Time Warner in talks to buy maker of 'Big Brother'

Endemol, the television production company behind
Big Brother, Ready Steady Cook and
Ground Force, has received a €2bn (£1.4bn) takeover bid from the American media giant Time Warner.

Endemol, the television production company behind Big Brother, Ready Steady Cook and Ground Force, has received a €2bn (£1.4bn) takeover bid from the American media giant Time Warner.

The move is the latest approach to Endemol by a rival media group keen to take advantage of Endemol's ability to sell its popular reality TV formats around the world.

Executives from Time Warner are understood to have met representatives from Endemol's parent, the Spanish communications group Telefonica, in New York recently to discuss the acquisition. The talks came after Time Warner sent a letter to Telefonica making an offer. Neither Telefonica nor Time Warner would comment on the talks, which were reported in the Spanish newspaper, La Gaceta.

There was speculation that Telefonica had told Time Warner that its initial valuation was too low. A price tag of about €2bn would force the Spanish telecomscompany to take a massive loss on Endemol, which it purchased for £3.5bn in 2000, when valuations of media companies were hugely inflated.

However, Telefonica is trying to sell off non-core assets built up during the dot.com era by its former chairman, Juan Villalonga. Last December Endemol's co-founder, Jon De Mol, was ousted and replaced by a Telefonica insider, Joaquin Agut, in a move widely seen as preparation for a sale.

A deal with Time Warner, the world's largest media group, would trigger a series of bonanza payments for senior managers at Endemol, including the chairman of the British arm of the company, Peter Bazalgette. He is thought to have collected a substantial amount of shares and share options in Endemol when it merged with his own company, Bazal.

A well-known figure of Britain's media circuit, Mr Bazalgette is credited with having created Food & Drink for the BBC more than 20 years ago. More recently, he was responsible for bringing Ready Steady Cook and Ground Force to British screens. Endemol UK also created Fame Academy, one of the array of programmes attempting to discover pop stars.

Endemol, which is headquartered in the Netherlands, is thought to have received a number of other approaches, including a possible management buyout. Mr Bazalgette told Broadcast magazine last month that the company was "in play" and that he and his colleagues would be "looking at what options are open to management".

While Endemol is viewed as a prime asset, an acquirer would have to take on its complex licensing agreements established in each of its 21 territories. In the UK, for example, Big Brother is licensed to Channel 4 under a four-year agreement. The deal expires next year, at which point Endemol could renegotiate the contract.

Endemol's European operations were created through a series of acquisitions. The UK arm evolved from a company called Broadcast Communications, which was bought by Guardian Media Group (GMG) in 1989. A year later, GMG bought Mr Bazalgette's Bazal. In 1998, Endemol took a 50 per cent stake in GMG and bought the rest of the company two years later, renaming it Endemol UK.

Time Warner, the owner of IPC, the British magazine publisher, could raise its bid for Endemol, and is thought to be keen to continue to discuss a deal in the coming weeks. It is likely that Telefonica would expect any bidder to acquire the whole of Endemol.

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