Former Endemol co-founder John de Mol has already proven that he knows how to "sell high." Now he's also showing that he may know how to "buy low."
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On Monday, an international consortium including de Mol's investment fund Cyrte purchased 75% of Endemol, the Anglo-Dutch reality TV powerhouse behind such reality and game shows as Big Brother and Deal or No Deal, from Spanish broadcaster Telefonica SA. The purchase price was 2.63 billion euros, a price which values the entire company at just under 3.5 billion euros. As part of the deal, the consortium members are required to make a tender offer for the other 25% of the company that is publicly held.
In addition to Cyrte, other key members of the consortium are lead member Mediaset, an Italian broadcast house that is part of the media empire controlled by former Italian premier Silvio Berlusconi, and the private equity funds of U.S. investment bank Goldman Sachs. The deal had been rumored for about a year, and Berlusconi's son Piersilvio has already announced that "Mediaset will not manage Endemol." Thus, Endemol is likely to remain independent.
In 2000, while riding high on the success of Big Brother and Who Wants to Be a Millionaire?, de Mol and Joop van den Ende sold 100% of Endemol, which they co-founded six years earlier, to Telefonica for 5.5 billion euros -- a price over 50% higher than the price for which Endemol is selling now. In addition, de Mol remained at Endemol as a paid creative consultant, and he and Ende retained approval rights regarding any change in Endemol CEO.
Telefonica, riding the crest of the Internet wave, saw Endemol as an online content provider. After the acquisition, Endemol went on a spending spree, acquiring the outstanding interests in its U.K. subsidiary in 2000, a major rival (Brighter Pictures) in 2001, and other significant assets in 2002 and 2003 (meaning that Endemol's selling price is about half of the amount that Telefonica paid for all the assets, taking the subsequent acquisitions into account).
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However, after the Internet bubble burst, the relationship between Telefonica and Endemol deteriorated completely. In December 2003, a new CEO at Telefonica -- in a direct swipe at the continuing power of the Dutch in Endemol -- unilaterally replaced the CEO of Endemol with one of his Spanish cronies, which breached de Mol's contract and prompted his immediate resignation from Endemol, as well as the resignations of several other top managers. The sudden talent exodus resulting from this seemingly-impulsive act of vengeance reputedly caused UK production house Pearson, the parent of American Idol producer FremantleMedia, to back out of an already-agreed upon deal to acquire Endemol from Telefonica.
Since then, although Telefonica has managed to recover some of its investment through Endemol's royalty stream as well as its public offering of a 25% stake in Endemol in the Netherlands in late 2005, Endemol has never come close to regaining the value that it once had, and Telefonica had already written off much of its investment.
De Mol is expected to return to an active management role within Endemol. As a consequence, Daily Variety is predicting that Stephane Courbit, head of Endemol's successful French operations and a rival bidder to de Mol, along with several Spanish Endemol executives, will soon depart.
Since his departure from Endemol, de Mol had set up his own Dutch broadcasting company, Talpa. The network produces not only Endemol programs but also a Dutch version of Expedition: Robinson, which is better known in the U.S. as Survivor ... despite the fact that Castaway Productions, the owners of the Survivor format, had sued de Mol and Endemol, alleging that Big Brother infringed on their format. The fate of Talpa has not been addressed by de Mol. It is possible that de Mol's executive team at Talpa can run the network while he moves over to Endemol (for an example, see Steve Jobs, who largely turned Pixar over to creative head John Lassiter when he returned to running Apple, although Jobs retained the CEO title for both companes).
Endemol currently has four programs on U.S. television: Big Brother, CBS' annual summer staple, and three regular season programs: Deal or No Deal and 1 versus 100 on NBC and ABC's Extreme Makeover: Home Edition. However, as new formats are the lifeblood of production houses, de Mol and Endemol will likely be under pressure from the investment funds to come up with some attractive new formats for the U.S. and Europe almost immediately.