PE Firms Force Telegraaf To Buy ProSieben Stake

AMSTERDAM (Reuters) – Dutch publisher Telegraaf Media Groep (TMG) (TLGNc.AS: Quote, Profile, Research, Stock Buzz) said on Friday that it was forced to exercise an option to buy 12 percent of German broadcaster ProSiebenSat.1 (PSMG_p.DE: Quote, Profile, Research, Stock Buzz) from private equity firms.

The purchase of the stake from Kohlberg Kravis Roberts & Co. (KKR) [KKR.UL] and funds advised by Permira will likely result in a writedown between 150 million and 200 million euros ($233-$311 million), TMG said.

The media group also announced plans to lay off staff, given slower projected growth in advertising revenue this year, without quantifying the job losses.

Earlier this year, TMG said it expected its earnings before interest, taxes and amortisation (EBITA) margin to be 9 to 10 percent, but on Friday said it now expects a margin of “at least 8 percent”.

“Given the further projected discrepancy between future revenue and expense trends, more drastic cost reduction measures will be required than announced to date,” the media group said.

The purchase of ProSiebenSat.1 shares was triggered after a holding company controlled by KKR and Permira exercised a put option, or a right to sell its stake in the German broadcaster, at 28.71 euros per share.

Since TMG is buying the stake well above ProSiebenSat.1's current share price of 5.42 euros, for a total 377 million euros, it is writing down the value of its stake.

The exact figure will be disclosed when TMG reports first half results on Aug. 14 after the market close, it said.

The complicated deal with ProSiebenSat.1 and private equity firms was forged last year when TMG sold a 20 percent stake in a ProSiebenSat1 unit for 433 million euros, giving it the right to potentially buy 12 percent of the German broadcaster.

As part of the deal TMG had a call option, or the right to buy shares, in ProSiebenSat.1 at 34.71 euros per share which expired earlier this year because of the steep drop in ProSiebenSat.1's share price.

TMG Chief Executive Ad Swartjes said the stake in ProSiebenSat.1 was an “important step that fits into our strategy of becoming less dependent on print media.” (Reporting by Reed Stevenson; Editing by Erica Billingham)