With the rise of publicly traded media companies, the days of the all-powerful media baron may well be over. But it seems that hasn’t stopped one aging publisher from wanting the best of both worlds.
The owner of Germany's largest media company, Axel Springer, is turning her family-owned firm into a limited partnership, ensuring it can enjoy the advantages of the stock market listing without having to relinquish control.
Friede Springer, the 74-year-old widow of company founder Axel Cäsar Springer was persuaded to make the change by her confidant and chief executive, Mathias Döpfner. Between them, they control print titles including two of Germany’s most-read newspapers, Bild, with 2.5 million readers, and Die Welt.
“The process was quite simple," Mr. Döpfner told Handelsblatt. "The step was easy for the family because it keeps 100 percent of the voting rights.”
Control becomes relevant, for example, in the case of a capital increase.
The step was easy for the family because it keeps 100 percent of the voting rights. Mathias Döpfner, CEO, Axel Springer
The change is advantageous for the Springer family. Mrs. Springer, a one-time nanny in Mr. Springer’s household, owns 90 percent of the media empire's stock. The rest is owned by her step-grandchildren Axel ("Aggi") Sven Springer and Ariane Springer, who once disputed her ownership. Neither is active in the company, and both appear content to live off their multi-million-euro payouts.
“We want to remain a family company,'' said Mr. Döpfner. He hopes the restructuring will be approved at Axel Springer's annual general meeting next year. The shares would be issued in the third quarter of 2015, according to the board member responsible for finance, Julian Deutz.
An American financial investor, General Atlantic, would become a major shareholder via an increase in the size of equity capital that is still outstanding: Springer and General Atlantic are involved in a joint advertising venture called Digital Classifieds - an internet company involved in online classified advertising and virtual marketplaces. Springer wants to use the shares to buy an additional 15 percent stake in this venture - raising its take from 70 percent to 85 percent.
In return, General Atlantic would receive an 8.6 percent stake in Springer.
But should shareholders unexpectedly fail to approve the transaction, Springer would have to pay General Atlantic €446 million ($554 million) plus interest in cash. The American investor has the right to sell its remaining stake in Digital Classifieds from 2018 onward or demand an initial public offering of the firm starting in 2020.
Axel Springer wants to continue its shopping spree despite the mountain of debt.
Mr. Döpfner said his objective was to increase Springer's activities in the digital classified market.
Until the Internet, classified print advertising was the main source of revenue for newspapers. But digital ads for real estate, jobs and vehicles are now Springer’s biggest growth drivers. About 44 percent of profit before interest, taxes, depreciation and amortization came from its online business in the first three quarters this year.
Springer operates 10 classified businesses. According to the company, nine are market leaders in their niches.
However, there is a downside to Springer buying back shares in Digital Classifieds: the purchase would balloon Springer's debt.
Net debt at Springer is roughly €164 million. The Digital Classifieds purchase and other deals will raise debt to €950 million by the end of this year.
Axel Springer wants to continue its shopping spree despite mounting debt.
The Berlin-based publisher is particularly interested in buying market leaders – including those outside Europe.
“We are out to find market leaders, and don't just look into growth regions,” board member Andreas Wiele said.
The author is a Handelsblatt correspondent specializing in the media and telecommunications industries. To contact the author: [email protected]