Media Giant in Talks to Take Majority of EM.TV

Private German media giant Kirch Group is in talks to acquire a majority stake in EM.TV & Merchandising AG, the Munich-based firm that owns 50% stake in F1 holding company SLEC, industry sources said on Tuesday.

Discussions centre on KirchMedia GmbH acquiring a majority of EM.TV shares, most of which would be sold by EM.TV founder and Chief Executive Thomas Haffa, the sources told Reuters.

The news sparked a dramatic turnaround in EM.TV's share price, which had earlier slumped as much as 22 percent on rumours the company could announce a profit warning when it unveils results at the end of the week.

EM.TV refused to comment about the profit-warning speculation although the company on Monday dismissed earlier rumours that it was in financial trouble.

Neither EM.TV or Kirch would comment on the acquisition talks, but analysts said such a deal could provide EM.TV with a financial lifeline to help it build its Formula One business.

"They need cash for their Formula One interests, otherwise they're in deep trouble. They're fine with their core business but they have an option to buy more of the Formula One holding which they can't afford," said one analyst in London.

Earlier this year, EM.TV acquired The Jim Henson Company - maker of children's television programmes the Muppets and Sesame Street - and 50 percent of Formula One motor racing holding company SLEC.

The sources said talks could be concluded this week but it was not yet certain that agreement would be reached. It was also possible that EM.TV was talking to other media groups about a merger, they added.

"I think EM.TV has been talking to everyone. There's been speculation they would have to do a deal with someone for some time and a failure to deliver on that has been part of the reason why the shares have performed so badly," one analyst said.

By 1740 GMT the stock was down 4.2 percent at 21.55 euros, as investors leapt on a seven percent rally, sparked by news of the talks, to take profits. The stock had earlier hit a low of 17.58 euros - a fraction of the 120 euros high hit in February.

EM.TV is expected to release nine-months results possibly on Friday and analysts said the market was bracing for negative news from the results.

EM.TV stock dropped sharply in October after the company said it could not book income and revenue from the acquisitions in the first half, forcing a revision of interim sales figures.