EM.TV Talking to Manufacturers About F1 Stake (updated)

Germany's EM.TV & Merchandising AG said on Monday it was in talks with Formula One car makers about the possibility of them taking a stake in SLEC, the holding which controls the commercial rights to the races.

EM.TV and its partner Kirch have until Wednesday to exercise an option to buy a further 25 percent in SLEC for almost $1 billion from Formula One mogul Bernie Ecclestone, taking their combined stake to 75 percent.

Michael Birnbaum, spokesman at media rights firm EM.TV, said it would "make sense" for the Formula One car makers to take a stake in SLEC.

EM.TV was in exploratory talks with them, he said, but they had not yet made any concrete proposals.

Kirch said on Saturday it had secured the financing for the option and would exercise it by the time it expires on Wednesday.

"We will exercise the option... as we have agreed with EM.TV," Kirch spokesman Hartmut Schultz told Reuters.

Several car makers contest Kirch and EM.TV upping their stake in SLEC. Jaguar Chief Executive Wolfgang Reitzle told a German newspaper on Monday he was opposed to the deal.

"We don't want Formula One to come under the influence of a media company. There is a danger that Grand Prix races will then become a pure media spectacle with the sport of secondary importance," said the chief of the British Formula One car maker, owned by Ford .

Asked how the car makers could prevent the purchase, Reitzle said: "There are still a lot of variations imaginable. The negotiations continue."

Patrick Faure, head of Renault Sport, said last week it was out of question that Formula One racing would be broadcast over pay-television channels.

German media reports suggested Kirch might want to use the the rights to prop up its ailing pay-TV channel, the only one in Germany, which is Europe's largest television market.

Shares in EM.TV rose on the news. At 1126 GMT, the stock gained 7.60 percent to 6.94 euros while the Neuer Markt Nemax 50 index was up 6.14 percent. The company is still trading about 94 percent below it February 2000 all-time high of 120 euros.

Road Block

But the car makers are not the only obstacles to a deal.

Racing mogul Bernie Ecclestone, who currently owns 50 percent in SLEC with the other half held by EM.TV, and the International Automobile Federation (FIA) are opposing the deal, which requires the approval of FIA's general assembly.

"Ecclestone does not have a veto right against the exercise of the option," Schultz said.

The spokesman declined to comment, however, on whether the FIA holds the right to block the deal.

On Saturday, Kirch said it had secured bank guarantees of around $1.5 billion. Guarantees for $550 million covered its agreed purchase of almost 25 percent of SLEC now owned by EM.TV. The remaining $987 million was for a call option held by EM.TV to purchase a further 25 percent in SLEC.

Max Mosley, the head of the FIA, has been reported as saying he believes the FIA general assembly will prevent Kirch and EM.TV from upping their stake in SLEC.

The presidents of 157 motor sports organisations from 118 countries form the FIA's general assembly. Each country holds one vote.

Mosley has said that he would like to see a consortium of five leading Grand Prix car makers purchase a stake in SLEC.

Kirch spokesman Schultz declined to comment on whether Kirch was in talks with Ecclestone or the Formula One car makers.