One insider familiar with the negotiations describes Time Warner’s bid for the debt-laden Dutch TV company as “rock bottom.” I’m told Endemol’s owners consider the Time Warner bid “ridiculously low.” It comes to seven times Endemol’s expected $192M earnings this year before interest, tax, depreciation and amortization (EBITDA). It’s anybody’s guess as to whether that’s enough for Endemol’s three owners — Silvio Berlusconi’s Mediaset, Goldman Sachs’ Capital Partners and Endemol founder John De Mol’s investment vehicle Cyrte. I’m told that Cyrte wooed Ronald Goes, head of international TV production at Warner Bros, into making the bid; the Dutch Time Warner executive used to be COO of Endemol. “His job is to do this kind of deal,” says media analyst Claire Enders. “His view is that Endemol has significant assets that can be built up.” Still, the offer illustrates how big a premium Rupert Murdoch paid for his daughter Elisabeth’s Shine Group: He shelled out $675M, valuing Shine at roughly 12 times EBITDA. That’s a huge difference: Endemol generates strong cash flow, even though it is desperate to wipe away at least $2.7B from the $3.8B it owes lenders. The Big Brother producer’s largest creditors include private equity funds Apollo Management, Centerbridge and Providence Equity Partners, and banks such as Barclays and RBS. The three shareholders are trying to persuade creditors to write off debt in exchange for equity. Separately, Mediaset has tried persuading UK broadcaster ITV to also buy the company.
“It’s an incredibly complicated situation because of the debt-for-equity swap,” says one insider. “Time Warner’s bid is unlikely to go through at this level, but if it raises the bid to E1.5 billion, they might be interested.” Time Warner’s lowball bid also could lead NBC Universal and Sony to jump in. European broadcasters Bertelsmann and RTL have also kicked the tires. Private-equity firm Permira looked for offers of about 8.5 times EBITDA when it tried to offload All3Media, another independent European TV producer. Permira yanked that sale because it could not find buyers at the level it was looking for. “The Time Warner offer is going to be hanging around for some time and it won’t go forward unless it’s increased,” Enders tells me. “It’s a signal for other bids to emerge. This is a a slow-motion process that’s going to take at least six months. Time Warner is signaling that they’re available to talk.”