Springer-ProSieben Merger Under Scrutiny

Reactions to the deal in which Axel Springer, the largest German newspaper publisher, will take over the country's largest TV broadcaster, ProSiebenSAT.1, have been mixed in Germany.

While Bavarian Prime Minister Edmund Stoiber of the conservative Christian Social Union (CSU) was among the first to greet the announced merger as an "obvious strengthening of the media sector in Germany," his political opponents from the Social Democratic Party (SPD) expressed a great deal of concern.

Ludwig Stiegler, vice-president of the SPD group in the German parliament, described the proposed merger as "a worrisome concentration of influence in one conservative publishing house."

"Springer shouldn't rejoice too soon. I am positive that the antitrust authorities will closely inspect the merger," said Stiegler.

The Italian syndrome

Monika Griefahn (SPD), president of the parliamentary committee on culture and media, expressed her concern for the future of media diversity in Germany. As a counter-measure to the homogenization of media power, Griefahn is advocating the creation of advisory boards under public law that would accompany commercial radio and TV stations.

"Above all, we should avoid developing relationships similar to those in Italy," Griefahn said, referring to the much criticized concentration of power of information under the umbrella of Prime Minister Silvio Berlusconi's media empire.

Representatives of other German media groups were equally concerned. Michael Grabner, vice-president of Holtzbrinck publishing group from Stuttgart and publisher of such widely circulated German newspapers as Die Zeit and Handelsblatt, stressed that the Springer - ProSiebenSAT.1 merger would create "a great media power not only in the field of journalism, but also on the advertising market."

Antitrust claims

Holtzbrinck is planning to take a firm stand on the takeover issue before the German antitrust authorities. According to German law, any company that has an economic interest in a merger being under investigation may approach the antitrust authorities to present their point of view. By doing so, they also gain access to the records of the given case as well as the right to appeal against the decision of the antitrust authority before the courts.

When Holtzbrinck announced its intention to purchase the Berlin-based newspapers Berliner Zeitung and Kurier in 2004, the antitrust authority did not give its go-ahead out of fear of creating a press monopoly in the German capital.

"We expect the same standards to be applied to Springer," Grabner said.

A thorough investigation

Ulf Vöge, president of the German governmental antitrust body, said that the potential effects of the announced merger on the media market would be thoroughly investigated, taking into consideration the cross-medial integration of print and television, which has no precedent in Germany.

Analysts with the German WestLB bank changed their recommendations for ProSiebenSAT.1 shares from "outperform" to "neutral," citing uncertain exchange value for the stockholders of ProSiebenSAT.1 preferred shares, unattractive cash compensation and lack of estimates for the potential of the company after the merger. Springer is expected to pay out the outstanding preferred shareholders at 14.10 euros per share in cash, which is below the current market price.

Springer management confident

Despite the reservations of media representatives, watchdogs and analysts, the Springer management is confident that the announced takeover will go smoothly.

"We are certain that we have good arguments for dispelling all concerns," said a spokesperson for Springer on Sunday.

Friede Springer, majority owner of the publishing group, denied claims that the merger was meant to create an opinion-bending powerhouse.

"I am only thinking about securing the future of my husband's publishing company," she said.

"To do that, we need a second leg to stand on," she said.