is just looking for a big deal after DirecTV.”

Reacting to the rumours, one Kirch executive retorted: “We have been able to honour our obligations in the past. There have been no discussions [between Murdoch and Kirch about a merger]. It is total speculation to talk about what will happen next October.”

Should speculation turn into fact, a takeover of Kirch may run into strong opposition in Bavaria, where the German group has hefty political support.

News source: Financial Times