Germany’s Kirch Holding to Merge Multimedia Units

Kirch Holding, Germany’s second-largest media company, is combining its multimedia units Kirch New Media and ProSieben Digital Media to streamline its Internet operations and cut costs.

ProSiebenSat.1 Media, which until now has owned all of ProSieben Digital Media, will have a 50% stake in the joint venture and KirchMedia, Kirch’s commercial TV and media rights unit, and KirchPayTV will own the rest. KirchMedia also owns 52.5% of ProSiebenSat.1.

“It’s a very positive strategic move for the long term,” said Roland Pfaender, analyst at BHF-Bank, who rates ProSieben “hold.” “Kirch New Media has the technological know-how and ProSieben has the content with its channels.”

The new company will focus on multimedia businesses and further develop Internet activities that are linked to television channels such as Kabel 1 or Sat.1.

The combination is set for completion in the next few weeks after agreement by ProSieben’s supervisory board.

“The combination makes sense as the markets for DSL and broadband didn’t grow as fast as expected,” Kirch spokesman Hartmut Schultz said in an interview.

ProSiebenSat.1, Germany’s largest television broadcaster, was created when ProSieben Media and SAT.1 combined last July amid increasing competition in the German television market.

ProSieben Sat.1’s shares dropped 3.1% to $32.75, valuing the companies at about $3.2 billion.