German media giants to merge, reports say

Negotiations between Axel Springer, which publishes Europe's best-selling tabloid, Bild, and ProSiebenSat.1 are at a very early stage and significant issues "still have not been addressed," an unnamed source close to the two groups told the dpa news agency on Tuesday.

Both companies declined to comment on the rumors, but Springer shares still shot up by 8.5 percent in early trading, while ProSiebenSat.1 stocks jumped nearly 7 percent.

Media mastodon

If the reports prove true, the talks would mark the second time in a decade that the two firms have launched a bid to join forces. The last time was in 2005, when Germany's competition authority blocked a 4.2 billion euro ($4.6 billion) takeover of ProSiebenSat.1 by Springer, arguing that the merger would violate the country's strict media laws.

Regulations prohibit private broadcasters from controlling more than a 30-percent share of TV viewership. Springer owns the 24-hour German news channel N24.

If successful, the new fusion would make the newly fused company Germany's second-biggest media group, with combined revenue of some 6 billion euros and nearly 20,000 workers.

Toe-to-toe with Facebook

Word of the talks comes as an ever-increasing number of consumers get their news online and digital heavyweights such as Google and Facebook leave more conventional outlets playing catch-up.

Analysts believe that the fusion of Springer and ProSiebenSat.1 could give Silicon Valley a run for its money.

Springer is one the few European media groups that appears to have successfully cracked the code of turning a profit in the Digital Age. That charge has been spearheaded by CEO Mathias Döpfner, whose focus on digital acquisitions has turned the Berlin-based publisher into one of Europe's leading digital media groups.

Challenges ahead

But there are still major obstacles ahead. For one, the Springer publishing house is controlled by Friede Springer, the widow of the company's founder. Any deal would have to go through her.

In a statement, the publisher said it was looking into plans to change the group's legal structure, which could sweeten the deal for Ms. Springer by allowing her to retain "control of the company on a long-term basis and to tap growth opportunities."

A potential fusion is also likely to run into fierce opposition from Germany's influential media unions, which worry that such a deal would severely constrict market diversity.

Reacting to the rumors on Tuesday, the head of the German Federation of Journalists, Michael Konken, warned that a merger would "concentrate considerable media power in one hand."

Last year, ProSiebenSat.1 said it had "another record year," posting a 10.4 percent jump in year-on-year earnings. It boasted a 28.7 percent share of the German TV audience.

pad/cjc (dpa, epd, Reuters)