By Douglas Busvine
FRANKFURT (Reuters) – Axel Springer’s share price jumped more than 20% on Thursday after the German publisher said its main owners were in talks with U.S. investor KKR to take the $5.4 billion (4.27 billion pounds) company private and pursue a long-term growth strategy.
Springer’s shares had lost more than a quarter in value over the past 12 months as investors grew impatient over its heavy digital investments and the drag from circulation declines at legacy media titles including the Bild daily.
In turning to private equity house KKR, founder Axel Springer’s 76-year-old widow, Friede, is bringing in an investor known for making long-term media investments in Germany, focusing on digital transformation and international expansion.
KKR, together with Permira, bought control of ProSiebenSat.1 Media in 2007 and sold out in 2014, having broadened the broadcaster’s entertainment offering and launched a foray into e-commerce.
The private equity firm also entered a music rights joint venture with Bertelsmann in 2009, selling its stake back to the publisher four years later.
Springer said late on Wednesday that its executive board was in negotiations with KKR and Friede Springer regarding a potential strategic investment in Berlin-based Axel Springer.
The talks will allow KKR to launch a public tender offer to buy out minority shareholders after KKR agreed to form a consortium with companies held by Friede Springer and Chief Executive Mathias Doepfner.
Friede Springer and Doepfner, who between them control 45.4%of Axel Springer, do not plan to sell their shares, the company said. The statement made no reference to stakes owned directly by Axel Springer’s grandchildren, Axel Sven and Ariane, who own 7.4% and 2.4% respectively.
The remaining 44.8% is in free float and is worth $2.4 billion at Thursday’s market price.
Terms for any tender offer still need to be worked out, Springer said. KKR declined to comment.
KKR’s talks with Springer come as buyout deals in Europe have reached a 12-year high, Refinitiv data shows, with $42.6 billion of transactions so far this year.
Bumper fundraising rounds over the past two years have armed private equity firms with record sums to invest, prompting renewed interest in listed companies despite rich valuations and fears of an economic slowdown.
In Germany, a $6.4 billion bid by private equity houses Hellman & Friedman and Blackstone to take Scout24 private collapsed after the move for the property and car classifieds company failed to win majority support.
Scout24, a digital operator that trades at an enterprise value of 20 times core earnings, was richly priced but shareholders held out in the hope that a strategic buyer would be prepared to pay more.
By contrast, Springer’s valuation has fallen to half of Scout24’s as investors looked elsewhere to capitalise on media restructuring plays, such as Norwegian publisher Schibsted, which has spun off its digital classifieds arm Adevinta.
Other diversified media groups struggling to contend with all-digital competition are also attracting opportunistic buyers, with Italy’s Mediaset grabbing a 9.6% stake in ProSieben on Wednesday after the broadcaster’s shares hit a seven-year low.
A source familiar with the matter said that talks on the KKR deal were at an early stage, but a deal could happen within weeks.
It’s possible Springer does not end up being taken fully private, the source said, adding that KKR would need to own a big enough stake to ensure that the company is not at the mercy of the market.
With KKR on board as a long-term investor, Springer would be in a position to eye more significant acquisitions. One potential opportunity would be the parts of eBay that the U.S. company is looking to divest.
That strategy looks broadly in line with KKR’s long-term approach, a second source said, highlighting the investor’s 20-year track record in Germany.
Most recently, KKR bought Tele Muenchen Group, which is involved in TV production and distribution, and has announced a series of follow-on deals to bring in on-camera and production talent.
(Additional reporting by Klaus Lauer, Alexander Huebner and Rachel Armstrong; Editing by David Goodman)