Grapevine: U.S. Bank to Bid for EM.TV's F1 Stake

German media firm EM.TV & Merchandising is talking to a U.S. investment bank about selling its 50 percent stake in Formula One holding company SLEC amid signs talks on a rescue by media giant Kirch have faltered.

Industry sources told Reuters that EM.TV supervisory board chief Nickolaus Becker and German media entrepreneur Herbert Kloiber met with representatives of investment bank Hellman & Friedman last week.

The sources said Hellman & Friedman is aiming to buy the 50 percent stake in Formula One holding company SLEC owned by EM.TV for $700 million. EM.TV bought the stake for 3.5 billion marks ($1.67 billion) in cash and shares last year.

The industry sources also said the bank would try to persuade Bernie Ecclestone, who owns the rest of SLEC, to refrain from exercising his option to sell a further 25 percent in the holding to EM.TV for an estimated $1 billion.

Forcing EM.TV to buy the stake would put a huge strain on its financial position, putting pressure on it to find a strong partner like Kirch.

Analysts estimate EM.TV's debt has swollen to 1.12 billion euros ($1.06 billion) after it bought the Jim Henson Company, producer of the Muppets, and the SLEC stake last year.

The embattled company said in December that Kirch would prop it up by buying half of its SLEC stake for $550 million.

But the rescue is looking fragile as German financial daily Handelsblatt reported on Monday that sources said Kirch and EM.TV were no longer talking.

But EM.TV repeated that it would continue talking to Kirch on an exclusive basis until the end of January and that Kirch had continued the so-called "due diligence" process of checking EM.TV's financial accounts on Thursday and Friday last week.

The spokesman added, however, that EM.TV Chief Executive Thomas Haffa and Kirch Deputy Chief Executive Dieter Hahn had not met for several weeks.

A source close to Kirch was more sceptical the discussions would continue in the near term: "At the moment there are no further talks. EM.TV seems to be hoping for a white knight."

The EM.TV spokesman said Haffa and Ecclestone had met last Saturday but the spokesman declined to comment on what the talks were about.

Handelsblatt said Ecclestone would seek to block Kirch's purchase of the stake as he fears that the Formula One races would only be broadcast on Kirch's pay-television channel Premiere World in Germany, Europe's largest television market.

And Ecclestone would not be alone in opposing a rescue of EM.TV by Kirch, according to press reports.

Kloiber, who owns the majority of German film licence dealer Tele Muenchen, told Handelsblatt: "I want to keep EM.TV away from the Kirch Group."

EM.TV, which holds 45 percent of Tele Muenchen, is in talks to sell this stake back to Kloiber for antitrust reasons as Kirch would own a dominating share of the German television rights trade if it bought an EM.TV stake, the EM.TV spokesman said.

But industry sources told Reuters they doubted Kloiber would want to buy the stake back. Kloiber was not immediately available for comment.

Shares in EM.TV were up 8.33 percent to 8.45 euros by 15:57 GMT while the Neuer Markt Nemax index was up 0.25 percent. EM.TV has seen its shares plunge around 90 percent since a February 2000 all-time high of 120 euros.