Telegraaf Media Groep signs Letter of Intent to Make Strategic Investment in New SBS Holding Company

Telegraaf Media Groep N.V. (TMG) has signed a Letter of Intent with PKS Media S.à r.l. (PKS Media), the new holding company for the SBS group, to make a strategic investment in PKS Media that will involve the sale of TMG’s minority interest in SBS Broadcasting B.V. (SBS Netherlands) and a cash investment by TMG in PKS Media.

PKS Media, controlled by investment funds advised by Permira (Permira) and investment funds advised by Kohlberg Kravis Roberts & Co. L.P. (KKR), recently acquired substantially all the assets and liabilities of SBS Broadcasting S.A. PKS Media will be renamed SBS Broadcasting S.à.r.l. (SBS) and, together with its subsidiaries will comprise the new SBS group.
SBS Netherlands owns the television stations SBS6 and Net 5 and the Veronica television channel and magazine.  The company is a joint venture among SBS (63%), TMG (27%) and Veronica Holding B.V. (10%).  Under the terms of the Letter of Intent, TMG would sell its 27% equity interest in SBS Netherlands to SBS. TMG thereafter would use the proceeds it has received in respect of its 27% share in SBS Netherlands, plus an additional one-time cash investment of approximately €18 million to acquire a 20% interest in SBS.
Permira and KKR will continue to have operational control of SBS and the new SBS group after completion of the transaction. TMG will nominate directors to the SBS board proportionate to its investment in SBS. In addition, the Letter of Intent provides that TMG will have certain rights in the event of a future sale of SBS or SBS Netherlands.
The parties are targeting to complete the transaction this year. TMG will realise a book profit under the proposed transaction. The treatment of the transaction in TMG’s books will be disclosed after completion.
As previously disclosed, TMG acquired a 2.4% stake in the former holding company for the SBS group, SBS Broadcasting S.A., for approximately €29 million earlier this year at an average acquisition price of €38 per share.  TMG expects that it will receive a liquidation distribution of approximately €35 million (based on an expected liquidation distribution to shareholders in the former SBS of approximately €46 per share).
Ad Swartjes, chief executive officer of TMG, commented: “This transaction gives TMG the possibility to participate in the strong international growth of SBS. We have great confidence in the current management of SBS that will continue to lead the company after the acquisition. This strategic step should be seen in the context of the ongoing internationalisation of our company. TMG cannot grow substantially in television broadcasting in the Netherlands as a result of the cross-ownership rules under the Dutch Media Act. In addition, television broadcasting has become an increasingly international business. Together with our partners SBS, Permira and KKR, we expect to explore possibilities to cooperate both in the Netherlands  and internationally to realise the potential value of this strategic relationship.”
Markus Tellenbach, chief executive officer of SBS stated: “I am delighted to continue our long-standing relationship with TMG as a strategic shareholder in the new SBS group. TMG will bring valuable media experience to SBS and both our companies will benefit from opportunities to cooperate in the Netherlands and internationally. Along with Permira and KKR, we are looking forward to working together with TMG to build on SBS’s position as one of the leading media groups in Europe.”
In a joint statement, Permira and KKR declared: “We are pleased that TMG has agreed to invest in the new SBS group along with us.  We believe TMG will be an excellent partner as we work with Markus Tellenbach and his strong management team to build on SBS’s success.”