Springer Family, KKR Eye Taking Bild Tabloid Publisher Private

(Bloomberg) -- KKR & Co. and Axel Springer SE are in talks about a strategic investment by the private equity firm that could take the German publisher private.

. KKR may launch a tender offer to buy out the minority shareholders in Axel Springer, which owns the mass-circulation daily Bild, according to a statement late Wednesday. Friede Springer -- the widow of founder Axel Springer who has the largest stake -- and Chief Executive Officer Mathias Doepfner support the potential investment and plan to keep their holdings.

. Shares of Axel Springer rose as much as 23% to 55.05 euros in Frankfurt on news of the possible offer, which was first reported by Bloomberg. It was their biggest daily jump since 2013 and propelled the company’s valuation to 5.9 billion euros ($6.6 billion).

. A buyout of minority investors would see Axel Springer join Bertelsmann, the German publisher that owns Penguin Random House, in being shielded from the scrutiny of public markets.

. With KKR on board, it could also make it easier for the company to fund acquisitions and capitalize on a bout of turmoil and retrenchment in the digital media industry. Springer shares had lost more than a quarter of their value in the past year before Thursday, denting its ability to do deals.

. More public companies are being taken private thanks in large part to buyout firms’ swelling cash reserves. The private equity industry, including real estate, debt and venture funds, is sitting on about $1.4 trillion in unspent cash, according to data compiled by Bloomberg, as institutional investors pour client money into the funds seeking returns.

. Last year, the number of public-to-private deals hit its highest in more than a decade, according to Bain & Co.’s annual private equity report.

. Digital Push . Doepfner has spent almost two decades turning Germany’s biggest publisher into a digital media company, shedding printing, newspaper and magazine operations to push into online news with products such as Business Insider and classifieds sites including job portal Stepstone. It now makes almost three quarters of its sales from digital businesses.

. Business Insider Helps German Publisher Springer Win the Web

. The sector has been looking shakier in recent years, with several news sites closing or cutting jobs as their owners try to staunch years of losses. Older news titles are fighting back with an increasingly successful subscription-based business model, and Alphabet Inc.’s Google and Facebook Inc. are looking to muscle in on the profitable classifieds business.

. Springer warned in March it expects operating earnings to decline in 2019 after several quarters of profitable growth.

. Terms of a potential investment by KKR in Axel Springer are still being reviewed, and there’s no guarantee that a deal will be reached, according to Wednesday’s statement.

. KKR may have to offer close to 60 euros per share to convince minority shareholders to sell, analysts at Berenberg said.

. Doepfner’s overhaul has come with the backing of Friede Springer, the fifth wife of late founder Axel Springer and a former nanny in the Springer home. In 2012, she rewarded Doepfner with a 70-million-euro share package.

. He suffered a setback in 2015 when he was forced to abandon a planned merger with German broadcaster ProSiebenSat1 Media SE to create a more effective counterweight to Springer’s powerful rival Bertelsmann. The same year, he lost out to Japan’s Nikkei Group in a bidding war for the Financial Times.

. Doepfner tried to change Springer’s legal status in 2016, which could have allowed him to use equity to fund takeovers without diluting the family’s stake, but shareholder opposition forced the company to abandon the move. Bringing in KKR could get round the problem by adding more debt-raising firepower to pay for acquisitions.

. Potential targets for Springer include EBay Inc.’s classified advertising business, which could come up for sale amid activist pressure , according to a person familiar with the matter.

. “We believe the KKR interest may be sparked by the potential for further industry consolidation,” said Berenberg analyst Sarah Simon. “Going private could solve the problem that the group has today in terms of its ability to do large deals.”

. At a London capital markets day in December, Doepfner, responding to speculation about potential changes to the company’s structure, said Springer is “constantly checking whether this is the optimal structure, or if there are better alternatives that would unlock value and would enable faster growth.”

. Springer is expanding its classifieds job portal Stepstone by adding 300 people this year and moving into Poland. It plans to hire additional reporters for Business Insider Germany on the conviction that online journalism “can be more profitable than print ever was,” Doepfner said in March.

. The company expects its Upday and Politico online news products to become profitable this year after Business Insider started making money last year.

. --With assistance from Jan-Henrik Förster, Ruth David, Ben Scent, Stefan Nicola and Kasper Viita.

. To contact the reporter on this story: Aaron Kirchfeld in London at akirchfeld@bloomberg.net

. To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Thomas Pfeiffer

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Springer Family, KKR Eye Taking Bild Tabloid Publisher Private