Murdoch's arrival puts Premiere firmly into play

By Nicola Leske - Analysis

FRANKFURT (Reuters) - Rupert Murdoch's buying a stake in pay-TV broadcaster Premiere (PREGn.DE: Quote, Profile, Research, Stock Buzz) has cemented the German company's status as a takeover candidate in a saga that hinges on the next auction of Budesliga soccer rights.

Analysts said Murdoch's News Corp (NWSa.N: Quote, Profile, Research, Stock Buzz) will most likely increase its near 15-percent stake to take full control or sell to a third party, such as French media group Vivendi (VIV.PA: Quote, Profile, Research, Stock Buzz), whose tentative approach to Premiere was headed off by Murdoch's move.

A source familiar with News Corp's intentions said Murdoch is not now planning to up his Premiere stake, but the market thinks Premiere's days as an independent company are numbered.

Murdoch's second stab at the German TV market was surprising, but this time around he may have the right recipe for success in Europe's largest TV market and one of the world's biggest TV advertising markets.

News Corp was involved in German media mogul Leo Kirch's Kirch Group via its stake in BSkyB (BSY.L: Quote, Profile, Research, Stock Buzz) but lost its investment in 2002 when Kirch's businesses faltered.

"The last time News had a stake in the business, management highlighted that a key frustration in the run up to Kirch's bankruptcy was their lack of control," Dresdner Kleinwort said in a note on Tuesday.

"News will likely be determined not to make the same mistake again. This suggests full control is almost certainly its priority in the medium term."

Michael Bahlmann at MM Warburg said it did not make sense for News Corp to buy shares at a 38-percent premium to the market price without gaining a controlling stake or being able to prevent a takeover by a third party.