Shareholders Urge EM.TV Chief to Resign

EM.TV & Merchandising Chief Executive Thomas Haffa should resign because he misled investors about the state of the company, said DSW, a shareholder group.

The call comes as Haffa and his brother, former Chief Financial Officer Florian Haffa, face an insider-trading investigation by the German securities regulator and eight shareholder suits alleging that Thomas Haffa didn’t tell investors fast enough about the company’s declining profit prospects.

EM.TV, which bought rights to the Muppets characters in February, told analysts in mid-November that it would post a full-year operating profit of about $290 million. Two weeks later it said operating profit wouldn’t exceed $24 million. Its shares fell 69% in December.

CEO Haffa “should take the consequences of the company’s current developments,” said Petra Kruell, spokeswoman for DSW, which says it represents more than 1,000 EM.TV shareholders. “A management that has abused shareholders’ trust to such an extent cannot be supported.”

Haffa was not available for comment. He doesn’t intend to resign, said Michael Birnbaum, a company spokesman. The supervisory board “is in full support of Thomas Haffa,” he said.

EM.TV markets rights and licenses for movies and TV programs and also produces children’s movies, cartoons and TV series. Shares of Munich-based EM.TV fell 90% last year, and more than 40% in each of the last three months. Thursday they rose as much as 36 cents to $6.03. The company, now valued at $867 million, was worth $14.2 billion at its peak in February, when it was the Neuer Markt’s most valuable company.

Tuesday, Thomas Haffa said he had sold 200,000 EM.TV shares in January and February 2000 without giving written notification to Westdeutsche Landesbank Girozentrale, which he was obliged to do under the terms of a November 1999 share sale. Florian Haffa also sold shares, his lawyer said. He declined to comment further.

“That this man is still CEO is unbelievable,” said Reinhild Keitel, spokeswoman of SdK, a shareholder group that also says it represents 1,000 investors. “The shareholders feel betrayed and fooled.”

Meantime, plans by Kirch Group, Germany’s second- largest media company, to invest in the company are floundering, according to German newspaper reports. Kirch is considering buying a quarter of the company and paying $550 million for part of EM.TV’s stake in Formula One auto racing.

EM.TV has dismissed the reports and said it intends to complete the transaction.

“If the talks with Kirch fail, shareholders will get even more upset,” said Sarah Schmitz, analyst at Commerzbank Securities in London, who rates EM.TV “hold.” “Recent developments make it increasingly difficult for other interested parties to trust Haffa.”

If the transaction goes through, it will cut the company’s debt to $628.4 million from $1.1 billion, the company said in December.

If it doesn’t, the company may have other options.

“I can’t deny” that the company had received other offers, Birnbaum said. “EM.TV will not start talks with others until those with Kirch are concluded.”

Fiat Auto, Ford Motor Co., Honda Motor Co. and DaimlerChrysler are interested in buying a stake in Formula One, according to a December report in Sueddeutsche Zeitung that cited Juergen Hubbert, who heads DaimlerChrysler’s Mercedes car unit.

Also in December, EM.TV said it will sell the global rights to all Sesame Street characters to New York-based Sesame Workshop.

The company is trying to sell its 45% stake in Tele Muenchen, which makes TV programs and licenses films to TV stations, to the company’s president, Herbert Kloiber. Analysts say EM.TV will get about $290 million for the stake, which it bought for about $387 million two years ago.