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Europeans tune TV pact
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April 7, 2000: 9:55 a.m. ET
Bertelsmann and U.K.'s Pearson link TV arms to form $19B powerhouse
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LONDON (CNNfn) - British media company Pearson and Germany's Bertelsmann said Friday they would merge their broadcasting arms to create an integrated media player valued at  20 billion ($19 billion) with plans to expand aggressively in Europe and North America.
The partnership is the latest step in the consolidation of the European media industry, driven by the clamour for content from new media outlets, particularly online services, and the rising cost of buying rights to broadcast audience-grabbing events such as soccer matches.
The deal drew applause from analysts, who said the combination of the region's largest TV and radio broadcaster, CLT-Ufa, and Pearson's vast TV program catalog - it is the world's largest producer of game shows - provided the partners with critical mass.
The enlarged company, valued at 20 billion ($19 billion) and with combined 1999 sales of 3.78 billion and pro forma pretax earnings of 459 million, will also be used to leverage the partners' expanding online news, sport and entertainment activities.
"This is not a defensive move, it's very aggressive," Bertelsmann chief executive Thomas Middelhoff told CNNfn. "It prepares the companies for new challenges like the Internet and makes us a much more international business."
 Bertelsmann is contributing its 50.75 percent stake in CLT-Ufa, whose remaining shares are held by Audiofina, a holding company controlled by the Belgian financier Albert Frère.
The announcement prompted a sharp rise in shares of Pearson (PSON), best known as the owner of the Financial Times newspaper. The stock jumped 15 percent to 2,375 pence in mid-afternoon trade. Audiofina shares surged 20 percent to 149 in Brussels.
U.S. market a target
Bertelsmann will hold 37 percent of the new company, which has yet to be named, while Pearson will own 22 percent. Group Bruxelles Lambert, the company through which Frère controls Audiofina, will have 30 percent with the balance owned by other Audiofina shareholders. Bertelsmann will take a 37 percent stake in Audiofina as part of the deal. Didier Bellens, recently named chief executive of CLT-Ufa, will head the new business.
The partners plan to list a minority stake in the company in London. The stock will provide privately held Bertelsmann with a means of funding acquisitions without having to dip into its pockets for cash.
Middelhoff said the immediate focus would be on strengthening content and distribution channels in Europe, though it would advance on the U.S. market if current ownership restrictions are relaxed. Overseas investors cannot own more than 24.9 percent in U.S. TV or radio channels.
 The listing also provides a new stock by which investors can take a stake in Pearson's TV business. The U.K. company has educational and business publishing interests and has sold off non-core leisure operations under the management of chief executive Marjorie Scardino.
"The potential of this new company is tremendous," said Scardino, noting that it planned to issue new equity to fund acquisitions.
CLT-Ufa controls 22 TV channels and 18 radio stations with a combined daily audience of 120 million. These include German TV channel RTL, other RTL channels in Belgium, Hungary and Poland, M6 in France and HMG in the Netherlands. The company had sales of 3.21 billion last year and net earnings of 415 million. The merger would also give the new company control of British broadcaster Channel 5. 
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