Takeover Rumors Getting Stronger

There are denials all around, but recent media reports indicate there is a serious interest by Rupert Murdoch in a possible full takeover of German media giant Kirch
Gruppe, using his multi-billion dollar option on its pay-TV
business to trigger a deal.

Sources in Murdoch's Newscorp., among the world's largest media concerns, told first the Financial Times and then other media outlets, that the multi-millionaire might try to use his 22 percent stake in Kirch media group's pay TV business to initiate a takeover of the German firm.

Spokespersons for both companies denied the rumors, which first began swirling in the middle of last week.

Debt-laden Kirch

Kirch's concern, which owns thousands of film rights and many of Germany's public television stations, is saddled with more than $4 billion in debt in its KirchMedia branch alone, according to a company report in mid-October.

Analysts believe the massive debt could make the group vulnerable to a takeover. And though any possible Murdoch takeover is still months away, insiders are already speculating on possible methods.

The most obvious starting point is Murdoch's share in KirchPayTV, the group's pay tv branch.

When Murdoch purchased the piece of the Kirch empire, he included a buy-back option which he could exercise as early as next year, according to the Financial Times. If he does so, Kirch would be required to buy Murdoch's piece back at the price of what some believe is more than $1 billion. The price tag could put that branch, and possibly other parts of the empire in serious trouble, say analysts.

Sources told the Financial Times that the Kirch Group is already trying to speed up the sale of its 25 percent stake in Telecinco, a Spanish TV channel, in order to raise money.

Another takeover possibility is Murdoch teaming up with America's Liberty Media, the largest shareholder in Newscorp. After Murdoch, which has also shown interest in Murdoch's pay TV share.

The takeover, if it happens, would mean a massive and historic shake-up in Europe's media landscape. It would mark the first time a non-European took control of a leading TV business in Europe. It would also make Murdoch Europe's largest broadcaster.

But he has many hurdles to overcome. Among them, Germany's government, which has not looked kindly on foreign takeovers. Kirch, among the most politically-connected German businessmen, could put up quite a fight.