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Think You Can't Afford Gumtree? Then Call KKR

Think You Can't Afford Gumtree? Then Call KKR

(Bloomberg Opinion) -- Axel Springer SE CEO Mathias Doepfner doesn’t lack ambition. What he’s missing is the capital to fund it.

Enter KKR & Co. Bloomberg News reported on Thursday that the U.S. private equity firm is considering taking the German media giant private alongside its founding family. It looks to be a sensible way for Doepfner to achieve his lofty goals – if minority shareholders can be persuaded any offer is attractive enough.

Doepfner is trying to transform the German publisher into a digital powerhouse focused on online brands and classifieds, where it already generates more profit than it does from Bild-Zeitung, Europe’s best-selling newspaper.

Much of his strategy has been built on deal-making. Doepfner has made at least $6.8 billion of acquisitions since he took the reins in 2002, according to data compiled by Bloomberg.

But earnings growth is set to be meager in the short term, and the reaction from investors has been lukewarm. Before Thursday, the shares were down by almost 40% from their February 2018 peak. He has little headroom to raise more money from the debt markets. At 1.6 times Ebitda, net debt is close to the 1.7 times average of his peer group, leaving him with little room to maneuver.

Doepfner may get an uncomfortable reminder of his lack of firepower when eBay Inc. puts its classifieds group up for sale. Springer is interested in bidding for the owner of Gumtree and Mobile.de, German magazine Capital reported in March. But the business’s reported $10 billion sticker price dwarfs the Berlin-based publisher’s own 5.9 billion-euro ($6.6 billion) market value. Going private might allow it to finance future acquisitions with more leverage.

It might now be too late for Springer to look at the eBay business given how long the KKR transaction may take to close. But Doepfner will at the very least hope that the combined entity will have the firepower the next time such a target comes around.

There is one note of concern for shareholders: if KKR, Doepfner and the Springer family are all in alignment, then there's a risk that minority investors will be left out in the cold with a disappointing offer. Under German law, KKR will have to convince about half of the non-family shareholders to back its bid to secure a domination agreement that would give the firm and family control. The shares jumped 20% to 54 euros on Thursday; a 33% premium to the stock’s undisturbed price would imply an offer of about 60 euros a share – a price at which the shares were last trading in October.

The onus will now be on the supervisory board to wring the best deal out of the buyout firm.

--With assistance from Chris Hughes.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

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