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Kirch to withdraw from EM.TV deal?

THE WALL STREET JOURNAL EUROPE is reporting that the talks between Kirch and EM.TV have broken down over the price being paid for EM.TV's stake in Formula 1. Kirch is offering only $550m for the stake which was purchased in March last year for $712.5m and $880m worth of EM.TV stock. The loss of a billion dollars on the deal seems to be more than EM.TV can stomach but failure to agree the rescue plan could leave the company in even greater trouble than it already is. However, if the Kirch deal does fail to materialize the way will be open for an alternative bid and there are several obvious candidates who may offer EM.TV more money.

Bernie Ecclestone made $1.3m when he sold the shares last winter and he may decide to try to buy them back for half the price. This would still be a better bid than Kirch is willing to make. This would enable Ecclestone to sell the shares again and thus revalue the Formula One group of companies. Alternatively Ecclestone could simply make a bid for the entire EM.TV company, perhaps in league with a media company such as Kirch or Disney. With its share price so low EM.TV is currently valued at little more than $520m and so control of the company could probably be purchased for around that figure as the remaining shareholders are unlikely to sell unless they are offered a decent price. Thomas Haffa may conclude that with all the problems he is having that he has thing to gain from holding on and could sell his shares in the business.

The EM.TV empire has considerable assets in television and merchandising and these would be very valuable to a rival firm such as Disney or the fast-expanding French media firm Vivendi Universal. The sale of these assets would offset the costs of buying EM.TV and the buyer would, in effect, get the F1 shares at a cheap rate.

The other bidder who might emerge is the much talked about consortium of European car companies which were discussing trying to buy into the sport in order to protect their investments. There may be some action in this respect in the coming days as the leaders of the automotive world gather in wintry Detroit for the annual Detroit Auto Show.

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