Kirch, EM.TV to Swap Formula One Stakes

German media giant Kirch Group is planning to take over EM.TV & Merchandising's stake in the Formula One car racing series, a German magazine reported on Wednesday.

German weekly magazine Focus Money said that privately held Kirch is aiming to swap its 50 percent stake in Junior TV for EM.TV's 17.5 percent stake in the SLEC holding company that controls Formula One. The move would enable Kirch to raise its stake to 75 percent of Formula One, giving it more influence over the distribution of television rights for the sports series.

In Germany, Kirch has the pay TV rights for Formula One, but the free-to-air rights remain with Bertelsmann's RTL Group. They are coming up for auction in 2003. Spokesmen from both Kirch and EM.TV said they were still negotiating over EM.TV's planned purchase of the 50 percent stake it doesn't already own in their Junior TV joint venture. They declined to comment on the conditions.

"We talking about the circumstances under which that can occur," said a Kirch spokesman.

Kirch and EM.TV each hold 37.5 percent in SLEC, while the remaining 25 percent is controlled by the organiser of the series, Bernie Ecclestone. Kirch has been able to exercise an option to raise its stake to 57.5 percent from September 1 as EM.TV is unable to pay back a loan it got from Kirch earlier this year to help bail it out of debt.

EM.TV's stake in SLEC would fall to 17.5 percent.

Kirch had tried to swap its share in the children's TV programme maker for a stake in EM.TV, though this plan was blocked by the regulatory authorities as EM.TV holds a stake in rival film rights trading company Tele Muenchen.

EM.TV has said it wants to focus on its core business of children's programming, shedding non-core assets to revive its flagging fortunes. Industry experts say the swap could be a distinct possibility, given that EM.TV does not have the financial means to pay for the Junior TV stake.

If it exercises the option, Kirch could face opposition from Ecclestone, who has the ability to vet control of SLEC. Carmakers also have threatened to set up another series if Kirch moves Formula One from free channels onto its pay-TV channel Premier, which has a smaller audience.

The industry experts said Kirch is in talks with car makers to give them some share, though a spokesman for the company declined to comment.