Europe’s largest newspaper publisher Axel Springer has been offered a stake in KirchMedia, the rights unit of floundering German media group Kirch Gruppe, in place of a €767 million ($669m; £470m) cash payment.

The offer is part of a rescue plan being discussed by KirchMedia’s creditors and shareholders, in which control would be prised from media mogul Leo Kirch in return for €800m in capital and a €200m short-term loan [WAMN: 26-Mar-02].

In January, Springer decided to exercise an option forcing Kirch to buy back its 11% holding in broadcast unit ProSiebenSat.1 (which KirchMedia controls with a 52% stake), helping to trigger the cash crisis currently engulfing the German media giant [WAMN: 31-Jan-02].

If Springer accepts the new offer, part of its €767m claim will be paid in KirchMedia shares. Kirch’s banks and other minority shareholders in the rights unit – including NewsCorp and Silvio Berlusconi’s Mediaset – would also gain enlarged stakes under the deal.

The offer to Springer may also help allay concerns of German politicians that KirchMedia is facing a foreign takeover.

Should the newspaper mammoth (headquartered in Hamburg and Berlin) agree to the deal, the largest block of shares in the new-look KirchMedia would be in German hands – other native shareholders including the banks, retailer Rewe and Leo Kirch, who would retain a small holding.

The parties involved meet today (Thursday) to hammer out who will get what, though nobody is expected to end up with majority control.

However, Mediaset has threatened to throw a spanner in the works by claiming it has no intention of raising its investment in KirchMedia, despite its involvement in talks aimed at doing exactly that. “We don’t intend to put more money into this matter,” declared Mediaset president Fedele Confalonieri.

Such sabre-rattling is regarded by some industry observers as a negotiating ploy designed to push Kirch into accepting a deal which will indeed raise Mediaset’s stake in KirchMedia.

Data sourced from: Financial Times; BBC Online Business News (UK); additional content by WARC staff