EM.TV Confirms Talks with Kirch Will Continue (updated)

Prospects for a rescue of debt-laden German media group EM.TV & Merchandising by media giant Kirch improved on Thursday as the two firms agreed to prolong exclusive talks, sources close to the negotiations said.

"The gap (between the two firms) has narrowed somewhat," one source told Reuters.

The original deadline for the negotiations expired on Wednesday. Kirch said just hours before the midnight deadline that the talks would continue into February.

The sources also denied a report in the Financial Times Deutschland that cited supervisory board sources as saying EM.TV and Kirch would continue to talk on an exclusive basis for a another week. No new deadline had been set, the sources said.

The odds on Kirch succeeding in its bid for 16.74 percent in EM.TV and almost half its 50 percent stake in Formula One holding SLEC were further boosted when German media entrepreneur Herbert Kloiber denied he was working to block the deal.

"It is not true that I am working on a counter consortium," Kloiber told Reuters in a telephone interview.

But Kloiber, whose Tele-Muenchen Gruppe (TMG) - a German film rights dealer - is 45 percent owned by EM.TV, made clear he would prefer to see the rescue attempt fail.

"We are interested in operating independently in the German media market. This is only possible if Kirch, or any other large media group, does not take a decisive stake in EM.TV," he said.

Cartel Clash?

The film rights dealer also said an EM.TV-Kirch link could fall foul of competition authorities.

"Certainly the anti-trust body will view Kirch taking a stake in EM.TV critically because of EM.TV's stake in Tele-Muenchen."

Kloiber declined to comment on whether he would aim to buy back the stake in TMG owned by EM.TV if the Kirch bid succeeded.

EM.TV has said it is in talks to sell its TMG stake back to Kloiber for anti-trust reasons.

Kloiber denied reports that he and EM.TV supervisory board chief Nickolaus Becker met Hellman & Friedman in January this month to discuss a purchase by the U.S. investment group of EM.TV's 50 percent stake in Formula One holding company SLEC.

The Financial Times Deutschland cited a banking source as saying that the offer by U.S. investment bank Helmann & Friedmann would only be valid for a limited time.

SLEC is equally owned by EM.TV and British racing guru Bernie Ecclestone.

British newspaper The Times reported on Thursday that the five big European carmakers Renault , BMW AG , Ferrari , Jaguar and Mercedes have joined forces to buy a partnership with SLEC from Ecclestone.

The carmaker cartel's long-term objective is to smooth the transition from Ecclestone, who underwent heart surgery two years ago, to an established structure.

The 11 Formula One teams were becoming concerned about the future, and the five carmakers formed an alliance to gain a foothold in the power structure and draw up succession plans.

"We want things to happen as soon as possible. These car companies have put an enormous investment into Formula One and they want to make sure their money and the sport is safe," Ecclestone was quoted as saying.

BMW were unavailable for comment and Mercedes-owner DaimlerChrysler declined to comment.