Desmond comes to the rescue of Five with £104m deal

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The Independent Culture

The media tycoon Richard Desmond last night sealed his takeover of Five, the channel whose hit shows include CSI and Neighbours, in a deal worth £103.5m.

The deal closed with immediate effect, transferring ownership to Northern & Shell (N&S), the publishing group owned by Mr Desmond. "This is a major acquisition and a long-term project," said Mr Desmond, who claimed that he would "invest heavily in talent and content both in the programming we already have and in home-grown programming".

Mr Desmond went on to say that Coronation Street, The X Factor and Panorama were all programmes he would like the channel to broadcast.

Asked if he was asking the BBC to make shows for his network, he said: "Well, why not, why not? Why can't we have Panorama on Channel Five? It's a jolly good programme."

He added: "Channel Five has proved itself to be a credible and competitive British broadcaster with some of the most sought-after programmes from home and overseas.

"I'm delighted to have taken ownership of the network and I know that, with the right investment, drive and leadership, it can go from strength to strength as a competitive broadcaster and a modern player for the digital consumer."

Mr Desmond owns the Daily Express and Sunday Express national newspapers as well as the Daily Star and its Sunday counterpart, and the celebrity lifestyle magazine OK!. Northern & Shell also owns a series of adult television channels, including the subscription channel Television X – The Fantasy Channel. The group has also expanded into "pay-per-night" with its Red Hot channels. European legislation means Mr Desmond will not be able to promote his print titles on Five. He will, however, be able to back the broadcaster in his publications.

The former parent company, the Luxembourg-based RTL Group, had become frustrated with Five's performance as it struggled through the downturn. A source close to the company said it had come to a point where RTL had to "invest or sell – and the opportunity to sell was too good to pass up". The source said RTL was happy with the price it received, which is "higher than the value of the assets".

"With a significant recovery of the UK TV advertising market and Five performing well in the first half of 2010, we saw a window of opportunity to realise a transaction based on a fair evaluation of Five," said Gerhard Zeiler, the RTL chief executive.

Claire Enders, founder of Enders Analysis, said: "Desmond is someone who has a real interest in the media. He is an innovative entrepreneur. The edge he has is the free publicity in the Star, OK! and the Express. He will build the buzz and the glamour in the publications, which is something the channel has been sorely lacking."

Mr Desmond has pledged to keep Five as a public-service broadcaster. This means a prime slot on the electronic programme guide, but the broadcaster must pledge to screen a certain amount of news and current affairs programming.

He revealed he will pay the £20m cost of Five's participation in Project Canvas, the joint venture with partners including the BBC, Channel 4 and BT, to bring online catch-up TV to the living room set. Five had walked away from the venture earlier this year.

Mr Desmond cleared the takeover with the media watchdog Ofcom earlier this week, and is expected to be called in front of the House of Commons culture committee, who will quiz him on his plans for the channel.

Five launched to great fanfare in 1997, backed by Pearson Television, United Business Media, Warburg Pincus and CLT-Ufa. CLT and Pearson later merged to form RTL, which subsequently took 100 per cent ownership. The group initially made its name in soft porn movies, football and action films, an image that the current chairman and chief executive Dawn Airey has worked hard to shed.

Recently it has struggled and in the last financial year, RTL was forced to write off more than half of the value of its UK operations. Five's earnings had fallen 30 per cent to £250m and the management was forced into a brutal cost-cutting programme, slashing 87 jobs from 354 staff, cutting £65m in costs. It had been hit particularly hard by the onset of the downturn which saw advertising plunge 12.5 per cent in 2009.

Ms Enders concluded: "Mr Desmond will be able to build market share at the channel through investment and cross-promotion, but will Five ever be a competitor to ITV? Hell no."