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Fox, Apollo plan Shine, Core, Endemol alliance

21st Century Fox intends to form a joint venture with Apollo Global Management that will bring Shine Group, Core Media Group and Endemol under one umbrella.

21st Century Fox counts the Fox broadcast network, cablenets FX, National Geographic Channels, MundoFox, Star, Fox International Channels and the Twentieth Century Fox film and TV studios among its assets, adding Elisabeth Murdoch’s Shine Group to the stable in 2011.

Now it wants to combine the latter with interests owned by Apollo, a private equity firm that has US$125bn of assets under management including a significant stake in Endemol and Core Media, the co-owner of American Idol, which it inherited through the 2011 buy-out of CKX.

Endemol owns production companies including Darlow Smithson, Initial, Tiger Aspect, and Remarkable Television in the UK, WeiT Media in Russia, NL Film in the Netherlands, Southern Star in Australia, plus 51 Minds Entertainment, Original Media and Authentic Entertainment in the US.

The firm has been through a protracted refinancing process after Mediaset, Cyrte Investments and Goldman Sachs paid €3.4bn (US$4.3bn) for the company in 2007 and the global economy promptly crashed the year after.

Endemol reduced its debt from €2.8bn to €500m through a restructure agreement with creditors in January 2012. Goldman ended its involvement in March that year, selling on its debt to Apollo and Cyrte, while Mediaset followed suit in April. This meant Apollo and Cyrte (a fund closely associated with Endemol founder John de Mol) effectively became majority shareholders in the Big Brother producer.

De Mol, one of 12 parties with money in Cyrte (now known as Daysim Investment Strategies), was expected to seek a merger of Endemol and his current Talpa Media business, but according to Dutch financial press ditched the ambition earlier this year as negotiations pushed the price higher. He could now sell his stake – thought to be around 25% – to Apollo, which is understood to control 30% of the firm. Debt held by the two firms will be converted to equity next month.

Apollo paid US$509m for CKX in 2011, handing it 19 Entertainment and co-ownership of Idol, plus rights to the Elvis Presley and Muhammad Ali estates. The company was rebranded as Core Media Group and former NBC and CBS executive Marc Graboff was brought in as boss in 2012, with a remit to build out the business.

Core has so far acquired Sharp Entertainment and invested in others such as B17 Entertainment, while divesting the Presley and Ali assets last year.

Former News Corp president and chief operating officer Peter Chernin reportedly held talks with Core in October 2012 about the possibility of merging it with Endemol via his Providence Equity Partners-backed entertainment business The Chernin Group.

Now, his former employer, the film and TV arm of News Corp that was rebranded 21st Century Fox in the wake of the string of phone-hacking scandals that necessitated a split in Rupert Murdoch’s empire, has entered the fray.

“The parties have entered into a preliminary agreement, subject to a number of conditions, which calls for 21st Century Fox and funds managed by affiliates of Apollo to jointly own and manage the new joint venture,” the company said today in a statement. “There can be no assurance that the proposed transaction will be completed.”

A spokesman for Apollo confirmed to C21 that there is a “preliminary agreement” between itself and 21st Century Fox, which also owns pay TV operators Sky Deutschland and Sky Italia and a 39.1% equity stake in BSkyB, which it emerged earlier this week could be combined into a single entity.

Should 21st Century Fox and Apollo bring Shine, Core and Endemol together under one banner, it would represent by far the biggest deal in the TV production industry so far this year, dwarfing Discovery Communications and Liberty Global’s joint acquisition of All3Media last week and the string of production companies the UK’s ITV has been snapping up.

Since launching in 2000, Shine has acquired a clutch of production companies including Dragonfly, Kudos Film and Television and Princess Productions and Brown Eyed Boy in the UK, Rubicon in Norway, Metronome in France, Meter Television in Sweden and Reveille in the US.

News Corp bought Shine for £415m – a deal that sparked allegations of nepotism from some of the former’s shareholders, who launched a legal challenge against the purchase, though the complaint was ultimately settled out of court.

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