Klatten confirms EM.TV retrenching

WERNER KLATTEN, the new chief executive of Formula 1 shareholder EM.TV, on Wednesday told the annual shareholder meeting in Munich that he intends to refocus the troubled company on its core business of trading broadcast rights and merchandising for the children's market. He said he intends to sell off the company's shareholdings in other businesses and reinvest the money in other companies which deal in family TV.

This means that EM.TV will be putting its share in Formula 1 up for sale. EM.TV spent around $1.5bn to acquire a company called Speed Investment Ltd which owned 50% of F1's holding company SLEC. The Kirch group then paid EM.TV $586m for a 49% share in Speed Investments and together they paid $987.5m for an additional 25% of SLEC which had been owned by a trust belonging to the Ecclestone Family.

By our calculations this means that EM.TV now owns around 38.25% of SLEC with the Ecclestone Family controlling 25% and Kirch owning 36.75%. Kirch is believed to have an option to acquire EM.TV's share of SLEC but that can only happen if Bernie Ecclestone agrees that the shares can be sold.

The other problem is that Kirch is struggling for cash at the moment and the purchase of more SLEC shares would cost anything up to $1bn, depending on the deal EM.TV's new management would settle for.

Ecclestone might block the Kirch deal and insist that the shares are sold to the European car manufacturers (and the F1 teams) who want a bigger share of the income in F1 and are threatening to start a rival F1 series when the current legal arrangements run out at the end of 2007.

The car manufacturers and teams will not be keen to pay too much for the shares and might insist that Kirch and the Ecclestone Family reduce their shareholdings.

Negotiating such a deal is going to be a difficult process because everyone will want what they consider to be good value for their shares. Teams argue that they should not have to pay having played a role in building up the World Championship while the FIA is also arguing that it must be involved in any deal that is agreed.

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