is expanding into pay television
Bidding for a one-third stake in Canal Satellite
By Simon Bond
French media group Lagardere has confirmed that it is close to buying a minority stake in Canal Satellite, the digital broadcasting platform controlled by European pay-TV giant Canal Plus.
Speculation around the deal recently sent Lagardere's shares sky rocketing on the Paris Bourse. Lagardere is expected to buy a 34 percent stake for an estimated $920 million, valuing Canal Plus' Canal Satellite venture at a massive $2.75 billion and heralding Lagardere's coming-of-age as a media company.
Lagardere's interests span defense, automobiles and media, with its media division accounting for nearly 60 percent of the group's $9 billion annual revenues. The media group's interests include several digital television and radio stations and it is a leading internet service provider in France.
The company's media roots are in magazine publishing and it owns over 200 titles including Elle and George. Last year Lagardere acquired the Japanese publisher Fujin Gaho and Italian magazine stable, Rusconi Editore.
By strengthening its presence in the pay TV market, Lagardere is looking for opportunities to leverage its assorted media brands across different platforms with its internet portals, magazine titles and TV stations all supporting each other.
When the deal is completed it will lift the uncertainty that has surrounded talks between the two companies. Just before Christmas, Arnaud Lagardere, head of the media division and son of the group's founder, threatened to walk away from the negotiations unless they were concluded by the end of 1999. His comments came as discussions had stalled over the price and size of Lagardere's proposed stake.
The problem came when Canal Satellite's value rose sharply in line with those of other media companies in the wake of the recent deal between Rupert Murdoch and Kirch, the German TV company. Murdoch's acquisition of a 4 percent stake in Kirch's pay- TV arm boosted "per subscriber" valuations to more than double the price paid just a few months earlier by Vivendi, the French utilities and communications group, when it brought a Canal Satellite stake from Pathe.
However, now it looks like Lagardere's hot temper has paid off and the company is getting a good deal. BSkyB agreed to pay $1.5 billion for its stake in Kirch which analysts valued at the equivalent to $3,400 per subscriber. Based on Canal Satellite's 1.4 million subscribers, Lagardere would be paying a mere $2,250 per subscriber--a bargain for any European pay TV asset these days.
-Simon Bond covers European media for Media Life, writing from outside of London.