German Firm to Buy Henson for $680 Million

Jim Henson Co., home to such popular family entertainment franchises as the Muppets and the “Bear in the Big Blue House” television show, has agreed to be sold for $680 million in cash and stock to Germany’s EM.TV & Merchandising, the companies announced Monday.

EM, a fast-growing publicly held media company based in Unterfohring, Germany, has been looking to enter the U.S. market and has been seeking sources of children’s programming for its channels overseas.

Henson, one of the last remaining independent entertainment companies, has been searching for a minority investor or strategic partner to underwrite its production costs. The Times first reported negotiations were underway last week.

The sale highlights the difficulties that stand-alone companies face as the entertainment industry consolidates in the United States. Power increasingly is concentrated in the hands of a few global conglomerates that control both programming and distribution outlets, including Time Warner, News Corp., Walt Disney Co. and Viacom Corp.

“It’s harder and harder for independent companies like ours,” said Brian Henson, chairman and chief executive of Jim Henson Co. “The huge, vertically integrated companies want a piece of our programs [in exchange for air time] and are paying lower licensing fees.”

He said combining with the German company should enable Henson to grow, without any change in leadership and with its headquarters remaining in Los Angeles.

Despite the appeal of its lovable and well-known Muppet characters, Henson has struggled in recent years to invent new ones and to reinvigorate and grow the brand, industry sources said.

Its last two movies, including “Muppets From Outer Space,” and its last prime-time network TV series, “Muppets Tonight,” were failures, underscoring kids’ preference for edgier programming such as “The Rugrats” and “Pokemon.”

Yet the German company is paying a huge premium for Henson because it is one of the last available name brands in family entertainment.

The privately held company, which is controlled by the five children of its founder, the late puppeteer Jim Henson, is profitable on annual revenue of more than $200 million. Henson has 450 hours of programming, in addition to owning the Creature Shop and stakes in several cable channels, including the Kermit channels worldwide and the Odyssey Channel in the United States.

Disney had agreed to buy Henson for $150 million in 1989, but the deal fell apart after Henson’s sudden death in May 1990.

Brian Henson said the company was looking for alternatives to replace its television and movie financing deals with ABC and Sony Pictures Entertainment, which expire this summer. He said the company decided to sell because of the comfortable fit with EM.TV, which is also family-controlled and complements Jim Henson Co.’s expertise in production with its own strengths in international marketing and merchandising.

Formed in 1989, EM is controlled by two brothers, Thomas and Florian Haffa. Through previous transactions, EM now controls nearly 30,000 half-hours of children’s programming, which it markets under the Junior name.

Under the agreement with EM, the Henson family will receive $340 million in cash and the other half of the purchase price in EM stock. The family will receive about 6 million shares of EM stock, equivalent to about 5% of the company.

Since its initial public offering in October 1997, EM’s stock value has increased 33,000% on Frankfurt’s Neuer market, which is equivalent to the United States’ Nasdaq.

After the sale is completed later this year, Brian Henson will give up his title as chief executive of Jim Henson Co., remaining as chairman.

Charlie Rivkin, now president and chief operating officer, will be promoted to chief executive officer and president. Lisa Henson will officially join the company as vice chairman and head of Jim Henson Pictures, the film division.

In a memo to Henson employees Monday, Brian Henson and Rivkin promised that the company will remain intact, with no expected leadership changes or staff reductions.

In several other recent acquisitions, the memo said, EM’s “practice has always been to be hands-off owners,” leaving creative operational and financial decisions to local management.

EM has been using its rising stock value to aggressively buy and license programming. It has also taken stakes in the German film production company Constantin Films and bought 45% of TeleMuenchen Group, which owns TV channels in Germany, Austria and Hungary.