Munich-based German broadcaster ProSiebenSat 1 Media AG yesterday announced having agreed to buy Luxembourg''s SBS Broadcasting SA€3.3 billion ($4.4 billion / Rs18,951.9 crore), a move that will unite two companies controlled jointly by Kohlberg Kravis Roberts & Co. and Permira, while creating a pan-European broadcaster that could take on the might of Bertelsmann AG''s RTL Group.

The deal will be financed through a new loan provided by a host of banks led by Bank of America Corp., with ProSieben also using the financing to wipe out its €150 million in debt. The two companies expect a smooth closure next month, as the deal does not require the approval of either the competition or media regulator.

Earlier this year private equity firms (PE) KKR and Permira acquired a controlling stake in ProSieben for €3.13 billion in a secondary buyout from a consortium with the intention of merging it with SBS as the two broadcasters do not have overlapping operations in Europe.

SBS has stations in the Netherlands, Scandinavia and Eastern Europe, with gaps in Central and Western Europe and no presence in Germany, Spain, France and the UK. ProSieben, which is Germany''s largest broadcaster with a host of entertainment, news and game show stations, is weak internationally.

Before the PE firms merged their new media businesses they had to convince the Netherlands'' Telegraaf Media Groep NV not to exercise its right of first refusal on SBS because of its 20-per cent stake in the broadcaster. In exchange, Telegraaf, best known as the publisher of a daily with the same name, would receive a 6-per cent stake in the combined entity.

Through their investment vehicle, Lavena 5 Holding GmbH, the two PE firms will hold 45 per cent of the enlarged ProSieben, which includes 76-per cent of its voting shares, while the management will own about 12 per cent, with the remaining being widely held.

Last year, the two broadcasters generated joint revenue of €3.1 billion and Ebitda of €691 million. ProSieben expects annual synergies of between €80 million and €90 million from the merger, with two-thirds of the savings coming from cost cutting and the rest from increased sales. The new group will be based in Munich.