FRANKFURT Publisher Axel Springer (SPRGn.DE) struck a 920 million euro ($1.22 billion) deal to sell some of Germany's best-known newspapers and magazines, severing its oldest roots in order to intensify its focus on digital media.
The company said on Thursday it was selling regional newspapers Berliner Morgenpost and Hamburger Abendblatt, five TV program guides and two women's magazines, jointly accounting for about 15 percent of group revenues, to Germany's Funke Mediengruppe.
"Axel Springer will continue its path toward becoming a leading digital media group, with a clear focus on the 'Bild' and 'Welt' groups," Chief Executive Mathias Doepfner said. The tabloid Bild is Germany's top-selling newspaper.
With print readership generally in decline, media groups are increasingly moving online for growth. Britain's Daily Mail and General Trust DMG0a.L said on Thursday that while revenues from advertising in its newspapers fell 7 percent in the third quarter, they soared 41 percent at the papers' companion websites.
Strong demand for online advertising helped France's Publicis (PUBP.PA), the world's third-biggest ad agency, report better than expected results last week, with sales growth accelerating sharply to 5 percent in the second quarter.
Shares in Axel Springer, the top newspaper publisher in Europe's biggest print media market, jumped on news of the deal and were up 12.65 percent at 38.89 euros by 1045 GMT.
Among the titles to be shed is TV guide Hoerzu, a household name across Germany. It became Axel Springer's first major publication in 1946 and was also one of the first publications to be licensed for sale in occupied Germany after World War Two.
Axel Springer created Hamburger Abendblatt, its first daily newspaper, only two years later, followed by Bild and Die Welt in 1952 and 1953.
JOB CUT FEARS
Funke, which publishes TV guide Gong and Westdeutsche Allgemeine Zeitung, among other regional papers, said the deal would help it become one of Germany's leading media companies.
Funke announced major layoffs earlier this year after a drop in advertising sales, and German journalists' union DJV voiced concern about possible job cuts at the titles it is buying.
"The planned takeover of the Springer publications does not bode well," its head, Michael Konken, said in a statement.
Funke will pay 660 million euros in cash at closing of the deal with Axel Springer or at the latest on June 30, 2014. To cover the remaining price, Axel Springer will grant Funke a vendor loan with a term of several years.
Axel Springer said final contracts would be signed as soon as Funke has agreed the necessary financing, which will likely be in the European autumn.
In the fiscal year 2012, the publications Axel Springer is selling generated 512.4 million euros of revenues, and contributed 94.8 million euros to group earnings before interest, tax, depreciation and amortisation (EBITDA).
As part of the preliminary deal signed on Thursday, the two companies will also set up joint ventures for the distribution and marketing of print and digital media offerings.
($1 = 0.7555 euros)
(Reporting by Maria Sheahan; Editing by Mark Trevelyan)