Canal Plus deal topples BSkyB

BSkyB is about to be toppled from its position as Europe's largest pay- television company by a ground-breaking merger between Richemont's NetHold subsidiary and the French television company, Canal Plus.

Canal Plus is to acquire 100 per cent of NetHold, which is based in the Netherlands, from NetHold's two parent companies, Richemont of Switzerland and South Africa's Multichoice, in exchange for 6.1 million new Canal Plus shares and a cash payment of $45m.

The deal announced last night will create a combined television group with over 8.5 million subscribers. It is only the latest development in a shake-out of the fast-developing pay-television. sector. Media rivals are jockeying for position with revolutionary digital technology coming on stream, allowing a huge expansion in the number of channels available.

Richemont already dominates its home market of Switzerland, and sees the Canal Plus alliance as a route into the lucrative German market. NetHold dominates the Scandinavian pay-television market and Canal Plus the French sector. It also has ambitions in the Low Countries.

In the key market of Germany, Rupert Murdoch's BSkyB has already formed a powerful alliance in digital pay-television with the German media tycoon Leo Kirch.

Rene Weber, an analyst with Bank Vontobel, said yesterday: "Murdoch's BSkyB is number one in Europe while NetHold is number two and Canal Plus is number three, so it would make sense for NetHold and Canal Plus to join forces."

Canal Plus and Richemont said last night that the new combine would have "a significant position in France, Italy, Spain, Scandinavia, Benelux and Germany as well as an established presence in several growing markets in Central Europe".

The group added that its aim "is to offer a wide range of tailor-made channels adapted to local tastes across Europe". Under the terms of the deal Richemont and Multichoice will own 15 and 5 per cent of the new group respectively.

Two shareholders in Richemont, Compagnie Generale des Eaux and Havas, will each have three seats on the new Canal Plus board, as will Richemont/Multichoice.

Canal Plus said: "As NetHold's operations are currently in a significant growth phase, particularly in view of the roll-out of digital broadcasting, NetHold is expected to incur operating losses until 1998 and reach break- even in operating terms during 1999.

"Significant profits and cash generation are expected from the year 2,000 onwards."

Johann Rupert, chief executive officer of Richemont and chairman of NetHold said: "Over the past four years NetHold expanded rapidly across Europe. I welcome this merger as an opportunity to increase our involvement."