KKR builds 5.2% stake in ProSieben, says company undervalued

BERLIN (Reuters) - U.S. private equity house KKR KKR.N said on Monday it had acquired a stake of 5.2% in ProSiebenSat.1 Media PSMGn.DE, becoming the third investor to amass a sizable shareholding in the struggling German broadcaster.

FILE PHOTO - Trading information for KKR & Co is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., August 23, 2018. REUTERS/Brendan McDermid

KKR, which bought ProSieben with Permira in 2006 in a deal reported to be worth 5.6 billion euros ($6.1 billion) before selling out eight years later, said it was again backing the company because it offered value.

“We have decided to reinvest into ProSiebenSat.1 based on our belief that markets are currently undervaluing the company,” a KKR spokesman told Reuters. “We view this as a financial investment.”

ProSieben disclosed KKR’s stake in line with German stock exchange rules which trigger a mandatory filing at a threshold of 5%. KKR owns a 3.2% stake directly and 2.0% via unspecified instruments, it said.

KKR joins Italy's Mediaset MS.MI, which directly and indirectly owns 24.2% in ProSieben, and investor Daniel Kretinsky whose Czech Media Invest (CMI) vehicle holds a 10% stake.

“We view it as a positive signal that, in addition to Mediaset and CMI, other market participants see ProSieben as an attractive investment - even at a time of crisis,” ProSieben said in a statement.

ProSieben is now valued at less than half the sum paid by KKR and Permira 14 years ago. It has shed two CEOs in the past two years as its core commercial TV franchise came under pressure from U.S. streaming giants such as Netflix.

Its last CEO, Max Conze, was ousted at the end of March after his attempt to pivot to digital commerce and entertainment shored up revenue but squeezed margins. Conze’s tenure was marked by management turmoil and he barely outlasted a deputy who publicly chided the “boardroom soap opera” at ProSieben.

Chief Financial Officer Rainer Beaujean was promoted to the top job just as the coronavirus pandemic hit Germany, causing advertising revenue to collapse by 40% in April.

Mediaset’s stakebuilding has raised speculation that it may launch a takeover bid. Kretinsky, and now KKR, have signalled however that they are financial - not strategic - investors who see value in ProSieben’s entertainment franchise.

Mediaset, controlled by the family of former Prime Minister Silvio Berlusconi, rules out a hostile takeover of Munich-based ProSieben as this would be costly and would likely trigger a political backlash in Germany, say sources close to the matter.

The stakebuilding activity comes ahead of ProSieben’s annual general meeting on June 10. Investors must register their shareholdings a week earlier to be eligible to cast their votes at the AGM in elections to the supervisory board.

Additional reporting by Elvira Pollina; Editing by Ludwig Burger and David Evans