Dividing to Conquer a Newspaper Empire in Germany

PARIS — A newspaper publisher moves haltingly into the digital era. The families that control the company do not always see eye to eye, and they worry about what will happen when a new generation, one with less ink on its hands, takes over. A powerful press baron senses opportunity and makes an unsolicited takeover bid.

Rupert Murdoch’s audacious, $5 billion bid for Dow Jones, publisher of The Wall Street Journal, ultimately ended a century of family control at one of the most prominent newspaper companies in America.

Is something similar about to happen in Germany?

A little more than a week ago, Mathias Döpfner, chief executive of the biggest newspaper publisher in Germany, Axel Springer, sent a Murdoch-style letter to the family owners of the second-largest German newspaper company, WAZ Mediengruppe, which also has significant investments in Austria and Eastern Europe, including the Balkans.

Mr. Döpfner wrote that Axel Springer was interested in buying WAZ or some of its parts and suggested a price of €1.4 billion, or $1.9 billion, for the whole company.

The offer came amid a long-running family drama at WAZ, a privately held company owned by the heirs of its two founders. In the sedate world of German publishing, where hostile approaches are almost unheard of, the letter landed like a howitzer round.

“To bid for another company’s assets without being invited is actually the manner of financial sharks,” Christian Nienhaus, co-chief executive of WAZ Mediengruppe, told the newspaper Die Zeit.

Analysts say Germany’s strict anti-cartel authorities would frown on an outright combination of Axel Springer, which owns the three-million-circulation Bild Zeitung, with WAZ, which publishes regional newspapers like the Westdeutsche Allgemeine Zeitung.

But Axel Springer may not really be after WAZ’s German newspapers, which are concentrated in North Rhine-Westphalia, the most populous German state.

WAZ also has a 50 percent stake in the largest-selling newspaper in Austria, the Kronen Zeitung — a publication that, analysts say, Mr. Döpfner has long coveted.

With a circulation of 800,000 in a country of only eight million people, Kronen Zeitung wields considerable influence in Austrian politics and business. Like Bild, it is a tabloid-style paper, with sensational headlines and pictures of scantily clad women. WAZ also owns a stake in another Austrian paper, Kurier.

WAZ’s newspapers in Hungary, Croatia, Serbia, Macedonia and Russia, meanwhile, might fit well alongside Springer’s operations in the region, where that company has a joint venture with the Swiss publisher Ringier.

Yet Mr. Döpfner’s letter also drew a scornful riposte from descendants of one of the founders of WAZ, Jakob Funke, who created the Westdeutsche Allgemeine Zeitung with Erich Brost in 1948.

“The Funke group is currently not interested in a sale of parts of WAZ Mediengruppe,” the family said via a spokesman, Klaus Schubries. “A sale of a stake in WAZ is also out of the question. Therefore, there is no possibility for negotiations with Axel Springer A.G.”

On the Brost side, the response to Mr. Döpfner’s overture was more cryptic. Peter Heinemann, a representative of the family, quoted from the First Letter of Paul to the Thessalonians, saying, “Test everything. Hold on to the good.”

The Biblical citation alluded to the key role that Mr. Heinemann, son of a former president of Germany, Gustav Heinemann, was playing in determining the future of WAZ. When Mr. Döpfner’s letter arrived, Mr. Heinemann was already reviewing one buyout offer, from one of three Funke siblings, Petra Grotkamp, for the Brost family’s 50 percent shareholding.

Ms. Grotkamp, who is 67, is offering the Brosts €470 million for their stake. Together with her existing stake of nearly 17 percent, this would give Ms. Grotkamp and her husband, Günther, a former chief executive of WAZ, a controlling interest in the company.

Article source: http://www.nytimes.com/2011/10/10/technology/dividing-to-conquer-a-newspaper-empire-in-germany.html?partner=rss&emc=rss