Time Warner (NYSE: TWX) has made a takeover bid for Endemol, the debt-laden Dutch production company behind Big Brother and Deal or No Deal.
The US media firm’s offer is thought to be worth about €1bn (£858m). “We have received an approach; it will now be put forward to Endemol’s lenders to consider,” said Charlie Armitstead, a spokesman for Endemol. “It doesn’t come as a surprise – Endemol is an attractive asset.”
Endemol has been labouring to restructure €2.8bn in loans after being unable to meet its banking covenants. The company has been in protracted discussions with lenders. That aside, the company is performing well at an operating level with a forecast of earnings before interest, tax, depreciation and amortisation of about €140m this year.
The production company is jointly owned by Italian prime minister Silvio Berlusconi’s Mediaset, Goldman Sachs’s Capital Partners and Endemol founder John de Mol’s investment vehicle Cyrte.
The timing of Time Warner’s unsolicited bid is opportunistic and will require the two-thirds majority approval of Endemol’s lenders, which include Barclays and RBS, to succeed.
The producer has a temporary agreement in place to waive its covenant breach until mid-November.
“We remain focused on reaching a solution with lenders,” Endemol said. “Those discussions continue to make good progress and we are confident that an agreement will put the business on a firm financial footing and strengthen Endemol’s prospects for the future.”
A restructuring could result in the three shareholders reducing their equity stake in a debt-for-equity swap with lenders in return for writing off some loans.
In June the Endemol chief executive, Ynon Kreiz, stepped down from the company. Endemol’s board has appointed the group president, Marco Bassetti, and the group chief financial officer, Just Spee, to manage the business on an interim basis.
Endemol non-executive director Charles Allen, the former ITV chief executive, has been given a role coordinating key initiatives including the hunt for a new chief executive.
Time Warner has been on a drive to expand its international production business in the past couple of years, taking a controlling stake in Shed Media, the UK company behind shows such as Supernanny and Waterloo Road, in August last year in a deal valuing the company at £100m.
The US company had been considered a potential suitor for another UK superindie, All3Media, the maker of shows including Midsomer Murders, but the sale was called off after a lack of interest from bidders in the £750m-plus price tag. Time Warner was never confirmed as a bidder.
Earlier this year Endemol secured a deal with Richard Desmond’s Channel 5, after tortuous and protracted talks, to relaunch Big Brother in the UK, nearly a year after the format was dumped by Channel 4.
“This would be an initiative of Cyrte, who know Ronald Goes [Dutch head of Warner Bros international TV production] well,” said one City source with knowledge of the situation. “Mediaset made very informal advances to ITV (LSE: ITV). This is about the shareholders looking for a solution. The problem is until the debt/equity issue is sorted you don’t know who owns Endemol really.”
The source believes that now Time Warner has been flushed out there is a possibility that other suitors such as NBC (NSDQ: CMCSA) Universal or Sony (NYSE: SNE) – one of the few bidders to show serious interest in All3Media – might weigh up a run at Endemol.
Time Warner’s Shed Media deal fulfilled its ambition to build up its UK production presence. However, it is thought that Jeff Bewkes, the chief executive of the Time Warner, has asked executives to look for further acquisitions to build up its European strength.
Endemol has a strong production and distribution business across the continent in markets including the UK, France, Spain and Germany. Nevertheless the source believes that the “odds are against” Time Warner pulling off a deal at this time.
“There are a lot of factors in play here, it is a bit of a mess, but if the debt holders believe that Endemol is at its lowest ebb in the market and that it is a recovery play they would be mad to sell now,” added the source.
This article originally appeared in MediaGuardian.