Kirch Approves Deal to Gain Stake in EM.TV

German media giant Kirch Group has agreed to acquire a minority stake in EM.TV & Merchandising, which owns the Muppets characters, and will assume several hundred million dollars in debt, industry sources told Reuters on Sunday.

The deal, which comes after the troubled media company slashed profit forecasts for the year Friday, will give privately held Kirch a minority holding rather than the majority stake originally expected.

But Kirch will be ensured a significant level of control and the ability to block any changes in the statutes of EM.TV, the sources said.

Details of the deal were expected to be announced at a news conference today, when EM.TV will report third-quarter earnings.

EM.TV insisted last week that it did not face liquidity problems, but sources said Kirch had been surprised by the extent of the problems at the company.

The once highflying media group slashed its profit forecast by more than 90% on Friday, blaming missed revenue targets and lower margins.

The deal with Kirch seals one of the most dramatic stories the German stock market has seen in recent years. The spectacular rise in EM.TV shares from their 1997 debut to a high of $100 in February created numerous millionaires in Germany, helping fuel a boom in stock market investing in a country where share ownership was once regarded with suspicion.

Under the agreement, Kirch will take a “significant stake” in SLEC Holding, the company that runs Formula One racing, but will leave EM.TV with part of its 50% holding in the unit.

EM.TV paid $2 billion in February to buy the Jim Henson Co. and half of the Formula One holdings.