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KirchMedia Auction Nears End-Game

Collapsed KirchMedia closed in on a buyer on Friday, as the German media group put the finishing touches to a shortlist of three bidders, with the aim of picking a winner in the next four weeks.

Collapsed KirchMedia closed in on a buyer on Friday, as the German media group put the finishing touches to a shortlist of three bidders, with the aim of picking a winner in the next four weeks.

Sources familiar with the process said the distressed television and rights group's creditors would approve the narrowed list of finalists early next week, after seven groups pitched proposals of up to 2.6 billion euros ($2.57 billion).

The auction will determine the shape of Germany's battered media industry and could see some of its most prized assets fall into foreign hands for the first time. KirchMedia's assets include a controlling stake in Germany's leading commercial broadcaster, a huge film library and top sports rights.

The seven bidders are expected to be informed later before early Monday about who has gone through to the next stage, sources said. Those that do not get through may join consortia that have, they added.

But the decision on who gets through will be based not just on price, but how serious each of the bidding groups and individuals are. One person said individual bidders were still floating between the various consortia.

"The advisers need to assess how firm the consortia are," said one person familiar with the process.

Among those tipped to be shortlisted are a German consortium comprising Munich bank HVB Group and German publishers Axel Springer Verlag, Heinrich Bauer Verlag and Spiegel Verlag.

The other major consortium consisting Germany's Commerzbank, French TV group TF1, and Sony Corp's Columbia TriStar are also expected to have made the grade.

The third bidder remains the wildcard. Among the financially strongest are U.S. media giant Viacom and billionaire investor and children's entertainment mogul Haim Saban.

Tangled Auction

Some sources said creditors would approve the shortlist as early as Monday and were aiming to wrap up a buyer by the end of August, four months after KirchMedia filed for insolvency after failing to repay billions of euros in loans.

However, confusion among the bidders indicates that the auction process might be more onerous than many expected.

More than 200 Kirch creditors met in a Munich cinema on Thursday to review the final seven bidders which emerged from an initial pool of 80. Some people close to the process said KirchMedia already had a broad idea of who would go through to the second round but needed to firm up their commitment.

Shortlisted bidders will be given greater access to KirchMedia's books and complex contracts surrounding its top commercial broadcaster ProSieben.Sat1, sprawling film library and sports rights such as World Cup soccer.

KirchMedia, the core division of German media mogul Leo Kirch's fallen empire, hopes to secure a final price well above the top 2.6 billion euro bid in the last round, as the final three get down to more serious competition for the assets.

The seven bidders are also expected to have included KirchMedia's former minority shareholder Mediaset - controlled by Italian premier Silvio Berlusconi's family.

However, fellow former minority shareholder News Corp was not among the final seven, sources said.

U.S. television network NBC, owned by General Electric, had also expressed an interest at one point, while Dutch production company Endemol, part of Spain's Telefonica, was also named as a long shot, some sources said.

Further Commitments

Sources said KirchMedia and its insolvency experts may want further guarantees from some of the bidders, especially the individuals, to ensure they are committed to the auction.

Sources said Viacom had bid alone. But while it is among the candidates with most financial muscle, sources noted that it was only interested in pieces of the KirchMedia empire.

Viacom, owner of the CBS network, has said it will only buy assets that add to earnings and grow at same rate as the rest of the company. Kirchmedia, which has some underperforming assets in its stable, might not fit the bill, some analysts noted.

KirchMedia and investment bank UBS Warburg, which is managing the auction, have insisted that KirchMedia be sold in one block. However, the assets are widely expected to be split up by whoever wins the auction.

(Additional reporting by Sabine Bub in Munich, Jeffrey Goldfarb in New York)

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