JULY 27, 2001

EM.TV to cancel Kirch deal

THE rescue deal between EM.TV and Kirch may be cancelled by the new management at EM.TV.

THE rescue deal between EM.TV and Kirch may be cancelled by the new management at EM.TV. The new boss of EM.TV will be Werner Klatten, who has bought 25.1% of the company from Thomas Haffa and will take over as chief executive at the end of the year. He is currently head of the Internet operations of Der Spiegel magazine.

Klatten is believed to have spent $87m to buy Haffa's shares. It is not clear where the money has come from but Klatten has family ties with the Quandt Family which owns BMW, his brother being married to Susanne Quandt. The car industry connection is tenuous but interesting as the European car manufacturers have been discussing buying more influence in F1.

Until Klatten takes over EM.TV will be run by chief financial officer Rolf Rickmeyer. Sources in Germany say that Klatten may decide to dump the company's F1 involvement and unstitch the rescue deal with Kirch in order to return to EM.TV's traditional activities of exploiting TV rights to cartoon characters. Klatten has Kirch connections, however, having previously run Kirch's Sat 1 channel.

The deal between Kirch and EM.TV has still to be cleared by the German competition authorities and in order for this to happen we understand that EM.TV has to sell a 45% shareholding in Kirch's rival TV company TeleMunchen. Unfortunately there does not appear to be a buyer at the moment. The unstitching of the F1 deals would be a complicated business. Kirch and EM.TV are partners are Speed Investment, the company which owns 75% of SLEC, the F1 holding company. If the alliance is broken up Kirch would, in theory at least, own 36.75% of SLEC trust. The Ecclestone Family own 25% and the remaining 38.25% would be available. How such an arrangement would be reorganized - and who might be willing to buy the shares - is a matter of pure speculation at the moment.

Whatever the case the latest developments in Germany are likely to add to the time needed for F1 to sort itself out commercially.

EM.TV last week wiped out all of its outstanding debts having sold its shareholding in Crown Media to Hallmark Entertainment for $103m.