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Power lands big European TV stake Add to ...

Paul Desmarais' Montreal-based Power Corp. has landed a $1-billion stake in a new European broadcasting powerhouse that includes the television interests of Britain's Pearson PLC.

The new company would have the biggest reach of any TV or radio broadcaster in Europe, Pearson said.

"We consider this to be an important development and a significant addition of value to our European holdings," said Power vice-president and general counsel Ted Johnson.

Power indirectly owns about 25 per cent of Groupe Bruxelles Lambert, which controls Audiofina SA. GBL, as well as Bertelsmann AG and Pearson, have agreed to bring together their interests in Pearson TV, CLT-Ufa and Audiofina SA to create one giant broadcaster with annual revenue of about $3.8-billion (U.S.) and worth an estimated $19.2-billion.

GBL has a 30-per-cent stake in the new company. The value of Power's indirect interest in the new company will be worth in excess of $1-billion (Canadian).

Power is a massive holding company with a stock market value of almost $4.7-billion. It owns Canada's largest mutual fund company, Investors Group Inc. and Great-West Lifeco Inc. and London Life Insurance.

Yesterday's agreement continues the trend toward consolidation in the media industry.

Companies are merging in an attempt to offer content and delivery channels. The urge to merge has been spurred on partly by the Internet and the possibilities it offers for content delivery.

Time Warner Inc. kicked off the trend in the United States when it teamed up with America Online Inc. in early January.

In Canada, telecom giant BCE Inc., parent of Bell Canada, has just completed its $2-billion takeover of CTV Inc., Canada's largest private broadcaster, in a deal that still requires regulatory approval.

Pearson PLC is perhaps best known as publisher of the Financial Times newspaper and The Economist magazine.

It said its deal will bring together its wealth of programs -- which include TV hits such as Baywatch -- with the broadcasting power of CLT-Ufa's shareholders Bertelsmann AG and Audiofina.

Albert Frere, chairman of Group Bruxelles, embraced the deal, which comes about three years after the merger of CLT and Ufa in 1997.

"My business partner, Paul Desmarais, and I are very happy with the tremendous progress made by CLT-Ufa since the merger some three years ago in transforming Europe's largest broadcaster into a highly profitable and tightly focused group," Mr. Frere said in a release.

"Today's merger marks a further step in the successful strategy developed with our partner, Bertelsmann. The alliance between CLT-Ufa and Pearson TV offers great opportunity for growth and the creation of shareholder value."

As one of just a handful of cross-border European media deals to date, analysts said the merger would now turn a bright spotlight on other key European media players including Rupert Murdoch and French media giant Vivendi SA.

"It will be big. It will be a tremendous powerhouse with sales of four billion euros [$5.50-billion] taking it into the FT-SE 100. Together, we are going to create the kind of value we just could not create alone," said Pearson chief executive officer Marjorie Scardino.

Pearson shares jumped 13 per cent on the news while Audiofina shares were up 24 per cent, as analysts applauded the deal. Bertelsmann, Germany's biggest media company, is not publicly traded.

"It's an enormous strategic positive to ally its production interests with distribution in Europe. And on valuation grounds Pearson's TV interests will now ride toward European levels," said Commerzbank analyst Nick Ward.

Bertelsmann said the new combine would hold talks with Vivendi's French pay-TV operator Canal Plus over possible joint ventures in sports and movie rights and would also seek to build on its U.S. foothold through acquisitions.

"We created the clear No. 1 in Europe. There's only one strategic issue and objective: the North American market," Bertelsmann chairman Thomas Middelhoff said. He noted, however, that foreign ownership laws would prohibit the company from buying more than 25 per cent of any U.S. free-to-air broadcaster.

The deal, which is subject to regulatory approval, comes one month after Spain's Telefonica moved to buy Dutch TV firm Endemol Entertainment and three months after America Online announced it would take over Time Warner.

Analysts said the focus would now be on the next big deal, with Mr. Murdoch's satellite empire and Vivendi in the spotlight after the French group said on Thursday it was open to talks with Mr. Murdoch about News Corp.'s global satellite operations. Vivendi controls Canal Plus and owns around 24.5 per cent of Mr. Murdoch's BSkyB.

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