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Kirch takes EM.TV stake
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December 4, 2000: 6:17 a.m. ET
German media group gets 25% holding in Muppets owner, buys F1 stake
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LONDON (CNNfn) - German media company EM.TV & Merchandising AG on Monday said privately-held rival Kirch Group will become a 25 percent shareholder in the firm in exchange for its half share in one of EM.TV's subsidiaries. The deal wasn't enough to save the Munich-based company's shares from a nosedive after it published a profit warning Friday.
Entertainment and publishing firm Kirch will also pay $550 million for 49 percent of EM.TV's stake in SLEC, the holding company that owns marketing rights to Formula One motor racing. EM.TV bought half of  SLEC in March for $1.65 billion, and has an option to buy a further 25 percent by the end of the year. The deal will free EM.TV of its debt burden, Reuters reported.
EM.TV distributes and produces cartoons from 'Bugs Bunny' to 'The Simpsons', and has a stock of some 30,000 children's and family TV program episodes that it markets internationally and in Germany under the Junior label – a business that it currently owns in a 50:50 partnership with Kirch. The latest agreement gives EM.TV full ownership of this unit.
The company said the tie up would end a period of uncertainty and allow it to work with a strong partner in future collaborations.
EM.TV (AETV) shares plunged nearly 30 percent, or  4.69, to 11.50, on Frankfurt's Neuer Markt, a forum for high-tech and high-growth stocks, as investors digested the profit warning the company published after the market closed Friday. It slashed its forecast for full-year earnings before interest and tax by over 90 percent to 50 million marks ($22.7 million), warning it would miss revenue targets and see lower profit margins.
The share price drop cut EM.TV's market capitalization to 1.7 billion ($1.5 billion).
Handing over shares
Thomas Haffa, founder and Chief Executive of EM.TV, will remain the largest shareholder in the company, although he will transfer part of his own stake to Kirch Group. Kirch will also name an executive to the EM.TV board.
EM.TV said deputy CEO and former chief financial officer Florian Haffa has resigned from its board.
EM.TV said it recorded a 135.3 million mark ($61.4 million) loss on ordinary activities in the nine months ended Sept. 30, compared with a 158.8 million loss the year earlier, hit by lower-than-expected sales and costs for the integration and financing of acquisitions. Among its assets, EM.TV is the owner of the Muppets characters and the German-language TV and merchandising rights to the Japanese children's character phenomenon Pokémon.
The media company's results excluded those of the Jim Henson Company, the creator of the Muppets, which it bought in February for $680 million, and its Tele München Gruppe and Formula One units.
Shares in EM.TV slid in October after the company said it couldn't include in this year's earnings its income and revenue from the Jim Henson Company or the recently acquired half share of Formula One, as previously expected.
The deal with Kirch is subject to shareholder and regulatory approval.
--from staff and wire reports 
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