Europe’s biggest newspaper publisher, Axel Springer, could get even bigger.

The German giant is in merger talks with Swiss rival Ringier to create a publishing behemoth boasting sales of €3.6 billion ($3.5bn; £2.3bn), a workforce of 20,000 and the number one position in European print media. It would own Germany’s Bild Zeitung, the world’s second-largest daily, plus the leading Swiss daily and Sunday titles, Blick and Blick am Sonntag respectively.

The duo have been talking about some sort of pact for over eighteen months, though the idea of a merger is said to have been triggered by recent attempts by media mogul Leo Kirch to sell his 40% stake in Springer [WAMN: 28-Aug-02].

Under discussion is a complex deal that would leave Friede Springer, the largest shareholder in the German group, with a majority holding in the merged firm. Michael Ringier, ceo of the eponymous publisher, would be the number two investor.

Springer [the company] would initially take over Ringier [the company], which would use the resulting cash to buy 90% of the Kirch stake. The remaining 10% would be sold to Springer [the person], who would add it to her existing 45% to gain a majority holding.

There is little overlap between the two groups’ operations, reducing the risk of regulatory obstruction.

However, there are still vital details to be agreed, such as the valuation of Ringier and whether Springer’s takeover of the Swiss firm will give the latter enough cash to buy its share of the Kirch stake.

Although the 40% holding is worth around €595m at current market prices, it is due to pass to Deutsche Bank as collateral for a loan. As this loan was worth €720m, the bank is expected to insist on a significant mark-up on the present valuation, otherwise it will seize the shares and arrange a public offering as early as mid-October.

Data sourced from: Financial Times; additional content by WARC staff