New York: Time Warner and Sony both bid for All3Media Holdings, lured by surging earnings of the British television producer, but the sale was pulled after the bids failed to meet the seller's target.
Permira Advisers, owner of London-based All3Media, was seeking about £750 million (Dh4.33 billion), or 12 times operating earnings, said two people with knowledge of the negotiations who declined to be named as the talks were private.
The aborted sale is symptomatic of the mismatch this year between global media companies seeking expansion in Europe and sellers unwilling to cash out as prices drop. The number of announced or completed deals involving the region's media companies declined 27 per cent in the first half, Bloomberg data show.
The worsening debt crisis and slump in equity markets have distorted valuations, said David Kershaw, CEO of advertising firm M&C Saatchi. "The expectations of the sellers haven't caught up with where multiples of potential acquirers have fallen to. That's where people start taking things off the table."
Price-to-earnings ratios among US media companies on average fell 17 per cent on a market capitalisation weighted basis in the last three months, according to Bloomberg data. The ratio for European media companies rose almost 4 per cent in the same period, meaning investors need to pay more.
Spokesmen at All3Media, which produced the Skins TV series for Viacom's MTV channel and the Are you smarter than a fifth grader game show for News Corp's Fox network, and at Time Warner declined to comment on the talks.
The sale of EMI Group, the London-based music label taken over by Citigroup this year after failing to meet its debt requirements, is dragging out. Bids for the company, which also owns recordings from the Beatles and Queen, were initially expected to wrap up in September.
Sony, Bertelsmann's BMG Rights Management, billionaire Len Blavatnik, Universal Music Group and private equity investor Alec Gores are interested in the record label of Katy Perry and Coldplay, two people with knowledge of the situation said in July.
Odeon sale
Investor Guy Hands' Terra Firma Capital Partners firm cancelled a sale of UK cinema chain Odeon and UCI Cinemas Group last quarter after getting offers from theatre companies and private equity firms below the asking price, said two people with knowledge of the bids.
There were 60 acquisitions for media companies announced or completed in the Eastern and Western European markets in the first six months, according to Bloomberg data. That compares with 82 deals in the same period a year earlier.
Earlier this year, Discovery Communications was among suitors of ProSiebenSat.1 Media's Nordic assets, which the German broadcaster decided to keep at the end. The owner of cable television's Animal Planet and Discovery Channel is looking for purchases, especially in Eastern Europe, but hasn't found very much that is for sale, CEO David Zaslav said.
"We're a little surprised given that the economy has been soft," he said.
Discovery has about $1.1 billion in cash and cash equivalents. That's up from $466 million at the end of last year and $623 million in 2009.
Especially US companies "have cash and they want to invest," said Barry Maloney, a partner at venture capital firm Balderton Capital. "But if they can't meet the expectations, the deals aren't going to be done."
Corporations have been hoarding cash and paying down borrowings. The S&P 500's net debt to earnings before interest, taxes, depreciation and amortization ratio is down to 2.6 from 5 in the second quarter of 2008, data compiled by Bloomberg show.
This year's earnings will increase 18 per cent to a record $99.36 a share and break $100 next year, according to the data.
Social Media
While most fast growing digital Internet companies such as Google Inc. and Facebook Inc. are based in the US, Europe still makes up a large portion of the world's largest media companies. According to a Forbes ranking from 2010, media firms from Europe, including Germany's Bertelsmann AG and Italy's Mediaset SpA, made up eight of the top 20 media companies, making the region second only to the US.
There also some bright spots in the European digital space that will draw interest from potential acquirers such as London- based music-streaming service Spotify Ltd., which is privately held and expanded into the US market this year, said Balderton Capital's Maloney, who helps manage the fund's $1.9 billion in committed venture capital, including funding for German social games developer Wooga GmbH and UK online loan-provider Wonga.
While international media companies are interested in expanding in Europe to get access to the local knowhow and the world's region with the highest gross domestic product in 2010, the lack of suitable acquisition targets may prompt investors to spend their money elsewhere.
The UK and other European markets "remain very attractive for lots of reasons, albeit economic growth isn't one of them," said Stuart Sparkes, director of the media corporate finance advisory at Deloitte LLP in London. "If you want access to growth, you inevitably end up going to the developing world in terms of India and China and most excitingly of all, Brazil."
Still going strong
While most fast-growing digital internet companies such as Google and Facebook are based in the US, Europe still makes up a large portion of the world's largest media companies. According to a Forbes ranking from 2010, media firms from Europe, including Germany's Bertelsmann and Italy's Mediaset, made up eight of the top 20 media companies, making the region second only to the US.
There also some bright spots in the European digital space that will draw interest from potential acquirers such as London- based music-streaming service Spotify, which is privately held and expanded into the US market this year, said Balderton Capital's Maloney, who helps manage the fund's $1.9 billion (Dh6.97 billion) in committed venture capital, including funding for German social games developer Wooga and UK online loan-provider Wonga.
While international media companies are interested in expanding in Europe to get access to the local knowhow and the world's region with the highest gross domestic product in 2010, the lack of suitable acquisition targets may prompt investors to spend their money elsewhere.
The UK and other European markets "remain very attractive for lots of reasons, albeit economic growth isn't one of them", said Stuart Sparkes, director of the media corporate finance advisory at Deloitte in London. "If you want access to growth, you inevitably end up going to the developing world in terms of India and China."
— Bloomberg
