Bye-Bye to an Empire
March 28, 2002
Measure it in hundreds of millions of dollars. Better yet, billions. $5.7 billion.
That’s Leo Kirch’s debt, and on Thursday it looked more certain than ever to bring down his empire.
The Kirch Group has been a German giant – a European giant – for decades, growing since its founder’s fateful decision to purchase the rights to Frederico Fellini’s film "La Strada" in 1956. The rights cost about $6,000, but with huge return on investment Kirch’s coffers were filled.
Thus began a life of investment, not just riding modern Germany’s wave of media growth but defining it. Along with Bertelsmann, Kirch Group is the countries biggest media group. The cherry on top is ProSiebenSAT.1, Germany’s largest television broadcaster, of which KirchMedia controls 52 percent.
But pay-TV has brought Kirch down, along with economic slowdown and financial over-extension, analysts say.
On Thursday, company representatives were dealing with creditors, trying to secure about $174 million in bank loans, or face bankruptcy.
"Sharks have sharp teeth"
Somebody, obviously, is going to buy Kirch’s losses and integrate them into other empires. The competition is fierce.
Italian media magnate and government chief Silvio Berlusconi’s Mediaset is in the running, as is Australian-American global tycoon Rupert Murdoch’s News Corporation, Saudi Prince Alwaleed’s Kingdom Holdings and Lehman Brothers.
Yet growing fears in Germany that foreign interests will buy up a huge slice of the national media market have prompted KirchMedia’s investors to offer a stake to Axel Springer, the German publisher. Berlusconi and Murdoch already hold small stakes and may want to maximise them without raising public ire.
If Axel Springer takes the deal, reported by the Financial Times newspaper to involve a $669 million debt-for-stake swap, shareholders could report that Germans still control the group.
If the Kirch Group cannot secure new loans, on top of those it already owes, the sell-off will fast become a feeding frenzy.
Of the Australian-American tycoon, Kirch said in the weekly Der Spiegel, "Murdoch is a shark. Sharks have sharp teeth. Anyone who can’t swim with them shouldn’t get in the pool with them."