Pearson, publisher of the Financial Times, German media giant Bertelsmann, and Audiofina of Belgium yesterday merged their broadcasting operations to create Europe's biggest TV group that will float on the London stock exchange with a value in excess of £12bn.
Bertelsmann and Audiofina, which jointly own broadcaster CLT-UFA whose properties include RTL, German's biggest TV channel, will merge with Pearson TV, producer of television programmes such as The Price is Right and Baywatch. The merged group will own 65 per cent of Channel 5, Europe's largest sports rights business, radio interests and a major presence on the internet.
"We have created the clear number one television company in Europe," said Thomas Middelhoff, chief executive of Bertelsmann. "This combination creates value in our business, value that we couldn't create on our own," said Marjorie Scardino, the Pearson chief executive.
The deal coincided with news that Mrs Scardino received £2.5m in compensation in 1999, including a three-year incentive payment worth £1.5m. She also holds options on 266,506 shares with a net value of nearly £2.5m.
The deal, advisers said, followed 18 months of negotiations with various potential partners. Mrs Scardino has aimed to give the television operation global scale, similar to its education publishing business, which became the world's largest after it acquired Simon & Schuster's education division.
Analysts questioned whether merging Pearson TV, primarly a programme maker, was maximising business's value. "I'm disappointed Pearson have given up on TV, but I can understand why they've done it," said Louise Burton, analyst with Investec Henderson Crothwaite. "They're building a big vertically integrated operation, although I think there is more distribution capacity than content."
Investors, however, signalled approval, pushing up Pearson's share price 13 per cent to 2,321p. Audiofina climbed 10 euros to 120 euros.
For privately owned Bertelsmann, the world's largest book publisher with imprints such as Random House and music publisher BMG, the listing of the merged TV group will be its first venture into the stock market. Bertelsmann and German publisher WAZ will hold 38 per cent, Groupe Bruxelles Lambert, a partner with Bertelsmann in CLT-UFA will own 30 per cent, Pearson will hold 22 per cent and 11 per cent will be publically listed.
The merged company will have annual sales of nearly 4bn euros and operating cash flow of about 460m euros.
Both Mrs Scardino and Mr Middlehoff said the new company will look to expand aggressively in Europe and the US.