Wednesday, May 16, 2007

John de Mol: never say NEVER

In 2005 the Dutch media tycoon John de Mol said that he considered Endemol to be a closed chapter. It was a one-liner, which he diplomatically used in order to create silence on this subject. Telefónica had just offered the shares of TV and digital media production company Endemol to the stock exchange. But when in 2006 Telefónica solicited serious offers to sell the company, John de Mol was one of the parties; his investment company Cyrte bid for the company in the consortium with the Italian media company Mediaset and the haute finance company Goldman Sachs. In the meantime John de Mol kept silent.

Now Endemol will be transferred to the consortium for 2,63 billion euro. All three partners are in the consortium for an equal share of 876 million euro. John de Mol will laugh at the deal. In 2000 at the height of the internet hype he and Joop van de Ende sold Endemol to Telefónica. This telecom company had been convinced by the gurus that telecom would converge with the digital media and that the mobile telephone would become a pocket PC, an MP3 player (when did MP3 players become fashionable?) and a television screen. Content would be needed to fill that market hole. While Time-Warner merged wit AOL, Telefónica acquired Endemol. The price paid, 5.5 billion euro, was reasonable, given the bright future.

But then internet crashed. The CEO of Telefónica was dismissed. The company was left with a company which was no core business for a telecom company. Besides the price paid was too high given the revenues. The accountants had to write off a hefty sum. But Telefónica took the time to get rid of the Fremdkörper. So the years went by and in 2005 Telefónica thought that the time had come to sell and cash. But as the acquisition of Endemol would be expensive, Telefónica sold 25 percent of the shares on the market. The value of the company was estimated on 1,1 billion euro at that time; after five years it was just one fifth of the original price paid for by Telefónica in 2000. With the present price of 2,63 billion euro, Telefónica can say that the company made a profit of 1,4 billion euro. But that is only the view of the new Telefónica mangers. You can also say that Telefónica has lost2.87 billion euro over the past five years.

John de Mol played the game DEAL OR NO DEAL well. He cashed with Joop van de Ende in 2000 5,5 billion euro. He was not allowed to be in the entertainment business for 4 years, so he invested his money in telecom companies and other companies. Once the entertainment clause was not valid any longer, he started the radio and television station TV10 in The Netherlands, just to show that he was back. And back he is with a vengeance. TV10 might not be the hottest station with the consumers, it is however a station to merge with or be acquired by RTL Netherlands or SBS. Once the position of TV10 has become clear, John de Mol can go back to Endemol to create formats and test them out on the channel TV10/RTL.

What is the future of Endemol? There may be three shareholders in the consortium. Usually this is a sign that the company will be broken up (see the scenario for the beleaguered bank ABN AMRO; do not show sympathy for that bank as they mess up the present sale in an Italian way!). But in this case only Goldman Sachs could take advantage of that; Goldman Sachs will be the company that will step out after a while and offer the shares to the two consortia members. A break-up would not help them. As a global creative entertainment company Endemol needs profits of the entire value chain from creating formats, to production and distribution. Endemol will teach Mediaset the international way of trading entertainment products for Italian and Spanish products. But Mediaset will always stay in the Golden Cage of Endemol, while Endemol will behave like a Big Brother to Mediaset.

(The picture is of the first Big Brother series in The Netherlands in 1999)

Blog Posting Number: 755


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