Muppets stake sold as EM.TV struggles to pay down debt

EM.TV, the debt-stricken children's television group, has agreed to sell a minority stake in Jim Henson, the company behind the Muppets, to an investment group led by a former TV programming executive.

Dean Valentine, the former chief executive of Viacom's United Paramount Network, and an ex-Disney executive, won a 49.9 per cent stake in the creator of Kermit, Miss Piggy, Fozzie et al for an estimated $30m (£20m).

Disney had been expected to bid for the whole company, and at least three other suitors had been said to be interested, but EM.TV has opted to keep a controlling interest.

The companies said they had signed a letter of intent on the deal, but terms of the proposed transaction were not disclosed. EM.TV bought Jim Henson for $680m (£440m) from the Henson family at the height of the technology, media and telecoms bubble in March 2000. If the £20m figure is confirmed it represents a significant loss for the German group – even after accounting for earlier disposals of the rights to Sesame Street characters and other Jim Henson investments.

EM.TV has been a forced seller of assets this year as it struggles to pay off a €64m (£40m) loan. This was due at the end of the year, but the group said last weekend that it had been granted an extension by its banks.

The Valentine deal included rights to Henson's characters, TV shows and movies, sources said. EM.TV is believed to be continuing talks with other suitors in case the Valentine agreement falls through.

Mr Valentine's group received financial backing from Europlay Capital Advisors, a private equity shop that specialises in media and entertainment.

Mr Valentine, who ran Disney's Touchstone TV and animation unit overseeing the creation of hit shows Home Improvement and Ellen, expects to build the Henson brand, which has suffered under Munich-based EM.TV.

"We feel there is enormous potential for growth, not merely from Kermit and the Muppets, but from the expansion of the Henson brand into all areas of family entertainment," Valentine said.

Valentine will run Henson with a management team that includes Mort Marcus, the former chairman of Miramax Television and Video, a Disney subsidiary, and Nick Van Dyk, former executive vice-president of Artisan Entertainment.

Valentine, who joined UPN in 1997, left in January of this year, a month after Viacom yanked control of the fifth-largest network from Paramount Television Group and put it in CBS' hands instead. A month later, Valentine reached an undisclosed settlement with UPN over a lawsuit he had filed concerning his $22m (£14m) employment contract.

The Henson empire was founded in 1958 by Jim Henson, who combined the workings of marionettes and traditional puppets to create Muppets. He died suddenly in 1990.