8 ffi3" «©MEDMSET dated 4 July 2007 KOPIE

Transcription

8
ffi3"
«©MEDMSET
cyrte
investments
TELECINCO
This Offer expires at 15:00 hours CEST, on 3 August 2007
OFFER MEMORANDUM
dated 4 July 2007
KOPIE '
RECOMMENDED AND UNCONDITIONAL ALL CASH OFFER
l
i
EDAM ACQUISITION B.V.
.
(a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid),
incorporated under the laws of The Netherlands,
having its seat (statutaire zetel) in Amsterdam, The Netherlands)
' oo
S
M
^I
FOR ALL THE ISSUED AND OUTSTANDING SHARES WITH A PAR VALUE OF EUR 0.10
IN THE SHARE CAPITAL OF
ENDEMOL N.V.
(a public limited liability company (naamloze vennootschap) incorporated under the laws of The Netherlands,
having its seat (statutaire zetel) in Hilversum, The Netherlands)
This offer memorandum (the "Offer Memorandum") contains the information required by article 9i of the Dutch
Securities Market Supervision Decree 1995 (Besluit toezicht effectenverkeer 1995,the "Bte 1995") in connection
with the Offer.
This Offer Memorandum contains details of the recommended unconditional offer by Edam Acquisition B.V.
(the "Offeror" or "Edam Acquisition") to holders of issued and outstanding shares with a par value of
EUR 0.10 each (the "Shares" and each a "Share") and the holders of such Shares being referred to as
"Shareholders", in the share capital of Endemol N.V. ("Endemol" or the "Company") to purchase for cash their
Shares subject to the terms and restrictions contained inthis Offer Memorandum (the "Offer"). Capitalised terms
used in this Offer Memorandum have the meaning as set out in Section 3 (Definitions).
Shareholders tendering their Shares under the Offer will be paid ontheterms contained inthis Offer Memorandum
inconsiderationfor each Sharevalidly tendered (ordefectivelytendered providedthatsuch defect has been waived
bythe Offeror) and delivered (geleverd) anamount incashequalto EUR24.55,subject totheterms and restrictions
of the Offer (the "Offer Price").
The Supervisory Board and the Management Board unanimously support the Offer and unanimously
recommend to Shareholders to accept the Offer (see Section 6 (Recommendation by the Supervisory Board
and the Management Board)).
The Acceptance Period under the Offer commences at 09:00 hours CEST, on 5 July 2007 and expires at
15:00 hours, CEST, on 3 August 2007 (the "Acceptance Closing Date"). Acceptance under the Offer must be
made in the manner specified in this Offer Memorandum. Shares tendered on or prior to the Acceptance Closing
Date may not be withdrawn.
On the date of this Offer Memorandum, the Offeror holds, directly or indirectly, 101,255,760 Shares representing
approximately 8 1 %of the aggregate number of issued and outstanding Shares (see Section 9 (Information on
the Offeror)).
The Offer is unconditional.
Announcements contemplated bytheforegoing paragraphs will be issued by press releaseandwill bepublished in
the Daily Official List of Euronext Amsterdam and in at least one nationally distributed newspaper (Hef Financieele
Dagblad or NRC Handelsblad) (see Section 7.8 (Announcements)).
The Shareholders who havetendered anddeliveredtheir Sharestothe Offeror will receivewithinfive Business Days
following the Acceptance Closing Date (the "Settlement Date") the Offer Price in respect of each Share validly
tendered (or defectively tendered provided that such defect has been waived by the Offeror) and delivered
(geleverd).
At 13:00 hours CEST, on 23 July 2007, an extraordinary general meeting of shareholders of Endemol
(the "Shareholders' Meeting") will be convened at Mövenpick Hotel Amsterdam City Centre, Piet Heinkade 11,
Amsterdam, The Netherlands at which time, among other matters, the Offer will be discussed.
1.
Restrictions and important information
1.1
Restrictions
The Offer isnot being made,andthe Shareswill not beacceptedfor purchasefrom or on behalf of any
Shareholder, inanyjurisdiction inwhichthe making or acceptance thereof would not be in compliance
with the securities or other laws or regulations of such jurisdiction or would require any registration,
approval or filing with any regulatory authority not expressly contemplated by the terms of this Offer
Memorandum. However, acceptances ofthe Offer by Shareholders not residing inThe Netherlands will
be accepted by the Offeror if such acceptances comply with the acceptance procedure set out in this
Offer Memorandum. Persons obtaining the Offer Memorandum are required to take due note and
observe all such restrictions and obtain any necessary authorisations, approvals or consents. Neither
theOfferor, nor Endemol,noranyoftheiradvisersaccepts anyliabilityforanyviolation byanypersonof
any such restriction.Any person (including,without limitation,custodians, nominees andtrustees) who
would or otherwise intends to forward this Offer Memorandum or any related document to any
jurisdiction outside The Netherlands should carefully read this Section 1 (Restrictions and Important
Information) before taking any action.The distribution ofthis document injurisdictions other than The
Netherlands may be restricted by law and therefore persons into whose possession this Offer
Memorandum comes should inform themselves about and observe such restrictions. Any failure to
comply with any such restrictions may constitute a violation of the law of any such jurisdiction.
1.1.1
United States of America
The Offer is not being made, directly or indirectly, into the United States of America and may not be
accepted inorfromtheUnitedStatesofAmerica by useormeansofthe interstate orforeign commerce
orofanyfacilityofasecuritiesexchange inthesejurisdictions including,butwithout limitation,electronic
mail,post,facsimiletransmission,telexandtelephone.ThisOffer Memorandum hasnotbeen submitted
to or reviewed by the United States Securities and Exchange Commission ("SEC") or any state
securities commission and neither the SEC nor any such state securities commission hasapproved or
disapprovedordeterminedwhetherthisOffer Memorandum istruthfulorcomplete.Any representation
to the contrary is a criminal offence in the United States of America.
ThisOffer Memorandum isnotbeingandshould not bemailedorotherwisedistributed orsentinor into
the United States of America.
1.1.2
Canada, Australia and Japan
The Offer and any solicitation in respect thereof is not being made, directly or indirectly, in or into
Canada, Australia or Japan, or by use of the mails, or by any means or instrumentality of interstate or
foreigncommerce,oranyfacilitiesofanationalsecuritiesexchange,ofCanada,AustraliaorJapan.This
includes, but is not limited to, post, facsimile transmission, telex or any other electronic form of
transmission and telephone. Accordingly, copies of this Offer Memorandum and any related press
announcements, acceptanceforms andotherdocuments arenot beingsentand must not bemailedor
otherwise distributedorsent in,intoorfromCanada,AustraliaorJapanor,intheircapacitiesassuch,to
custodians, nominees or trustees holding Shares for persons residing in Canada, Australia or Japan.
Persons receiving this Offer Memorandum and/or such other documents must not distribute or send
themin,intoorfromCanada,AustraliaorJapan,orusesuchmailsoranysuchmeans,instrumentality or
facilitiesfor any purpose inconnectionwiththeOffer; sodoingwill invalidate any purported acceptance
of the Offer. The Offeror will not accept any tender by any such use, means, instrumentality or facility
from within Australia, Japan or Canada.
1.2
Important Information
This Offer Memorandum contains important information that should be read carefully before any
decision is made to tender Shares in connection with the Offer. Shareholders are advised to seek
independent advice where necessary. In addition, Shareholders may wish to consult with their tax
advisers regarding the tax consequences of tendering their Shares in the Offer.
TheinformationincludedinSections 1,2,4.2,4.3,4.4 (except4.4.3),4.6,4.9,4.11,7,9,11 (ii)and12has
beensolely provided bytheOfferor.Theinformation included inSections4.4.3,4.5,4.7, 4.10.4,6,8,10,
15.1 up to and including 15.4, 16.1 and 16.2 has been solely provided by Endemol. The information
included inSections 3, 4.1, 4.8,4.10 (except 4.10.4), 4.11, 4.12,4.13,11 (i), 11 (iii) up to and including
11 (v), 13 and 14 has been provided by the Offeror and Endemol jointly. The information included in
Section5hasbeenprovidedbyNMRothschildandisidenticaltotheFairnessOpinion.The information
included inSection 15.5and 16.3 has been provided by Ernst &YoungAccountants and is identical to
theoriginalauditorsstatementsasofthe samedateissued byErnst&YoungAccountants.Section 14is
a Dutch language summary of information provided by the Offeror and/or Endemol in the English
language.
The Offeror and Endemol are exclusively responsible for the accuracy and completeness of the
information provided in this Offer Memorandum, each with respect to such information as it has
provided, andtogether with respecttothe informationthey have providedjointly, exceptfor information
thathasnotbeenprovided byeitherofthem (whichincludestheFairnessOpinion inSection5for which
N M Rothschild is responsible and the information in Section 15.5 and 16.3 for which Ernst & Young
Accountants isresponsible).EachoftheOfferorandEndemolconfirms,withrespecttosuch information
it has provided in this Offer Memorandum, that to the best of its knowledge and belief as of the date
hereof the information contained inthis Offer Memorandum istrue andaccurate inall material respects
and there are no facts the omission of which would make any statement in this Offer Memorandum
misleading inanymaterialrespect.Pleasebeawarethatcertainfinancialandstatistical information and
otherfigurescontained inthisOffer Memorandum mayberounded upordownandshouldtherefore not
be regarded as exact.
The information included in this Offer Memorandum reflects the situation as at the date of this Offer
Memorandum unless specified otherwise. Neither the issue nor the distribution of this Offer
Memorandum shall under any circumstances imply that the information contained herein is accurate
andcomplete asofanytimesubsequenttothisdateorthattherehasbeennochange inthe information
set out inthis Offer Memorandum or inthe affairs ofthe Offeror and/or Endemol and/or its subsidiaries
and/or itsaffiliatessincethedateofthisOffer Memorandum.Theforegoingdoesnotaffectthe obligation
of both the Offeror and Endemol, each insofar as it concerns them,to make a public announcement
pursuant to article 9b paragraph 1of the Bte 1995, if applicable.
No person, other than the Offeror and Endemol and without prejudice to the Auditor's Report and the
ReviewReportissuedbyErnst&YoungAccountants andtheFairnessOpinion issuedbyNMRothschild
includedinthisOffer Memorandum,isauthorisedinconnectionwiththeOffertoprovideany information
or to make any statements on behalf of the Offeror or Endemol in connection with this Offer or any
information contained in this Offer Memorandum. If any such information or statement is provided or
made by parties other thanthe Offeror or Endemol such information or statement should not be relied
uponashavingbeen provided byormade byoron behalf ofthe Offeror orEndemol.Any informationor
representation not contained in this Offer Memorandum must not be relied upon as having been
provided by or made by or on behalf of the Offeror or Endemol.
This Offer Memorandum and the Offer are, and any tender, purchase or delivery of Shares will be,
governed by and construed in accordance with the laws of The Netherlands. The District Court of
Amsterdam (Rechtbank Amsterdam) and its appellate courts shall have exclusive jurisdiction to settle
anydisputeswhich mightariseoutoforinconnectionwiththisOffer Memorandum,theOfferand/or any
tender, purchase or delivery of Shares.Accordingly, any legalaction or proceedings arising out ofor in
connectionwiththeOffer Memorandum,theOfferand/oranytender, purchaseordelivery ofSharesmay
be brought exclusively in such courts.
This Offer Memorandum is published in the English language and a Dutch language summary is
included as Section 14. In the event of any differences, whether or not in interpretation, between the
English language text of the Offer Memorandum and the Dutch language summary of this Offer
Memorandum, the English language text of the Offer Memorandum shall prevail.
ABN AMRO Bank N.V. has been appointed as Exchange Agent in the context of the Offer.
Georgeson Sri. has been appointed as Information Agent in the context of the Offer.
Addresses
The Offeror
Edam Acquisition B.V.
Flevolaan 41A
1411 KC Naarden
The Netherlands
The Company
Endemol N.V.
Bergweg 70
1217 SC Hilversum
The Netherlands
The Exchange Agent
ABN AMRO Bank N.V.
AS Exchange Agency MF 2020
Kemelstede 2
4817 ST Breda
The Netherlands
RO. Box 3200
4800 DE Breda
The Netherlands
Tel: +3176579 9455
Fax: +3176579 9643
Email: So.servicedesk.c&[email protected]
The Information Agent
Georgeson Sri.
Information Agent
Via Emilia 88
Rome-00187
Italy
Tel: +390642171777
Tel: +3180065706570 (Dutch Retail Shareholder Toll Free Number)
Fax: +390645239163
Email: [email protected]
Availability of copy documentation
Copies of this Offer Memorandum are available on the website of Endemol (www.endemol.com).
Endemol's website does not constitute a part of, and is not incorporated by reference into this Offer
Memorandum. Copies ofthe Offer Memorandum arealso available onthe InformationAgent's website
(www.georgeson.it). The Information Agent's website does not constitute a part of, and is not
incorporated by reference into this Offer Memorandum. Copies of this Offer Memorandum are
furthermore availablefree ofcharge attheoffices of Endemol,the Exchange Agent andthe Information
Agent at the addresses mentioned above. For Dutch retail Shareholders copies of the Offer
Memorandum,aswellasother informationrelatingtotheOffer,areavailablefreeofchargethroughatoll
free information number as provided for by the Information Agent, at the number stated above.
Copiesofthe EdamAcquisitionArticlesofAssociationareavailablefreeofchargeattheofficesofEdam
Acquisition and can beobtained bycontacting EdamAcquisition attheaddress mentioned above.The
Offeror is a newly incorporated entity and accordingly no annual reports of Edam Acquisition
are available.
Documentation incorporated by reference
Copies of the Endemol Articles of Association and the financial information of Endemol relating to the
annual financial statements (jaarrekening) of Endemol for the financial year 2006 ended on
31December 2006,thefinancialyear 2005ended on31December 2005 (including comparison figures
for the financial year 2004 ended on 31 December 2004) as adopted by the general meeting of
Shareholders,which documentsareincorporated by reference in,andformanintegral partof,thisOffer
Memorandum, areavailablefree of charge atthe offices of Endemol and the Exchange Agent and can
be obtained by contacting Endemol or the Exchange Agent at the addresses stated above.
Forward-looking statements
This Offer Memorandum includes forward-looking statements that involve risk and uncertainty.
Generally, words such as may,will, expect, intend,estimate,anticipate, believe, plan, seek continue or
similar expressions identify forward-looking statements. Although both the Offeror and Endemol, each
with respect to the statements ithas provided,believesthatthe expectations reflected insuchforwardlooking statements are basedon reasonable assumptions andare,tothe bestoftheir knowledge, true
andaccurateonthedateofthisOfferDocument,noassurancecanbegiventhatsuchstatementswillbe
fulfilled, and no representations are made asto the future accuracy and completeness of theforwardlooking statements.Any suchforward-looking statement must beconsideredtogether withthefactthat
actual events or results mayvary materiallyfrom suchforward-looking statements dueto,among other
things,political,economic orlegalchanges inthemarketsandenvironments inwhichtheOfferor and/or
Endemol do business, competitive developments or risks inherent to the Offeror's or Endemol's
business plans and uncertainties, risk and volatility infinancial markets and other factors affecting the
Offeror and/or Endemol.
The Offeror and Endemol undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise, except as required by
applicable laws and regulations or by any appropriate regulatory authority (such as the AFM).
Financial advisers
Goldman Sachs International,whichisauthorisedandregulated inthe UnitedKingdom bythe Financial
Services Authority, is acting as a financial adviser exclusively to the Offeror and to no one else in
connection with the Offer and will not regard any other person (whether or not a recipient of this Offer
Memorandum) as a client in relation to the Offer and will not be responsible to anyone other than the
Offeror for providing the protections afforded to the clients of Goldman Sachs International or for
providing advice in relation to the Offer.
Goldman Sachs International has given and has not withdrawn its written consent to the issue of this
Offer Memorandum with the references to its name in the form and context in which they appear.
Mediobanca—Banca di Credito Finanziario S.p.A. is acting as a financial adviser exclusively to the
Offeror andto noone else inconnection withtheOfferandwill not regardany other person (whether or
notarecipientofthisOffer Memorandum) asaclientinrelationtotheOfferandwillnotberesponsibleto
anyone other than the Offeror for providing the protections afforded to the clients of Mediobanca—
Banca di Credito Finanziario S.p.A. or for providing advice in relation to the Offer.
Mediobanca—BancadiCreditoFinanziarioS.p.A.hasgivenandhasnotwithdrawnitswrittenconsentto
the issue of this Offer Memorandum with the references to its name in the form and context in which
they appear.
N MRothschild isacting asfinancial adviser exclusively to Endemol and to no one else in connection
withtheOfferandwillnotregardanyother person (whetherornotarecipientofthisOffer Memorandum)
asaclient inrelationtotheOfferandwillnotberesponsibletoanyone otherthanEndemolfor providing
the protections afforded to the clients of NM Rothschild or for providing advice in relation to the Offer.
N MRothschild hasgivenand has notwithdrawn itswrittenconsent tothe referencesto its name inthe
form and context in which they appear in this Offer Memorandum.
2.
Table of contents
Page
1.
Restrictions And Important Information
1.1
Restrictions
1.2
Important Information
2. Table Of Contents
3.
Definitions
4.
Explanation Of The Offer, Future Governance And Indicative Timetable
4.1
Background Of The Offer
4.2
The Offer
4.3
Substantiation Of The Offer
4.4
Rationale For The Offer
4.5
Recommendation By The Endemol Boards
4.6
No Acceptance Conditions, Acceptance Period, Subsequent Acceptance Period
And Settlement
4.7
Shareholdings Of The Members Of The Endemol Boards
4.8
Treatment Of Share Plans
4.9
Consequences Of The Offer
4.10 Future Governance And Employee Interests
4.11 Financing The Offer
4.12 Merger Protocol
4.13 Indicative Timetable
5.
Fairness Opinion Of N M Rothschild
6.
Recommendation By The Supervisory Board And The Management Board
7.
Invitation ToThe Shareholders
7.1
Offer Price
7.2
Acceptance By Shareholders
7.3
Acceptance Of Defective Tenders
7.4
Acceptance Period (Aanmeldingstermijn)
7.5
Settlement
7.6
Listing
7.7
Dividend Policy
7.8
Announcements
7.9
Commission
7.10 Restrictions
8.
Information Regarding Endemol
8.1
Introduction
8.2
History And Development Of Endemol
8.3
Corporate Structure
8.4
Corporate Strategy And Objectives
8.5
Endemol Globe
8.6
Selected Markets
8.7
Regulation
8.8
Current Trading, Trends And Prospects
8.9
Directors, Senior Management And Employees
8.10 Share Capital And Dividend
8.11 Share Plan
8.12 Main Shareholders
9.
Information On The Offeror
9.1
Introduction
9.2
Acquisitions And Disposals
9.3
Shareholders
10. Shareholders' Meeting
11. Further Declarations Pursuant ToThe Dutch Public Offer Rules
1
1
1
5
7
11
11
11
11
12
13
13
13
14
14
16
16
16
17
18
21
22
22
22
23
23
23
23
23
23
24
24
25
25
25
26
26
27
28
32
33
34
36
37
38
39
39
39
39
41
42
Page
12. TaxAspects
12.1 General
12.2 Withholding Tax
12.3 DutchTaxesOnIncomeAndCapital Gains
12.4 OtherTaxesAnd Duties
13. Press Releases
13.1 Press Release Date 18June 2007
13.2 Press Release Dated 14May2007
13.3 Press Release Dated24April 2007
13.4 Press Release Dated9 March2007
13.5 Press Release Dated 14February 2007
13.6 Press Release Dated30January 2007
13.7 Press Release Dated9January 2007
14. Dutch Language Summary
15. Endemol Financial Information
15.1 Endemol Consolidated Financial Information RelatingToThe Financial
Years2006,2005And2004
15.2 NotesToThe Endemol Consolidated Financial Information ForThe Financial
Years2006,2005And2004
15.3 Endemol Company Financial Information ForThe FinancialYears2006And2005
15.4 NotesToThe Endemol Company Financial Information ForTheFinancial
Year2006
15.5 Auditor's Report
16. Endemol Consolidated Financial Information ForThe First Quarter Of 2007
16.1 Endemol Consolidated Interim Financial Information RelatingToThe3Month
Period Ended31 March2007
16.2 NotesToEndemol Consolidated Interim Financial Information RelatingToThe
3 Month Period Ended31 March2007
16.3 Review Report
43
43
43
44
45
46
46
50
51
52
52
53
54
55
67
67
71
112
113
116
117
117
119
120
3.
Definitions
Any reference inthis Offer Memorandum to definedterms in pluralform shall constitute a reference to
such definedterms insingular form,andviceversa.Allgrammatical and other changes required bythe
useofadefinition insingularform shall bedeemedtohavebeenmade hereinandtheprovisions hereof
shall be applied as if such changes have been made.
The following definitions apply throughout this Offer Memorandum, except for capitalised terms in
Sections 5, 13, 14, 15 and 16 of this Offer Memorandum.
Acceptance Closing Date
means the time and date on which the Offer expires, being at
15:00 hours CEST on 3 August 2007;
Acceptance Period
means the period during which the Shareholders can tender their
Shares to the Offeror, which begins at 09:00 hours CEST on
5 July 2007 and ends on the Acceptance Closing Date;
Admitted Institutions
means those institutions admitted to Euronext Amsterdam;
Auditors
means Ernst & Young Accountants;
Auditor's Report
means the auditor's reports issued by Ernst & Young Accountants;
AFM
means the Netherlands Authority for the Financial Markets (Stichting
Autoriteit Financiële Markten);
Bte 1995
meansthe Dutch Securities Market Supervision Decree 1995 (Besluit
toezicht effectenverkeer 1995), as amended from time to time;
Business Day
means acalendar day otherthanaSaturday orSunday onwhich the
commercial banks inThe Netherlands aregenerally openfor normal
business;
CEST
means Central European Summer Time;
Combined Group
meanstheEndemolGroupandtheEdamAcquisitionGrouptogether;
Commencement Date
means the date on which the Offeror shall make the Offer
(het bod uitbrengen);
Company
means Endemol;
Cyrte Fund I
means Cyrte Fund IC.V., alimited partnershipformed under the laws
of The Netherlands, having its registered office at Flevolaan 41A,
1411 KC Naarden, The Netherlands;
Cyrte Fund II
means Cyrte Fund IIB.V., aprivate limited liability company (besloten
vennootschap met beperkte aansprakelijkheid) incorporated under
the laws of The Netherlands, having its seat (statutaire zetel) in
Amsterdam,TheNetherlands, havingitsregisteredofficeatFlevolaan
41A, 1411 KC Naarden, The Netherlands and registered with the
chamber of commerce under number 32122988;
Cyrte Investments
means Cyrte Investments B.V, a private limited liability company
(besloten vennootschap met beperkte aansprakelijkheid)
incorporated under the laws of The Netherlands, having its seat
(statutairezetel) inAmsterdam,TheNetherlands,havingits registered
office at Flevolaan 41A, 1411 KC Naarden, The Netherlands and
registered with the chamber of commerce under number 32081228;
Cyrte Stake
has the meaning as set out in Section 9.2.2;
Daily Official List
means the Daily Official List (Officiële Prijscourant) of Euronext
Amsterdam;
Digital Media
has the meaning as set out in Section8.1;
Dutch Civil Code
means Burgerlijk Wetboek;
Dutch GAAP
meansGenerallyAcceptedAccounting PrinciplesinTheNetherlands;
EBITDA
has the meaning as set out in Section 4.3;
Edam Acquisition
means Edam Acquisition B.V, a private limited liability company
(besloten vennootschap met beperkte aansprakelijkheid)
(statutairezetel) inAmsterdam,TheNetherlands,havingits registered
office at Flevolaan 41A, 1411 KC Naarden, The Netherlands and
Edam Acquisition Articles
of Association
means the articles of association (statuten) of Edam Acquisition as
they stand since its incorporation on 3 May 2007;
Edam Acquisition Group
means Edam Acquisition, the companies which directly or indirectly
wholly-own Edam Acquisition and Edam Acquisition's subsidiaries
excludingthosesubsidiaries whicharealsomembersofthe Endemol
Group;
EN-SOP
Endemol
means Endemol N.V, a public limited liability company (naamloze
vennootschap), incorporated under the laws of The Netherlands,
having its seat (statutaire zetel) in Hilversum, having its registered
office at Bergweg 70, 1217 SC Hilversum, The Netherlands and
Endemol Articles of
Association
means the articles of association (statuten) of Endemol, as most
recently amended on 28 October 2005;
Endemol Boards
means the Supervisory Board and the Management Board together;
Endemol Group
means Endemol, its subsidiaries and participations (deelnemingen);
Endemol Holding
means Endemol Holding B.V, a private limited liability company
(besloten vennootschap met beperkte aansprakelijkheid),
(statutairezetel) in Hilversum,The Netherlands, having its registered
Endemol Investment
Holding
means Endemol Investment Holding B.V, a private limited liability
company (besloten vennootschap met beperkte aansprakelijkheid),
(statutaire zetel) in Hilversum,The Netherlands, having its registered
Endemol France
means Endemol France S.A.S.;
Endemol Italy
means Endemol Italia S.p.A;
Endemol Spain
means the subsidiaries of Endemol Espana Holdings S.L;
Ernst & Young Accountants
means Ernst & Young Accountants;
Euronext Amsterdam
meansEuronextAmsterdam N.V, ortheofficialmarketsegmentofthe
stock exchange of Euronext Amsterdam N.V, as appropriate;
Euronext Paris
means Euronext ParisS.A, ortheofficial marketsegment ofthestock
exchange of Euronext Paris S.A., as appropriate;
Euronext Trading Day
means a day on which Euronext Amsterdam is open for trading;
Exchange Agent
means ABN AMRO Bank N.V a public limited liability company
(naamloze vennootschap) incorporated under the laws of
The Netherlands, having its seat (statutaire zetel) in Amsterdam,
TheNetherlands,havingitsregisteredoffice atGustav Mahlerlaan 10,
1082 PP Amsterdam, The Netherlands and registered with the
chamber of commerce under number 33220369;
Fairness Opinion
means the original fairness opinion dated 18 June 2007 issued by
N M Rothschild;
GS Capital Partners
means, collectively, GS Capital Partners VI Fund, L.R, GS Capital
PartnersVIParallel,L.R, GSCapital PartnersVIGmbH &Co.KG,and
GSCapital PartnersVIOffshore Fund,L.R, each havinganaddress at
85 Broad Street, New York, NY 10004, United States of America;
IAS 32
IFRIC
IFRS
Information Agent
means Georgeson S.r.l., a limited liability company incorporated
under the laws of Italy, having its registered office in Rome at Via
Emilia 88, 00187 Rome Italy, and registered with the chamber of
commerce of Rome under number 05847921003;
IPO
means the initial public offering for Shares on 22 November 2005;
Legal Merger
Management Board
means the management board (raad vanbestuur) of Endemol;
Mediacinco
means Mediacinco Cartera S.L, a company incorporated under the
laws of Spain and having its registered office at Carretera de
Fuencarral aAlcobendas 4,28049 Madrid,whose sharesare held by
Mediaset and Telecinco;
Mediaset
means Mediaset SpA, a private limited company incorporated under
thelawsof ItalyandhavingitsregisteredofficeatPaleocapa3,Milan,
Italy;
Merger Code
means the Merger Code 2000 (SER-besluit Fusiegedragsregels
2000);
Merger Protocol
means the merger protocol agreed and signed by the Offeror and
Endemol on 18 June 2007;
Merger Rules
meansallapplicable lawsandregulations, including but notlimitedto
applicable provisions of the Wte 1995, the Bte 1995, any rules and
regulations promulgated pursuant totheWte 1995andthe Bte 1995,
the policy guidelines and instructions of the AFM, the Dutch Works
CouncilAct (Wetop deondernemingsraden), the Merger Code2000,
the rules and regulations of Euronext Amsterdam, the Dutch Civil
Code or the New Merger Rules as and when applicable;
New Merger Rules
means all laws and regulations pursuant to or inconnection with the
implementation into the laws of The Netherlands of Directive
2004/25/EC of 21 April 2004, including applicable provisions of the
Dutch Financial Supervision Act (Wetop het financieeltoezicht), the
Bill implementing theTakeover Directive (Wetsvoorstel uitvoeringswet
overnamerichtlijn), the Decree on Public Bids (Besluit openbare
biedingen) and the Dutch Civil Code;
N M Rothschild
means N M Rothschild & Sons Limited;
Non-scripted
Offer
means the recommended unconditional offer made by the Offeror to
Shareholders to purchase for cashtheir Shares subject to the terms
and restrictions contained in this Offer Memorandum;
Offer Memorandum
means this offer memorandum relating to the Offer;
Offer Price
means an amount in cash equal to EUR 24.55 per Share (which
equals EUR 25.00 per Share less the final dividend for the financial
year2006ofEUR0.45 per Sharewhichwaspaidon31May2007) for
each Share validly tendered (or defectively tendered provided that
suchdefect hasbeenwaived bytheOfferor) anddelivered (geleverd)
under the terms and subject to the restrictions of the Offer;
Offeror
means Edam Acquisition;
Offeror Shareholders
meansCyrteFund II,GSCapitalPartnersandMediacinco,theindirect
shareholders of the Offeror;
Plan
Post-Offer Actions
Purchase Price
Review Report
means the review reports issued by Ernst & Young Accountants;
Scripted
SEC
Settlement or Settlement
Date
means the date on which, inaccordance with the terms of the Offer,
the Offeror shall pay the Offer Price to the Shareholders who have
validly tendered (or defectively tendered provided that such defect
hasbeenwaivedbytheOfferor) anddelivered (geleverd) their Shares
under the Offer, being no later than the fifth Business Day after the
Acceptance Closing Date;
Shareholder(s)
means holder(s) of one or more Share(s);
Shareholders' Meeting
meanstheextraordinary general meeting ofShareholdersthat isheld
inaccordance withthe Merger RulespriortotheAcceptance Closing
Dateand isconvened by Endemol onor priortothe Commencement
Date;
Shares
means the issued and outstanding shares in the share capital of
Endemol, being ordinary shares with a par value of EUR 0.10 each;
Squeeze-Out
Statutory Squeeze-Out
Supervisory Board
meansthesupervisory board (raadvancommissarissen) ofEndemol;
Takeover Squeeze-Out
Telecinco
means Gestevisión Telecinco S.A., a public limited company
incorporated under the laws of Spain and having its registered office
at Carretera de Fuencarrola Alcobendas 4, 28049 Madrid, Spain;
Telefonica
means Telefonica S.A., a company incorporated in Spain and
registered under number A28015865, whose registered office is at
Gran Via 28, Madrid, E-28013, Spain;
Telefonica Closing
has the meaning as set out in Section 9.2.1
Telefonica Closing Date
Telefonica Share Purchase
Agreement
Telefonica Stake
Wte 1995
means the Dutch Securities Market Supervision Act 1995 (Wet
toezicht effectenverkeer 1995), as amended from time to time.
10
4.
Explanation of the Offer, future governance and indicative timetable
4.1
Background of the Offer
On14May2007,Telefonicasignedanagreementtosellits99.7306%interest inEndemol Investment
Holding,whichholdsa75%indirectstakeinEndemolof93,750,000Shares(thestakeinEndemolN.V.
being the "Telefonica Stake"), to the Offeror (the "Telefonica Share Purchase Agreement"). The
Telefonica Stake is the main asset of Endemol Investment Holding. During the auction process for
Endemol Investment Holding conducted byTelefonica,bidderswererequiredtospecifically valuethe
TelefonicaStake.TheTelefonicaSharePurchaseAgreementvaluedtheSharesatEUR24.55perShare
(whichequals EUR25.00perSharelessthefinaldividendforthefinancialyear2006of EUR0.45per
Sharewhich was paid on31 May 2007) (the "Purchase Price"). The price paidto Telefonicafor its
interest in Endemol Investment Holding is equal to the Purchase Price adjusted for the cash,debt,
receivables and payables related to Endemol Investment Holding and its subsidiaries excluding the
EndemolGroup,andistheoutcome ofacompetitiveauction processconducted byandnegotiations
withTelefonica.
ClosingofthetransactionscontemplatedbytheTelefonicaSharePurchaseAgreement(the"Telefonica
Closing") occurred on3July 2007 (the "Telefonica Closing Date").
On 14 May 2007, Endemol announced that it had been informed by Telefonica that pursuant to the
TelefonicaSharePurchaseAgreementtheOfferorhasundertakentomaketheOfferforatleasttheOffer
PriceatthefirstpossiblemomentaftertheTelefonicaClosingDate.Sincethenanagreement hasbeen
reached between the Offeror and Endemol with respect to the Offer and the main terms of this
agreement are reflected inthis Offer Memorandum.
By virtue of the Telefonica Share Purchase Agreement, the Offeror has undertaken to make an
unconditional publictenderoffertotheminorityShareholdersofEndemolforapriceperShareatleast
equaltothePurchasePrice,notearlierthantheTelefonicaClosingDateandnotlaterthantheendofthe
period ofthree months commencing ontheTelefonicaClosingDate.
Cyrte Fund I has sold to the Offeror its 7,505,760 Shares (the "Cyrte Stake") at the Offer Price on
26 March2007.Thecompletion of such saleoccurred ontheTelefonica ClosingDate.
4.2
The Offer
The Offeror is making an Offer to acquire from Shareholders all Shares, subject to the terms and
restrictionscontained inthisOffer Memorandum.Shareholderstenderingtheir SharesundertheOffer
willbepaidincashtheOfferPriceofEUR24.55perShare(whichequalsEUR25.00perSharelessthe
final dividend forthefinancial year 2006of EUR0.45 per Sharewhichwas paid on31 May2007).
4.3
Substantiation of the Offer
TheOfferPriceisthesamepriceasthePurchasePriceagreedwithTelefonicafortheTelefonicaStake
followinganauctionprocessconductedbyandnegotiationswithTelefonica.TheOfferPricerepresents
acompellingvaluetoShareholdersbyextendingthesamecontrolpremiumaswaspaidtoTelefonicato
allShareholders.TheOffergivesShareholderstheopportunitytotag-alongwithTelefonicaandtohave
thefull benefit of the competitive auction process conducted byTelefonica.
The Offer Price has been basedoncarefulfinancial analyses, consisting ofthefollowing elements:
theOfferor purchasedtheTelefonicaStakeforanagreed PurchasePriceperShareequaltotheOffer
Pricepursuanttoacompetitive auction process conducted byandnegotiationswithTelefonica.Inits
press release of 14 May 2007, Telefonica announced that the sales process has been marked by
"fiercelycompetitivebidding"andthatTelefonicaused"objectiveselectioncriteriabasedoneconomic
andfinancialfactors";
aleveragedbuy-outanalysis,basedonthehistoricandexpecteddevelopments intheoperationaland
financial performance of the business of the Endemol Group aswell asthe current conditions inthe
leveragedfinance markets;
• a discounted cash flow analysis based on historic and expected developments in the
operational andfinancial performance ofthe EndemolGroup;and
11
inaddition,certainfinancial informationasderivedfromannualaccounts,analyst presentations, market
reports, press releases and additional financial information provided by Telefonica.
The Offer represents:
• attractive valuation metrics compared to the recent trading of peer company stocks and to
the recent trading of Endemol;
• amultipleof24.1timesestimatedearnings persharefor2007basedon consensus
broker estimates as recorded in Institutional Brokers Estimate System on
12June 2007;
• on the basis of the implied enterprise value, a multiple of 14.4 times estimated
earnings before interest,taxes,depreciation andamortisation ("EBITDA") for 2007
basedonconsensus broker estimatesasrecorded inInstitutional Brokers Estimate
System on 12June 2007;
• a premium of 12.6% to the closing Share price of Endemol on 8 March 2007, the last
Business Day priortotheannouncement on9 March2007thatTelefonicawasconsidering a
possible total or partial divestiture of the Telefonica Stake;
• a premium of39.9%and 55.5%respectively over thevolume weighted average price of the
Shares of EUR 17.55 and EUR 15.79 during the six and twelve months up to and including
8 March 2007, the last Business Day prior to the announcement on 9 March 2007 that
Telefonica wasconsidering apossible totalor partialdivestiture oftheTelefonica Stake;and
• a premium of 172.8% to the Endemol IPO introduction price of EUR 9.00 on
22 November 2005.
4.4
Rationale for the Offer
4.4.1
The Offeror's strong intention is that the Company will remain strategically and
operationally independent from the Offeror Shareholders.
4.4.2
TheOfferor purchasedtheTelefonicaStakeforthePurchase PriceperShare pursuant
to an auction process conducted by Telefonica. In its press release of 14 May 2007,
Telefonica announced that the sales process has been marked by "fiercely
competitive bidding" and that Telefonica used "objective selection criteria based on
economic and financial factors" to select the ultimate buyer.
Byvirtue oftheTelefonica Share PurchaseAgreement, the Offeror has undertaken to
makeanunconditional publictenderoffertotheminorityShareholders ofEndemolfor
a price per Share at least equalto the Purchase Price, not earlier thanthe Telefonica
Closing Dateandnot laterthantheendofthe periodofthreemonthscommencing on
the Telefonica Closing Date.
4.4.3
The Company confirms that the Endemol Boards' rationale for recommending the
Offer to Shareholders for acceptance is:
(a)
Controlpremium: the Offer Price is equal tothe Purchase Price.The Offer
gives the Company's minority Shareholders the opportunity to tag-along
withTelefonica,to selltheir Shares ataprice including a "control premium"
and to have the full benefit of the competitive auction process conducted
by Telefonica;
(b)
Unconditional all cash offer, the Offer provides Shareholders, in
comparison to a share-for-share exchange, the opportunity to realise
immediate value in cash for their Shares, eliminating significant price risk
relatedtofuture investment, execution uncertainty andany liquidity discount
upon sale;
(c)
Compellingvaluation: theOffer Price representsapremium of75.3%ofthe
volume weighted average price calculated over the period since the
Company's IPO and up to and including 8 March 2007 or a premium of
172.8%to the Endemol IPO introduction price on 22 November 2005;
12
4.5
(d)
Ongoing support of Endemol: the Offeror Shareholders support the
Company's strategy andcomprise investorswho haveextensive experience
inthe television industry andwho can provide significant support, expertise
andcapitalinpartnershipwithEndemoltosupportstrategic initiativesforthe
benefit of its employees, customers and other stakeholders; and
(e)
Fairness Opinion: the terms ofthe Fairness Opinion are satisfactory to the
Endemol Boards.
Recommendation by the Endemol Boards
As set out in Section 6 (Recommendation by the Supervisory Board andthe Management Board), the
Endemol Boards,aftergivingdueconsiderationtothestrategic,financialandsocialaspectsoftheOffer,
unanimously support the Offer and conclude that the Offer is inthe best interests ofthe Company, the
Shareholders andallother stakeholders inEndemol.The Endemol Boards unanimously recommend to
Shareholders to accept the Offer.
Forthe rationale oftheOffer andthe Endemol Boards' rationaleto recommendtheOffer, please referto
Section 4.4 (Rationale of the Offer). Reference is further made to Section 5 (Fairness Opinion of
N M Rothschild) and Section 6 (Recommendation by the Supervisory Board and the Management
Board).
4.6
No Acceptance Conditions, Acceptance Period, subsequent acceptance period
and Settlement
4.6.1
No Acceptance Conditions
The Offer is unconditional.
4.6.2
Acceptance Period
The Acceptance Period begins on 5 July 2007 at 09:00 hours CEST and ends on 3 August 2007 at
15:00 hours, CEST.
Shares tendered on or prior to the Acceptance Closing Date may not be withdrawn.
4.6.3
Subsequent acceptance period (na-aanmeldingstermijn)
OnorabouttheAcceptance Closing Date,theOfferor mayannounceasubsequent acceptanceperiod.
During a subsequent acceptance period, neither Shareholders who tendered Shares during the
Acceptance Period, if such Shares were accepted pursuant to the Offer, nor Shareholders who tender
Shares during a subsequent acceptance period, shall have any right to withdraw such Shares from
the Offer.
4.6.4
Settlement
Onthe Settlement Date,the Shareholders who havetendered and delivered their Sharestothe Offeror
will receive the Offer Price in respect of each Share validly tendered (or defectively tendered provided
that such defect has been waived by the Offeror) and delivered (geleverd).
The Shareholders who have tendered and delivered their Shares to the Offeror in a subsequent
acceptance period will receive the Offer Price in respect of each Sharevalidly tendered (or defectively
tendered provided that such defect has been waived by the Offeror) and delivered (geleverd) no later
than five Euronext Trading Days after the end of a subsequent acceptance period.
4.7
Shareholdings of the members of the Endemol Boards
Asofthe dateofthisOffer Memorandum, 5,200 Sharesare held by Mr.Bazalgette,who has irrevocably
undertaken totender the Shares held by him undertheterms and subjecttothe restrictions ofthe Offer
as described in this Offer Memorandum. Other than the information contained in this Offer
Memorandum, the Offeror Shareholders, as well as any other person falling within the scope of the
definitionofofferorascontained inarticle 1 subpoftheWte 1995,did notdiscloseto Mr.Bazalgetteany
material information regardingthe Offer whichwould be relevantfor Shareholders when considering to
tender Shares under the Offer.
13
Asofthe dateofthisOffer Memorandum,noSharesareheldby Mr.Rodnguez-VinaCancio,Mr.Kerstens
or by any of the members of the Supervisory Board or by the Endemol Boards members' spouses,
registered partners or children (if they are minors) or by legal persons controlled by these persons.
4.8
Treatment of share plans
The treatment of the Plan and the EN-SOP are described in section 8.11 (Share plans).
4.9
Consequences of the Offer
4.9.1
Summary of risk factors following the Offer
Shareholders whodo nottender their Shares intheOffer should carefully reviewthis Section4.9,
which describes certain risks they will be subject to if they chose not to accept the Offer. These
risks are inadditiontotheexposuretothe business ofthe Endemol Group,assuch business and
the structure of the Endemol Group may change from time to time after the Settlement Date.The
following is a summary of the key additional risks:
(a)
SQUEEZE-OUT PROCEDURE
As soon asthe relevant legal requirements have been satisfied,the Offeror may
seektoacquirethe remainingSharesthrough aSqueeze-Out. Forfurther details,
reference is made to Section 4.9.2.
(b)
LOSS OF LIQUIDITY
As soon asthe relevant legal requirements have been satisfied,the Offeror may
seek to terminate Endemol's listing of Shares on Euronext Amsterdam and to
convert Endemol into aprivate limited liability company (besloten vennootschap
metbeperkteaansprakelijkheid),whichwill interalia cause all Sharesto become
subject to transfer restrictions.
Alternatively or cumulatively, the Offeror may seekto implement a Legal Merger,
which could result in Shareholders becoming shareholders in a merging entity
byoperationof law.Thismergingentity maybeaprivate limited liability company
(besloten vennootschap met beperkte aansprakelijkheid), and the shares in its
capital may not be listed or publicly traded, and may be subject to transfer
restrictions.
Even if no conversion or merger is implemented, the size of the free float in
Shares will be substantially reduced as a result of the Offer, and as a result
trading volumes and liquidity of Shares will be materially adversely affected.
(c)
INCREASED LEVERAGE
As a result of one or more Legal Mergers or as a result of other measures
including any of the procedures set out in Section 4.9.2 below, implemented by
the Offeror and Endemol after the Settlement Date,the proportion ofthe balance
sheet of Endemol or its successor entities which is represented by debt is likely
to increase substantially compared to the current position.
(d)
REDUCED GOVERNANCE RIGHTS
In the event that Endemol or any merging entity will no longer be listed and its
shares will no longer be publicly traded,the statutory provisions applicable to
the governance of public or listed companies will no longer apply andthe rights
of minority Shareholders will be limited to the statutory minimum.
(e)
CONTROLLING SHAREHOLDER
Sincethe Telefonica Closing Date, Endemol is majority controlled bythe Offeror
and the Offeror controls the appointment of all of the members of the
Endemol Boards.
14
(f)
TAX TREATMENT OF DISTRIBUTIONS
The Offeror and Endemol have no insight into and no responsibility with respect
to the tax treatment of Shareholders with respect to any distributions made by
Endemol or any successor entity to Endemol, which may include dividends,
repayments of capital and liquidation distributions. Any dividends, repayments
ofcapitalanddistributions ofsaleproceedsafterasaleofsubstantially all assets
of Endemol followed by a liquidation, may raise specific tax issues for
Shareholders.
(g)
DIVIDEND POLICY
The Offeror expects to amend significantly Endemol's dividend policy. The
Shareholders should beawarethat Endemol may notpay (cash) dividendsto the
Shareholders in the future.
4.9.2
Legal structure of the Combined Group following the Offer
Squeeze-Out
TheOfferor reservesthe rightto useany legally permitted methodtoobtain 100%oftheShares.Forthis
purposetheOfferor will consider, depending interalia onthe number ofShares obtained bythe Offeror
asaresult oftheOffer,to initiateafterthe Settlement Dateasqueeze-out procedure (uitkoopprocedure)
in accordance with article 2:92a of the Dutch Civil Code ("Statutory Squeeze-Out") or, subject to
implementationandapplicability ofthe relevantprovisionsintothelawsofTheNetherlands,thetakeover
buy-out procedures inaccordance withthe proposed article2:359c ofthe DutchCivilCode ("Takeover
Squeeze-Out" and together with the Statutory Squeeze-Out, "Squeeze-Out").
Inthe eventthatthe Offeror hasacquired95%or more ofthe Sharesfollowing the Settlement Date,the
Offeror, assoonas possible, intends to initiateaSqueeze-Out inordertoacquire the remaining Shares
not tendered and not held by the Offeror or Endemol.
Legal Merger
The Offeror willalsoconsider effecting alegal merger (juridische fusie) inaccordance witharticle 2:309
of the Dutch Civil Code ("Legal Merger"), between Endemol and the Offeror or a subsidiary of the
Offeror,with Endemol beingthedisappearing entityorsurviving entityandtheOfferor,orasubsidiary of
the Offeror, being the surviving entity or disappearing entity, respectively.
Inthe eventthatthe Offeror does notacquire 95%or moreofthe Sharesfollowingthe Settlement Date,
suchthat it is not possible to initiatethe Squeeze-Out procedure,the Offeror may by simple majority of
thegeneralmeetingofShareholdersofEndemolvotetoeffectdirectlyaLegalMergerbetweeneitherthe
Offeror or awholly-owned subsidiary ofthe Offeror, and Endemol, inwhich the Offeror or such whollyowned subsidiary is the surviving entity and Endemol the disappearing entity.
In case such a Legal Merger is effected, Shareholders that have not tendered their Shares under the
Offer will become, by operation of law, shareholders in the surviving entity, alongside the Offeror, a
subsidiary of the Offeror or the Offeror's shareholder(s), as the case may be. After a Legal Merger is
effectedtheOfferor may initiateaSqueeze-Out procedure, inordertoobtainanyshares inthe surviving
entity not held by the Offeror.
Other possible measures
At any time after the listing of the Shares on Euronext Amsterdam has been terminated, it may be
decided to convert Endemol into a private limited liability company (besloten vennootschap met
beperkte aansprakelijkheid), all in accordance with the laws of The Netherlands and the Endemol
Articles of Association.
Inaddition,the Offeror reserves the right to submit proposals to the Shareholders in order to alter the
company structureandthecapitalstructureofEndemoland/or intendstoachieveanoptimalfinancialor
other structuring, including amendments to the Endemol Articles of Association, a liquidation, a
demerger (splitsing) asspecified inarticle2:334aofthe Dutch CivilCode orasaleofallor substantially
all of the assets of Endemol, which may or may not be followed by a distribution of proceeds to the
Shareholders, all in accordance with the laws of The Netherlands and the Endemol Articles of
15
Association. Also, the Offeror and Endemol reserve the right to have the Offeror contribute assets to
Endemol against the issuance of shares in the capital of Endemol, in which case pre-emptive rights
(voorkeursrecht) of other Shareholders will be excluded. Any distribution may take the form of a
distribution outofreserves,aninterimdividend,adividend or,incasetheCompany isalso liquidated,a
liquidation distribution.Thiswould bedone inordertoalignthecompany structure of Endemolwiththe
Combined Group's new holding and financing structure.
Finally, the Offeror reserves the right to conduct any other legal means which may be effected in
accordance withthelawsofTheNetherlandsandotherapplicable lawsfromtimetotimeinorderforthe
Offeror to acquire allthe Shares (such legal means, together with the Legal Merger, Squeeze-Out and
other possible measures specifically set out above, collectively the "Post-Offer Actions"). Any
Post-Offer Actions will bestructured and implemented,taking into account relevant circumstances and
applicable laws and regulations.
4.10
Future Governance and employee interests
4.10.1
The Management Board will continue to be appointed on the "best person for the
job" principle.
4.10.2
The members of the Supervisory Board will be nominated by the Offeror
Shareholders, ineachcase including,for aslong asthe Dutchcorporate governance
code (codeTabaksblat) applies tothe Company, "independent" members within the
meaning of that code.
4.10.3
Future Composition of the Supervisory Board
Mr.FernandezValbuena resignedfromtheSupervisory BoardeffectivetheTelefonica
Closing Date. Mr. Botman is proposed to be appointed at an extraordinary general
meetingofshareholders,dated5July2007.Mr.Smitand Mr.BadfaAlmirallwill resign
from the Supervisory Board effective the final date of settlement of Shares tendered
underthe Offer, but inany event no laterthan30 calendar daysafterthe Acceptance
Closing Date.
4.10.4
Compensation of members of Endemol Boards
Mr. Smit and Mr. BadiaAlmirallwill receive their annual compensation as member of
the Supervisory Boardforthefullyear 2007.Thetotal amount of compensation to be
paid in 2007 to each of Mr. Smit and Mr. Badfa Admiral! is EUR 50,000.00.
4.10.5
After the Settlement Date the Offeror is committed to respect and prepared to work
within the framework of Dutch governance rules including but not limited to: (i) the
employee co-determination regulations (medezeggenschap) as applied by the
Endemol Group; and (ii) the provisions of the Dutch Works Council Act (Wetop de
Ondernemingsraden).
4.10.6 TheOfferor does notanticipatethattheOfferwill havenegative consequencesforthe
employees of the Company or the Endemol Group within the meaning of Article 9i
sub x Bte 1995.
4.11
Financing the Offer
The Offeror Shareholders will provide the equity andthe shareholders' loans inequal parts of one third
each. The Offeror will finance acceptances under the Offer through a combination of fully committed
debt facilities (arranged by: ABN AMRO Bank N.V; Barclays Capital; Credit Suisse, London Branch;
Goldman Sachs International; Lehman Brothers International (Europe);and Merrill Lynch International),
subject to customary conditions and other conditions in line with the Offer, and equity financing and
shareholders' loans.
TheOfferorfirmly believesthattheintended capitalanddebtstructurefortheEndemolGroup: (i) leaves
the Endemol Group adequate financial flexibility; (ii) leaves the Endemol Group head room for
non-organic growth; and (iii) can be supported by the business of the Endemol Group.
4.12
Merger Protocol
InrelationtotheOffer,Endemol andtheOfferor haveentered intothe Merger Protocol on 18June2007.
16
4.13
Indicative Timetable
Expected Date and Time
Event
(Alltimes areCEST)
09:00 hours,4July 2007
09:00 hours,5July2007
13:00 hours,23July 2007
26July 2007
15:00 hours,3August2007
15:00 hours, 10August2007
Publication of advertisement announcing the availability ofthe
Offer Memorandum andthe commencement of theOffer
Commencement oftheAcceptance Period undertheOffer
Shareholders' Meeting,atwhich meeting the Offer, amongother
matterswill bediscussed
Envisaged datefor publication by Endemol of interim resultsfor
thefirst six months of thefinancial year2007
Acceptance Closing Date
Deadlinefor Shareholders wishingtotender Shares
Settlement Date
17
5.
Fairness opinion of N M Rothschild
Strictly Private and Confidential
The Supervisory Board and the Management Board
6 9 1 9 PO T H Q f " H11 Pï
Bergweg 70
1217 SC Hilversum
The Netherlands
18 June 2007
Dear Sirs:
The Supervisory Board and the Management Board (together the "Boards") of Endemol N.V
("Endemol" orthe "Company") haveretained NMRothschild &Sons Limited ("Rothschild") to provide
our opinion ("Opinion") as to the fairness, from a financial point of view, of the offer by Edam
Acquisition B.V. ("the Offeror") onthe outstanding and issuedshares inthe capital of Endemol not yet
owned directly or indirectly by the Offeror (the "Shares") as specified in the Merger Protocol dated
18 June 2007 between the Company and the Offeror (the "Merger Protocol") (the "Offer").
TheMerger Protocol provides,among otherthings,thattheconsiderationforthe SharesintheOffer will
be€24.55 payable incash (the"Consideration") which,asfarasthevalueofthe Shares isconcerned,
corresponds to the purchase price to be received by Telefonica S.A. ("Telefonica") for the shares in
Endemol Investment Holding B.V. after adjustment for the dividend paid to shareholders on
31May2007.Thetermsandconditions oftheTransactionaremorefullysetforthinthe MergerProtocol.
In arriving at its opinion, Rothschild, among other things:
(i)
reviewed the Merger Protocol;
(ii)
reviewed the sale and purchase agreement dated 14 May 2007 between Telefonica
and the Offeror relating to the sale and purchase of 34,595,252 shares representing
approximately 99.7%ofthe issued share capital of Endemol Investment Holding B.V.
(the "SPA");
(iii)
reviewed certain publicly available business and financial information relating to
Endemol that Rothschild deemed to be generally relevant in evaluating Endemol;
(iv)
reviewedcertainaudited and unauditedfinancial statements of Endemol,and certain
other financial and operating data, including financial forecasts, concerning the
respective businesses, earnings, cash flows, assets, liabilities and prospects
of Endemol;
(v)
reviewed certain audited and unaudited financial information regarding Endemol
Investment Holding B.V. and its subsidiaries;
(vi)
held discussions with the Boards, management and advisors and other
representatives ofEndemol regardingthe mattersdescribed in(iii),(iv)and (v)above,
as well as the operations and financial condition and prospects of Endemol;
(vii)
reviewed the relationship of the Consideration to various levels of earnings and
compared this relationship to the same relationships for certain publicly traded
securities of such other companies that Rothschild deemed to be generally relevant
for or comparable to Endemol;
(viii)
reviewed, to the extent publicly available, the financial terms of certain public
transactionsthat Rothschilddeemedtobegenerally relevant,toEndemolasawhole;
(ix)
reviewed,totheextentpubliclyavailable,informationrelatingtopremiapaidincertain
transactions that Rothschild deemed to be generally relevant;
N M Rothschild & Sons Limited
Telephone +44 (0)20 7280 5000
Registered number925279 England
New Court, St.Swithin's Lane
London EC4P4DU. United Kingdom
Investment Banking Facsimile +44 (0)20 7280 S67I
www.rothschild.com
S i t e d S ^ S V
the FinancialServicesAuthority
18
(x)
reviewed the estimated present value of the unlevered, after-tax free cash flows of
Endemolforthefiscalyearsending2007through2014andaterminalvalueattheend
of 2014 based onfinancial forecasts providedto or discussed with Rothschild by the
Management Board and management of Endemol, respectively;
(xi)
reviewed the affordability of an acquisition of Endemol from the perspective of
financial investors with regard to equity return targets, potential exit valuations and
currently available acquisition financing based on financial forecasts provided to or
discussed with Rothschild by the Management Board and/or management of
Endemol; and
(xii)
considered such other factors and information, and conducted such other analyses,
as Rothschild deemed appropriate.
In connection with our review, we did not assume any obligation independently to verify any of the
financial orother information utilized,reviewedorconsidered by usinformulating ourOpinionand have
reliedonsuchinformation,includingallinformationthatwaspubliclyavailabletousorprovidedtousby
the Company being accurate and complete in all material respects. With respect to the financial
forecastsandother informationandoperatingdatafortheCompany providedtousbythe management
of the Company we have assumed that these have been reasonably prepared on bases reflecting the
best available estimates andjudgments of the management of the Company asto the future financial
performance of the Company. We express no view as to the reasonableness of these forecasts and
projections or the assumptions on which they are based.
In arriving at our Opinion, we have taken into account certain specific risk factors related to the
Company's business and the industry in which it operates, including reliance on key management
personnel currently working for the business and the continuity of important relationships within the
television sector.
With respect totaxand regulatory matters,we have relied,withyour consent, ontheadvice ofcounsel,
experts and advisors to the Company and,further, on discussions with, and information and materials
furnished to us by, the management of the Company regarding the tax position of the Company. We
have also assumed, at your direction, that there has not occurred any material change in the assets,
financial condition, results of operations, business or prospects ofthe Company since 31 March2007,
i.e. the date of the most recent financial and business information relating to the Company made
availableto us.Wefurther haveassumed,withyour consent,thatthe representations andwarrantiesof
the parties contained in the Merger Protocol are true and correct, and that each of the parties to the
Merger Protocol haveperformed andwill perform allofthecovenants andagreements to be performed
by it under the Merger Protocol. We have also assumed, with your consent, that all governmental,
regulatoryorotherconsentsandapprovalsnecessaryfortheconsummationoftheOfferwillbeobtained
without any adverse effect ontheCompany orthe Offer,andthat nodivestitures orasset salesfromthe
Company will be requiredasaresult ofthe Offer, ineither casethatwould inany respect bematerial to
our analysis.
We have not assumed responsibility for making an independent evaluation, appraisal or physical
inspection of any of the assets or liabilities (contingent or otherwise) of the Company nor have we
evaluatedthesolvency orfairvalueoftheCompany underany lawrelatingto bankruptcy, insolvency or
similar matters.AspartofthisOpinion,wehavealsoreviewedthecomposition ofthetotal consideration
received by Telefonica with reference tothe amount attributed to the 75%shareholding in Endemol on
the one hand and the amount attributed to other assets and liabilities sold by Telefonica on the other.
Our Opinion is based on economic, monetary and market and other conditions as ineffect on,andthe
information made available to us as of, the date hereof. Accordingly, although subsequent
developments mayaffectthisOpinion,wehavenotassumedanyobligationto update,reviseor reaffirm
this Opinion.
In connection with this Opinion, we were not authorized by the Company to conduct, nor have we
conducted,anysolicitation ofthirdparty indications ofinterestfortheacquisition ofallorany partofthe
Company or any other alternative transaction. We are expressing no opinion herein as to the price at
which the Shares will trade at any future time.
Weareserving asfinancial advisor to the Company inconnection withthe delivery of our Opinion.The
amount ofourfees isindependent ofthesuccess ofthe Offer.Thefee ispayable upontheearlier ofthe
19
issue of the Opinion and one week prior to the closing of the sale of Telefonica's indirect stake in
Endemol. Inaddition,weareentitledtoamonthly retainerfee.The Boards also agreedto reimburse us
forreasonableexpenses incurredbyusinperforming ourservices,includingfeesandexpensesof legal
counsel,andto indemnify usand related persons against liabilities,including liabilities under securities
laws,arising out of our engagement, except for cases of gross negligence orwilful default on our part.
While neither we nor any of our affiliates were at the date of the Opinion engaged on any advisory
assignments with the Offeror or its shareholders or has served asfinancial advisor tothe Offeror or its
shareholders onany mergers andacquisitions assignments withinthe previous year,weandcertain of
ouraffiliates may haveservedasfinancialadvisortoshareholders oftheOfferor and/ortheiraffiliates on
unrelated matters inthe past and might have received fees for such services. In addition,we and our
affiliates may,inthefuture, provide financial advisory orother services tothe Offeror and/or its affiliates
and to shareholders of the Offeror and/or their affiliates and may receive fees for such services. Inthe
ordinarycourseofbusiness,weandouraffiliatesmaytradethesecuritiesoftheCompany orthoseofthe
Offeror'sshareholders eitherfortheirownaccountsorfortheaccountsofcustomersandmay,therefore,
at any time hold a long or short position in such securities. We and our affiliates may also maintain
relationships withthe Company, the shareholders ofthe Offeror andtheir respective affiliates or related
parties.
ThisOpinion isforthe information ofthe BoardsoftheCompany inconnection with itsevaluation ofthe
Offerandshould notbeviewedasdeterminative oftheviewsoftheBoardsormanagementwith respect
tothe Offer. Itdoes not constitute arecommendation asto howanyshareholder shouldvote oract with
respect to any corporate matter.
This Opinion is limited to the fairness, from a financial point of view and as of the date hereof, of the
Considerationto bereceived bytheshareholders pursuanttotheOfferand does notaddress any other
aspect of the Offer. Our Opinion does not address, and we express no view as to, the merits of the
underlying decision bythe Company to proceedwithorengage inthe Offerand relatedtransactions or
as to any aspect of the Offer (including without limitation the structure of the Offer), other than the
ConsiderationtobereceivedbytheholdersofShares,nordoesitaddressanyothertransactionthatthe
Company has considered or may consider. We express no opinion as to the consideration the
shareholders may have received in an alternative transaction, or on the relative merits of the Offer as
compared to any alternative transaction or business strategy that may be available tothe Company. In
addition, you have not asked usto address, andthis Opinion does not address,thefairness to, or any
other consideration of, the holders of any class of securities, creditors or other constituencies of the
Company other than the holders of Shares.
ThisOpinion may not bedisclosed,referredto,or communicated (inwhole or inpart) toanythird party
for any purpose whatsoever except with our prior written approval which will not be unreasonably
withheld. This Opinion may be reproduced infull inthe disclosure document that the Company must
publish inanticipationofthe generalmeetingofshareholderstobeheldduringtheOfferperiod,butmay
not otherwise be disclosed publicly inany manner without our prior written approval which will not be
unreasonably withheld, and then only in full.
Baseduponandsubjecttotheforegoingandotherfactorswedeemrelevant inreliancethereon,itisour
Opinionthat,asofthedatehereof,theConsiderationtobereceivedbytheholdersofSharespursuantto
the Offer is fair, from afinancial point of view, to such holders.
Very truly yours,
N M ROTHSCHILD & SONS LIMITED
20
6.
Recommendation by the supervisory board and the management board
As per theTelefonica Closing Date, Mr. Fernandez Valbuena resigned as a member ofthe Supervisory
Board.AsMr.FernandezValbuenaisthechieffinancial officer ofTelefonica,hewasconsideredarelated
party with respect to decisions that had to be taken in connection with the Offer. Accordingly
Mr. Fernandez Valbuena did not participate in the decision-making process in the meetings of the
Supervisory Board in relation to the Offer.
Throughouttheprocess,theEndemol Boards havemetonafrequent basisanddiscussedthe progress
of the process and key decisions that had to be taken in connection therewith.
The Endemol Boards,after giving due consideration tothe strategic,financial and socialaspects ofthe
Offer unanimously supporttheOffer andconcludethattheOffer isinthe bestinterests ofthe Company,
the Shareholders and all other stakeholders in Endemol. The Endemol Boards unanimously
recommend to Shareholders to accept the Offer.
Reference is also made the Fairness Opinion as included in Section 5 (Fairness Opinion of
N M Rothschild) of this Offer Memorandum.
Supervisory Board
Management Board
L. Badia Almirall
E.J. Rodnguez-Vina Cancio
G.H. Smit
RL. Bazalgette
J.RC. Kerstens
21
7.
Invitation to the Shareholders
TheOfferor makesarecommended unconditional public cashofferfor alltheShares.Shareholders are
advised to review this Offer Memorandum (including all documents incorporated by reference herein)
and in particular Section 1 (Restrictions and Important Information) thoroughly and completely and to
seek independent advicewhereappropriate inorderto reachabalancedjudgement with respecttothe
OfferandthisOffer Memorandum. Shareholders whoconsider nottotendertheirSharesareadvisedto
review Section 4.9.1 (Summary of risk factors following the Offer) With due reference to all statements,
terms and restrictions included in this Offer Memorandum, Shareholders are hereby invited to tender
their Shares under the Offer in the manner and subject to the terms and restrictions set out below.
7.1
Offer Price
ForeachSharetendered underthetermsandconditions oftheOffer,theOfferorofferstheOffer Priceof
EUR24.55 incash (whichequals EUR25.00 perShare lessthefinaldividendforthefinancial year 2006
of EUR 0.45 per Share which was paid on 31 May 2007).
7.2
Acceptance by Shareholders
7.2.1
Shareholders who holdtheir Sharesthrough anAdmitted Institution are requested to
maketheiracceptance knownviatheir bank orstockbroker no laterthan 15:00 hours
CEST on 3 August 2007. Your bank or stockbroker may set an earlier deadline for
communication by Shareholders in order to permit the bank or stockbroker to
communicate its acceptances to the Exchange Agent in a timely manner.
The Admitted Institutions may tender Shares for acceptance only to the Exchange
Agent and only in writing. Intendering the acceptance, the Admitted Institutions are
required to declare that (i) they have the tendered Shares in their administration,
(ii) each Shareholder who accepts the Offer irrevocably represents andwarrants that
theSharestendered by himarebeingtendered incompliancewiththe restrictionsset
out in Section 1 (Restrictions and Important Information) and (iii) they undertake to
transfer these Shares to the Offeror on the Settlement Date.
The tendering of Shares in acceptance of the Offer shall constitute irrevocable
instructionstoblock anyattempttotransfertheSharestendered,sothatonorpriorto
the Settlement Date no transfer of such Shares may be effected (other than to the
Exchange Agent on or prior to the Settlement Date and the Shares have been
accepted for purchase) andto debit the securities account inwhich such Shares are
held ontheSettlement Dateinrespect ofalloftheSharestendered,against payment
by the Exchange Agent of the Offer Price per Share in respect of those Shares.
7.2.2
Undertakings, representations and warranties by tendering
Each Shareholder tendering Shares pursuant to the Offer other than through an
Admitted Institution, by such tender, undertakes, represents and warrants to the
Offeror, on the date that such Shares are tendered through to and including the
Settlement Date, that:
(a)
the tender of any Shares constitutes an acceptance by the Shareholder of
the Offer, on and subject to the terms and conditions of the Offer;
(b)
such Shareholder has full power and authority to tender, sell and deliver
(leveren), and has not entered into any other agreement to tender, sell or
deliver (leveren),theSharesstatedto have beentenderedtoanyparty other
than the Offeror (together with all rights attaching thereto) and, when the
same are purchased by the Offeror for cash, the Offeror will acquire such
Shares,withfulltitle guarantee andfreeandclear ofallthird party rights and
restrictions of any kind; and
(c)
suchSharesarebeingtenderedincompliancewiththerestrictionsassetout
inSection 1(Restrictions and Important Information) and the securities and
other applicable laws or regulations of the jurisdiction in which such
Shareholder is located or of which it is a resident and no registration,
22
approvalorfilingwithany regulatory authority ofsuchjurisdiction is required
in connection with the tendering of such Shares.
Shares tendered on or prior to the Acceptance Closing Date may not be withdrawn.
7.3
Acceptance of Defective Tenders
The Offeror reserves the right to accept any tender for acceptance, even if it has not been effected in
such manner as set out in Section 7.2 (Acceptance by Shareholders).
7.4
Acceptance Period (aanmeldingstermijn)
The Acceptance Period begins on 5 July 2007 at 09:00 hours CEST and ends on 3 August 2007 at
15:00 hours, CEST.
TheOfferor willaccept allSharesthathavebeenvalidlytendered (ordefectivelytendered provided that
such defect hasbeenwaived bythe Offeror) inaccordance withthe procedures setforth inSection 7.2
(Acceptance by Shareholders).
7.5
Settlement
Onthe Settlement Date,the Shareholders who havetendered and deliveredtheir Sharestothe Offeror
will receive the Offer Price in respect of each Share validly tendered (or defectively tendered provided
that such defect has been waived by the Offeror) and delivered (geleverd).
The Shareholders who have tendered and delivered their Shares to the Offeror in a subsequent
acceptance period, when applicable, will receive the Offer Price in respect of each Share validly
tendered (or defectively tendered provided that such defect has been waived by the Offeror) and
delivered (geleverd) no laterthanfive EuronextTrading Daysafterthe end ofasubsequent acceptance
period.
7.6
Listing
ThepurchaseofSharesbytheOfferor pursuanttotheOffer,amongotherthings,willreducethe number
ofShareholdersandthenumberofSharesthatmightotherwisetradepubliclyandcouldadversely affect
the liquidity and market value of the remaining Shares.
IntheeventthattheOfferor hasacquired95%ormoreofthe SharesfollowingtheSettlement Dateandin
consultation with Euronext Amsterdam, it is intended that Endemol's listing of Shares on Euronext
Amsterdam will be terminated as soon as possible after the Settlement Date. This would further
adversely affect the liquidity of any Shares not tendered pursuant to the Offer. In addition,the Offeror
may initiate any of the procedures as set out in Section 4.9.2 (Legal Structure of the Combined Group
following the Offer), including procedures which would result intermination of the listing ofthe Shares
(including Shares not being tendered).
7.7
Dividend Policy
The Offeror expects to amend significantly Endemol's dividend policy. The Shareholders should be
awarethatEndemol maynotpay (cash)dividendstotheShareholders inthefuture.Forfurther risksthat
Shareholders will be subject to if they choose not to accept the Offer, please refer to Section 4.9.1
(Summary of risk factors following the Offer).
7.8
Announcements
Announcements contemplated by this Offer Memorandum will be issued by press release or
advertisement and will be published in the Daily Official List and in at least one nationally distributed
newspaper (HetFinancieele DagbladorNRCHandelsblad). Subject to any applicable requirements of
the Merger Rules andwithout limiting the manner inwhich the Offeror may choose to make any public
announcement,theOfferorwillhavenoobligationtocommunicateanypublicannouncement otherthan
as described above.
23
7.9
Commission
AdmittedInstitutionsshallreceivefromtheExchangeAgentonbehalfoftheOfferoracommissioninthe
amountofEUR0.01628inrespectofeachSharevalidlytendered(ordefectivelytenderedprovidedthat
such defect has been waived by the Offeror) and delivered (geleverd), up to a maximum of
EUR1,000.00perShareholdertender.Thecommission mustbeclaimedfromtheOfferor throughthe
ExchangeAgentwithinthirtydaysoftheSettlementDate.NocostswillbechargedtotheShareholders
bythe Offeror or by Endemolforthe delivery and payment ofthe Shares if anAdmitted Institution is
involved. Costs might be charged if aforeign institution is involved in the delivery and payment of
theShares.
7.10
Restrictions
TheOfferisbeingmadewithdueobservanceofsuchstatements,termsandrestrictionsasareincluded
intheOfferMemorandum.TheOfferor reservestherighttoacceptanytender undertheOffer,whichis
madebyoronbehalfofaShareholder,evenifithasnotbeeneffectedinthemannerdescribedabove.
24
8.
Information regarding Endemol
8.1
Introduction
The Endemol Group isaglobal leader intelevision and other audiovisual entertainment. The Endemol
Groupcreates premiumentertainment ideasandoffersthemtotheworld's leading broadcasters.These
ideas are used to produce high-quality shows, often resulting in hits with strong brand value.
Subsequently, the Endemol Group exploits the value of its brands across other media and
communication channels, such as mobile telephones and broadband Internet. To develop ideas and
brands, the Endemol Group secures and motivates local entrepreneurs who are self-starters and who
cultivate strong creative teams. The Endemol Group distributes its content via aggregators such as
broadcasters, who largely fund the productions, thus minimising the risk to the Endemol Group's
business model.TheEndemolGroupearnsitsrevenuesprincipallythroughfeesfrom broadcastersand,
to a lesser extent, through fees from advertisers, aswell asfrom telecom and internet companies. The
Endemol Group isan ideas-led business which enables the Endemol Group to minimise its investment
in costly equipment and infrastructure.
The Endemol Group creates Scripted, Non-scripted and Digital Media content:
scripted programmes are programmes such as drama, comedy, soap operas and telenovas (being
scripted serialswitharegularcorecastwithadefined ending) forwhichwriters pre-determinethe script
and structure ("Scripted");
non-scripted programmes comprise reality TV entertainment, game shows and talent shows in which
the main events within the programme are not pre-determined by writers and producers but are the
result of actual events happening during the show ("Non-scripted");
digital Media products are mainly but not exclusively brand exploitations ofthe Endemol Group's main
programmes, including ringtones, 'wallpaper' for PCs, broadband streaming of programmes over the
Internet and mobile phones, mobile and online games and interactive viewing services including
participation TV ("Digital Media").
8.2
History and development of Endemol
In 1994,the companies oftwo major television producers inThe Netherlands,Joop van den Ende and
John de Mol, merged to become Endemol. This merger triggered the development of the Endemol
Group internationally.TheEndemol Group hasrapidlyexpandedsincethentobecomealeadingformat
creationandproduction groupofcompanies.Thisrapidgrowthwasachievedthrough both acquisitions
and internally developed start-ups of television production companies.
Endemol Holding N.V, a predecessor of Endemol Investment Holding, was listed on the Amsterdam
stock exchange in 1996. Telefonica made a public offer for all of the outstanding shares of Endemol
Holding N.V. in2000and acquired almost 100%ofthe outstanding shares. Following completion ofthe
acquisition, Endemol Holding N.V. was delisted.
On 22 November 2005, the Shares (of the newly incorporated Endemol) were listed on Euronext
Amsterdam through the IPO.
25
A corporate reorganisation took place prior to the IPO which resulted in the legal and beneficial
ownership of Endemol France being separatedfromthe rest ofthe Endemol Group.The reasonfor this
reorganisation wasan unresolved dispute withtheformer shareholders of Endemol France concerning
theirearn-outarrangement,dating backtotheacquisitionofthesecond50%ofthiscompany in2000.In
September2006anagreementwasreachedwiththeformershareholders ofEndemolFrance regarding
thisearn-out arrangement.This createdanopportunity forthe potential acquisition and reintegration of
the French business into the Endemol Group.
On8January 2007,Telefonica and Endemol successfully concluded negotiations for the acquisition of
Endemol France by Endemol. The Shareholders approved the acquisition of Endemol France in an
extraordinary general meeting of shareholders on 14 February 2007.As a result Endemol France has
again become part of the Endemol Group.
On9 March 2007,Telefonica announced that itwas considering a possible total or partial divestiture of
the Telefonica Stake. On 14 May 2007 Telefonica announced that it had agreed to sell the Telefonica
Stake to the Offeror pursuant to the Telefonica Share Purchase Agreement.
8.3
Corporate structure
Endemol N.V., NL
Endemol Holding 8.V, NL
EndemolNederiandHolding B.V.,
NL
Endemol Intemational B.V.,NL
c
Dutchsubsidiaries
Endemol FinanceB.V., NL
Endemol Paris Holding,SASand
French subsidiaries
Endemol ItaliaHoldingS.p.A.and
Italian subsidiaries
^Endemol Deutschland GmbHand
!
German subsidiaries'
Endemol.UKHoldingLtdandUK
subsidiaries
Endemol EspafiaHolding,S.L.
andSpanishsubsidiaries
Endemol USA Holding,Inc and
USsubsidiaries
.jj. OtherWwlcJWide subsidiaries
tfc•
(reference. tb'tRe»-:.;' •ËrSemol GlpbeV
8.4
Corporate Strategy and Objectives
Endemol Group's strategy remains focused on profitable growth and market leadership. Maintaining
and building the strength of its core business remains the key priority. In recent years, the Endemol
Group has generated value from its unique international corporate network and expects to continue
doing so in 2007. Additionally, Endemol intends to create further growth by focusing on five areas:
(1) focus on core business; (2) expansion in North America; (3) growth in Scripted; (4) Digital Media
opportunities; and (5) new geographic markets and acquisitions.
8.4.1
Focus on core business
Forthe coming years,the main priority for the Endemol Group isto retainandfurther expand its strong
position inNon-scripted programming ontheworld's major commercialtelevision networks. Inorder to
do so, the Endemol Group is focussing on the following key activities: (1) continuing creativity that
delivers the best formats via the best talent; (2) proactive management of the lifecycle of its formats;
26
(3) proactive management of its library offormats tostimulate trading of ideasand intellectual property
within the Endemol Group; (4) sustaining its strong relationships with major broadcasters; and
(5) deployment of additional initiatives that enhance cross-company revenues and improve efficiency
and high quality standards of productions.
8.4.2
Expansion in North America
The United States is the largest television market in the world. The Endemol Group has had a direct
presence in North America since 2000 and has developed strong relationships with the major
United States' television networks as a result of high rating shows, such as Fear Factor, Extreme
Makeover:HomeEditionandmore recently,DealorNoDealand 1 vs. 100.Inordertofurther develop its
position in North America (including Canada), the Endemol Group will focus on the following growth
areas: television networks, cable networks, Scripted, Digital Media, the Hispanic market and Canada.
8.4.3
Growth in Scripted
Scriptedprogramming isasignificant genre both intermsofviewing hours,primetimeand broadcaster
budgets and has increased in popularity over recent years. The Endemol Group's activities in the
ScriptedfieldspanmorethantenterritoriesandtheEndemolGroupenjoysaparticularly strong position
in three of its main markets: The Netherlands, Italy and Spain. Endemol believes there is potential to
leverage this know-how and to achieve further growth in other markets. To do so, it plans to adopt a
group-wide approachto Scripted (scripted exchanges, scripted GCT,incentives,etc),similartothe one
usedsosuccessfully inNon-scripted.Furthereffortswillthereforebemadetoretainintellectual property
rightsinordertoallowtheinternationalexploitationofScriptedprojects.Fromafunding perspective,the
Endemol Group's strategy is generally to avoid undertaking major commitments as regards deficit
financing and pre-financing.
8.4.4
Digital Media opportunities
Historical boundaries between the telecom and the media industries have been blurred by dynamic
technological developments, a range of emerging media platforms and the resulting changes in
consumer behaviour. However, peoplecontinuetopreferentertainment content. DigitalMedia platforms
therefore provide additional opportunities for content production companies, as Endemol, to exploit
their programming and best known brands.The Endemol Group's strategyfor Digital Media isfocused
inthreeareas:participationTV(inwhichviewers interactwithshowstowinprizes,bidfor products,etc.),
brand exploitation (in which viewers interact with well-known entertainment formats' brands either by
in-programme exploitation, such as voting calls or call and win games, or by out-of-programme
exploitation such as (internet) games, ringtones and wallpaper), and tailor-made content (content
designed specifically for non-TV related platforms).
8.4.5
New geographic markets and acquisitions
TheEndemol Group hasatwo-step strategy towards entering new geographic markets.Thefirst phase
consists of setting up a solid commercial relationship (licensing) with the main broadcasters in the
targeted countries.The countries are prioritised based ona number of relevantfactors such as market
size,opennesstowesterncontent or regulatoryframework. Examples ofcountrieswhere Endemol isin
this first phase include the Middle East and Eastern Europe (although Endemol already has direct
presence in Poland and Russia). Once the Endemol Group has established a strong commercial
relationship over anumber ofyears, itmoves intothe second phase bydeveloping adirect presence in
the relevant country through start-up vehicles. Examples of countries where Endemol is inthis second
phaseare India,wherethe Company hashad asuccessful start,and South EastAsia,where itisinthe
process of setting up a subsidiary.
8.5
Endemol Globe
Endemolcurrentlyhas(directorindirect) subsidiariesorpartnerships intwentyfivecountries:Argentina,
Australia, Belgium, Brazil, Chile, Colombia, Denmark, Finland, France, Germany, India, Italy, Mexico,
New Zealand, The Netherlands, Norway, Poland, Portugal, Russia, South Africa, Spain, Sweden,
Switzerland,theUnitedKingdomandtheUnitedStates.Endemolalsosellsdirectlytocountrieswhereit
does not have a permanent presence. The Endemol Group does business in almost all geographical
markets around the globe.
27
8.6
Selected Markets
8.6.1
Summary total operating income by business unit and geographic region
(a)
Report by genre
In2006,the Endemol Group experienced turnover growth inall genres compared to
2005. The growth in Non-scripted (+22.2%) and Digital Media (+65.3%) was
particularly remarkable. Scripted showed a 8.5% growth over 2006.
Turnover per genre
J ^
% change
686.3
131.1
82.7
22.2%
8.5%
65.3%
1,117.4 900.1
24.1%
EURmillion
2006
Non-scripted
Scripted
Digital Media
838.4
142.3
136.7
TOTAL
Non-scripted
Non-scripted turnover in 2006 grew by 22.2% compared to 2005, reaching
EUR 838.4 million. This growth was mainly attributable to the Endemol Group's
operations in the United Kingdom, the United States and Italy.
2006was anextremely successful yearforDealorNoDeal("DOND"), which made a
major contribution tothe overall performance ofthe Endemol Group. Itwasaired ina
total offorty-six countries in2006,the two most notable being the United States and
the United Kingdom. DOND has been so successful that it has triggered a renewed
appetite for game shows worldwide. Endemol leveraged this increasing demand by
closing anumber ofdealsfor othergameshows inseveralterritories.These included
"1vs. 100",arevampedformatfromtheEndemolGroup's library,and newformats to
follow DOND,namely Showme theMoney andSetforLife. Inspite ofthe success of
DONDandtheothergameshows,BigBrother remainedthe leadingformat in2006in
terms of revenues and was aired in a total of nineteen countries during the year.
ExtremeMakeover:HomeEditionrankedfourth inthe EndemolGroup's globalformat
turnover, despite the fact that it was only produced in the American market.
Overall, the main Non-scripted formats continued to perform strongly throughout
2006. This was mostly due to the ongoing creative efforts made to keep them
appealing and fresh to the audience.
28
Scripted
In 2006, Scripted reached a turnover of EUR 142.3 million, an increase of 8.5%
comparedtothepreviousyear.Almost halfofthisgrowthwasduetotheacquisitionof
an additional 11% in Nijenhuis & de Levita Holding B.V. in The Netherlands.
Endemol subsidiaries in Spain,The Netherlands and Italy continued to be the main
contributors tothe Scriptedgenre in2006.Endemol Spain enjoyedagoodyear, with
successful productions such as Arrayan and Amar en Tiempos Revueltos. In The
Netherlands,the Scripted genre showed strong growth compared to 2005.The most
important productions, Goede Tijden Slechte Tijden ("GTST") and Onderweg Naar
Morgen ("ONM") saw their contracts extended for three and two years respectively.
For Endemol Italy, Scripted business decreased in 2006 compared to the previous
year, but remained a strong contributor to the total Scripted revenues, through
well-known series such as Vivere and Cento Vetrine.
Progress continued to be made by the Endemol Group in the Scripted field in the
United Kingdom (scripted comedy), Germany, Argentina and South Africa. In the
UnitedStates,however, nostrongfinancialcontribution inthisgenreisexpected inthe
short term.
Digital Media
In the Digital Media field, total turnover increased by 65.3% compared to 2005,
reaching EUR 136.7 million. This remarkable growth was due to important
developments in Digital Media's three main areas.
In the area of Participation TV,the performance of the Endemol Group in 2006 was
strong with the generation of more than 220 million calls/SMSs (2005: more than
140 million calls/SMSs). Since early 2006, Endemol Nederiand has been operating
under new regulationsfor ParticipationTVinThe Netherlands.However,the Endemol
Group had already startedto develop innovative Participation TVconcepts that were
fully compliant with these regulations before they came into effect. The reduction of
revenues for Participation TV in The Netherlands was almost completely off set by
organic growth in other countries like Belgium, Portugal and the United Kingdom.
Additional growth camefrom acquisitions inSpainand inGermany. Inboth countries
noParticipationTVrevenueswere recorded in2005.Thefirst moves into Participation
TV in the United States look encouraging.
The Endemol Group's performance within the brand exploitation area was also
verygood,generating morethan450millioncalls/SMSs (2005:morethan300 million
calls/SMSs). This was fuelled by DOND, particularly in the United States and the
United Kingdom.Other interactive shows likeBigBrother andOperacion Triunfo also
made a significant contribution to this field.
Finally, the Endemol Group had some notable "tailor-made content" projects
(i.e.content madespecificallyfor non-TV platforms).Oneofthe most popularwasthe
made-for-mobile interactive reality show GetClose To...,which was initially launched
withthe mobile service provider 02 inthe UK,featuring TheSugababes.Thiswas so
successful that the same concept was launched inSpainwith Movistar featuring the
Spanishsinger Melendi.Other significant examples includetheacquisition ofasmall
United States based tailor-made company called JoeCartoon and a deal with
Comcast intheUnitedStates,whichseestheEndemolGroupcommissioning original
content for digital distribution.
(b)
Report by territory
The Endemol Group registered growth in almost every territory in 2006, with
particularly strong organic growth contributions from the United Kingdom, the
United States, Italy and Spain. The Endemol Group continued to enjoy significant
turnover contributions from almost all the different territories where the Endemol
Group is located.
29
Turnover per country
2006
EURmillion
2005
% chan
9e
United Kingdom
United States
Spain
The Netherlands
Italy
Germany
Rest of the world
Inter segment
247.5
202.7
154.9
152.0
137.8
71.0
202.9
(51.5)
173.0 +43.1%
138.4 +46.4%
126.3 +22.6%
+ 1.2%
150.2
105.9 +30.1%
82.9 -/-14.3%
166.2 +22.1%
(42.9) -1-20.0%
TOTAL
1,117.4
900.1
+24.1%
United Kingdom
2006 was a superb year for Endemol UK with a total turnover increasing by 43.1%
(+42.4% in local currency), reaching a total of EUR 247.5 million, and thereby
continuing to be Endemol's largest market.
BigBrother (boththestandardandthe celebrityversion) enjoyedverystrong ratings,
significantly contributing to the success of Endemol UK and resulting in a new
long-term dealwith Channel 4until 2010.DOND hasalso beenvery successful since
itslaunch in2005and hasbecomeanintegral partoftheChannel 4schedule.DOND
was also akey driver of Endemol UK's growth inDigital Media revenues in2006.The
increasing demandforgameshowsworldwide,triggered bythesuccess ofDOND,is
also visible in the United Kingdom where 1vs. 100 was successfully launched on
BBC1 and two new game shows were sold to ITV.
Other strong areas of growth in the United Kingdom included numerous locally
createdformats (e.g.SoccerAid, 8Outof 10Cats,RestorationVillage)andtailor-made
mobile content (Get Close to The Sugababes).
United States
In North America, Endemol's total turnover increased by 46.4% (in local currency
+45.8%) reaching a total of EUR 202.7 million.
DOND was a major success on NBC throughout 2006 and was one of the most
watched programmes inthecountry.TheDigitalMediaDONDLuckyCaseGamealso
continued to perform well. Following the success of DOND, Endemol USA closed a
numberofdealsforothergameshowslike 1vs100(NBC),SetforLife (ABC)andShow
Me The Money (ABC). Like in the United Kingdom, 1vs. 100 is delivering a strong
performance intheUnitedStates.Theshow'smid-October launchon NBCscoredthe
highest 18-49 rating for any non-sports Friday telecast on any network since
January 2005. NBC ordered 10 additional episodes just after its launch. Extreme
Makeover: Home Edition remained a ratings success for ABC.FearFactor, however,
was lesssuccessful in2006andseason7wastherefore not commissioned.Also The
Onewaspulledfromthescreensafterdisappointing ratings.BigBrother, onthe other
hand, proved to be a steady performer in the summer of 2006.
Inthe Hispanic market, Vasono Vas,the Spanishversion ofDONDwas successfully
launched in the autumn of 2006 on Telemundo. In Canada, two local versions of
DONDwere sold,for boththe Englishand French-speaking communities (thiswas in
addition to sales of recordings and programmes for repeated broadcasting - by
Endemol USA to this market). Both versions premiered in 2007 and achieved
extremely good ratings.
Spain
InSpain,the turnover grew by 22.6%in 2006, reaching a total of EUR 154.9million.
30
Theformats Operación TriunfoandGranHermano (BigBrother) continuedto perform
strongly onTele5 in2006, both interms of ratings and ancillary exploitation.Allé Tü
(DOND) wasalsoverypopular onTele5.MiraquiénBaila (StrictlyDancing) continued
to beone ofthe most successful shows onTVE1. Endemol significantly increased its
output on the new channel Cuatro, with successful shows such as Channel n04,
Supermodelos, Alta Tension and El Hormiguero. Endemol Spain also did more
businesswithAntena3.IntheDigitalMediafield.Additionally EndemolSpain enjoyed
a good year in the participation TV genre through its newly acquired company
Portalmix and a number of programmes (e.g.BuenasNoches,BuenaSuerte (Antena
3) launched for several broadcasters. Endemol Spain remained a very strong
contributor intheScriptedfieldwithsuccessfulproductions suchasAmarenTiempos
Revueltos andArrayan.
The Netherlands
In The Netherlands, turnover grew by 1.2% in 2006, reaching a total turnover of
EUR 152.0 million.
AlsoinTheNetherlandsDONDhadasound performance in2006.BigBrotherairedin
theautumn of2006onTen,where itoutperformed the channel average market share
(8.8% vs. 6.5%). In the Scripted field, The Netherlands continued to be one of the
major contributors in the Endemol Group and the contracts for two of the most
popular serieswereextendedforanumberofyears.Inaddition manynewserieswere
launched by both Endemol Nederiand B.V. and Nijenhuis & De Levita Holding B.V.
Italy
In Italy, the turnover grew by 30.1% in 2006, reaching a total of EUR 137.8 million.
Thiswaslargelyduetotheexcellent performance ofBigBrother,whichreturnedtothe
Italian screens in 2006 after being absent in2005.DOND also performed strongly in
the Italian market in2006,asdid other programmes like//TrenodeiDesideri,Skating
with Celebrities,LaFattoria, TheBeautyandthe Geek, Who WantstobeaMillionaire,
Che Tempo Che Fa and Invasione Barbariche. In the Scripted genre there was a
decreaseinturnover in2006comparedtothepreviousyearespecially inrelationtoTV
series. However, Endemol Italy remained a very strong contributor of Scripted
programming within the Endemol Group.
Germany
In Germany, the turnover declined by 14.3% in 2006, reaching a total of
EUR 71.0 million.
This was mainly due to the ending of Big Brother in February 2006, and the
postponement ofthe newseries until2007.Endemol's mainshows inGermany, Who
WantsTo BeAMillionaire andAllYouNeedIsLove,continuedtoratestrongly in2006.
Inaddition,DONDwassuccessfully re-launched in2006 having beenonairfor onlya
short period in 2005. In the Scripted field progress was made in 2006 with the
productionofthreeTVMoviesandthecommissioning ol8Outof 10CatsandSpoons.
In order to strengthen sales in the Digital Media genre, a company called Callactive
wasacquired inOctober2006.Callactivespecialises intheproduction of Participation
TV shows.
Rest of the world
Amongst the other territories in Europe where the Endemol Group has a permanent
presence,therewasastrong performance inPortugal,largely dueto ParticipationTV.
Inthe LatinAmerica region,the Endemol Group enjoyed steady growth in Argentina
whereFearFactor was producedfor sixdifferent countries. InAsia,there was asolid
start for the Indian subsidiary in 2006. Finally, Endemol Southern Star Pty Ltd, in
Australia performed strongly mainly due to the success of Big Brother 6.
31
8.6.2
Key Financials
The following tables represent a summary of the income statement, cash flow and balance sheet
information for the Endemol Group for the financial years ended December 31, 2006 (audited),
December31,2005 (audited).AsEndemolwasnotyetincorporated in2004,thefiguresforthefinancial
yearendedDecember31,2004 havebeenincludedforcomparison reasons.Thesecomparativefigures
were audited as part of the financial statements for the year ended December 31, 2005.
Please refertosection 15.2.1for additional detailsonthe basisof preparation offinancial information of
the Endemol Group.
IFRS
2006
EUR million
2005
2004
Income statement data
Turnover
EBITDA
EBITDA as a %of turnover
1,117.4
177.1
75.9%
900.1
152.8
17.0%
850.9
132.4
15.6%
Operating result
Income before Tax
Net income attributable to shareholders
Net income as a %of turnover
160.5
154.5
96.8
8.7%
135.4
135.1
82.6
9.2%
117.2
111.2
64.5
7.6%
Earnings per share (EUR)
Fully diluted earnings per share (EUR)
No. of shares (million)
0.77
0.76
125.0
0.66
0.65
125.0
0.52
0.51
125.0
Cash flow data
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
99.8
(47.2)
(14.8)
95.4
(42.0)
(90.1)
93.7
(35.4)
(0.5)
Net cash flow
Capital expenditure
37.8
13.7
(36.7)
14.3
57.7
15.2
Balance sheet data
Non-current assets
Current assets
263.6
450.7
235.9
331.0
315.6
378.7
Total assets
Non-current liabilities
Current liabilities
714.3
36.3
433.3
566.9
16.1
404.9
694.3
46.3
412.6
Total liabilities
Shareholders' equity
Minority interests
469.6
237.1
7.6
421.0
139.5
6.4
458.9
229.5
5.8
566.9
694.3
(87.4)
97.8
2.2
(67.4)
115.6
2.2
(117.8)
129.2
0.4
12.6
50.4
11.8
4,316
34.3%
3,928
25.7%
3,249
33.9%
Total liabilities & equity
714.3
Net financial indebtedness
Cash and cash equivalents
Short-term financial debt
Long-term financial debt
Net financial debt/(cash)
Other/ratio's
FTE's (full time equivalents)
Solvency (total equity incl. minority interests/Balance sheet total) . . .
8.7
Regulation
The Endemol Group's business issubjectto and may beaffected byvarious laws and regulations, the
most important of which are briefly summarised below. As Endemol is a Dutch company listed on
Euronext Amsterdam, it is subject to the Dutch corporate governance code, the general rules of
Euronext Amsterdam aswell as certain other legislation applicable to listed companies. In connection
32
with these regulations, Endemol has made a number of changes to some of its corporate governance
and compliance practice, and is reviewing its internal control procedures on a continuous basis. In
addition, Endemol evaluatesand monitors regulatory developments inthecountries inwhich itisactive
from time to time.
Thefollowing specific regulatory restrictions which concernthe Endemol Group's activities areof note:
8.8
8.7.1
Asubstantial partofthebusinessconsists oftheexploitationofformats.The Endemol
Group's success depends, in part, on its ability to protect current andfuture formats
by securing, enforcing and defending its intellectual property rights. However, both
the legal status of these formats and the scope of protection offered for them are
uncertain. Most jurisdictions do not recognise format rights per se and there is no
generally recognised definition of the word "format".
8.7.2
Participation TV and activities in the Digital Media field entailing participation by the
audience may be considered gaming,gambling,a lottery or acompetition in certain
countries and, consequently, may be or become forbidden or subject to restrictive
legislation. For example, in The Netherlands the Code for Promotional Games of
Chance came into effect on 1 January 2006. Endemol has reviewed the Endemol
Group's business modelsfor ParticipationTVtaking this new code intoaccount, and
various new promotional gameformatsweredeveloped inordertocomplywiththese
stricter rules prior to 1January 2006.
8.7.3
On24 May2007,the European Commission andthe European Parliament reached a
common positionontheAudiovisual MediaServicesDirective (AMSD).TheAMSDwill
replace the Television Without Frontiers Directive and is expected to enter into force
before the end of 2007 (with an implementation period for the EU Member States of
twoyears).OneofthemostimportantsubjectsoftheAMSDfortheEndemol Groupis
product placement. According to the common position reached on 24 May 2007,
product placement will, in principle, be prohibited. However, it shall be permissible,
unless an EUMember Statedecides otherwise, incinematographic works,films and
series made for audiovisual media services, sports programmes and light
entertainment programmes. Programmes containing product placement must be
appropriately identifiedatthestartandendoftheprogramme andwhenaprogramme
resumes after an advertising break in order to avoid any confusion on the part of
the viewer.
8.7.4
The Endemol Group collects data about individuals and istherefore subject to rules
andregulationsconcerningthetreatmentofthisinformation.TheEuropeanUnionhas
adopted the Data Protection Directive (DPD) which imposes restrictions on the
collection, useand processing of personal data,and guarantees rightsto individuals
who are the subject of that personal data. The majority of the Endemol operating
companies can be regarded asdatacontrollersforthe purposes ofthe DPD.Insome
non-EUstates inwhich the Endemol Group operates,regulations havebeen brought
into force, which are similar to those operating within the European Union.
Current Trading, Trends and Prospects
Progress has been made during the first quarter of 2007 on several elements of the Endemol Group's
strategy.
TheEndemol Group hasenjoyedasolidfirstquarter of2007within itscore businesses.DealorNoDeal
is now the top format in terms of turnover. The game show continues to deliver high viewer ratings in
countries like the United States, the United Kingdom and Italy. Big Brother also remains a sound
contributor, having returned to air in countries like Italy, Germany and Argentina. Fuelled by the
worldwide gameshow revival,1 vs. 100entered Endemol Group'sformattopfiveinthefirstquarter and
will this year be produced in approximately twenty countries.
InNorthAmerica,Extreme Makeover: Home Edition continued to be among the most popular shows in
the United States.Also, 1vs. 100,whichfirst startedairing inthefall of2006on NBC retained its strong
ratings in the first quarter. As indicated earlier, the production and syndication of Fear Factor in the
United States ended in 2006.
33
In Scripted, Endemol saw strong growth fuelled by a host of new drama series and telenovelas in its
main Scripted countries, likeThe Netherlands, Italy and Spain. Newseries includeJulia's Tango inThe
Netherlands and Una Madre Detective in Italy. In addition, Guardia Costiera in Italy made a sound
contribution to first quarter performance.
Inlinewith Endemol's continuing searchfor expansion into newterritories,either organically or through
acquisitions, Endemol France was acquired and integrated back into the Endemol Group as of
January 2007. The acquisition brings the total number of territories in which Endemol has an actual
production presence to 25.
In the Digital Media field, the continued success of formats like Deal or No Deal and Big Brother
generated substantial call and SMS revenues. Participation TV revenues improved slightly despite the
recentcontroversy andrelatedpublicitysurroundingTVphoneingames intheUnitedKingdomandThe
Netherlands. In the field of non-TV related content, Endemol continued to explore new initiatives and
develop specific contentfor mobile,onlinevideo and internet concepts. InApril,Endemol announced a
partnershipwith ElectronicArtsonanew project calledVirtualMe,whichwill makesuccessful Endemol
TV formats available in an online virtual reality.
Finally,Endemol sawitsNon-scripted businesscontinueatthesame highlevelasin2006.Digital Media
and Scripted saw further growth. Sound contributions came from countries like the United Kingdom,
Italy and Spain, while Germany and France had a somewhat slower than expected start of the year.
8.9
Directors, Senior Management and Employees
Endemol isapublic companywithlimitedliability incorporated underthelawsofTheNetherlands. Ithas
a two-tier system of corporate governance, consisting of a Supervisory Board and a Management
Board. The day-to-day management of the Company is vested with the Management Board.
8.9.1
Supervisory Board
Authority, composition and functioning
TheSupervisory BoardwasestablishedasofEndemol'sincorporationon28October2005;Mr.Smitand
Mr. BadiaAlmirallwere appointed asa member ofthe Supervisory Boardfrom that date. Mr.Botman is
proposed to beappointed atanextraordinary meeting of shareholders,to be held on 5July 2007.The
Supervisory Board oversees the policies pursued by the Management Board as well as the general
course oftheCompany's business. Italso provides advicetothe Management Board. Inperforming its
duties,the Supervisory Board isrequiredtoact inthe Company's interests and inthose ofthe business
asawhole.MembersoftheSupervisory BoardaregenerallynotauthorisedtorepresenttheCompany in
dealings with third parties.
Members of the Supervisory Board
At the date of this Offer, the table below details information regarding each of the Supervisory
Board members.
Name
Age
Mr. Luis Badfa Almirall
Mr. Gert Smit
Position
Nationality
59 Member Spanish
59 Member Dutch
Mr. BadiaAlmirall was appointed asaSupervisory Board member on 28 October 2005for afour-year
term. In2006 a rotation schedule was put into place andthe term of Mr BadfaAlmirall will expire at the
annual general meeting of Shareholders in 2008. Reference is made to Section 4.10.3 (Future
Composition of the Supervisory Board). Mr. BadfaAlmirall holds a Law degree from the Universitat de
Barcelona. Healso has adiplomafrom the Centre of Fiscal and Financial studies of the Universitat de
Barcelona,adiplomafrom INSEADatFontainebleauandheisaFinancialAnalystfromtheDelegationof
Catalonia.Mr.BadfaAlmirallhashelddifferent Boardmemberships intheManagingSociety ofthe Stock
Exchange Market of Barcelona (since 1990), Metropolis Inmobiliarias y Restauraciones (since 1995),
Tejidos Royo (since 1997), Terra Networks (from 2003 to July 2005) and Leti Laboratories (since
June2005).From 1985until2001hewasPartnerFounder,VicePresidentandExecutiveBoard member
of the Beta Capital Group. From 2001 to June 2006 he was Vice President of Beta Capital
34
Meespierson, S.A. and Beta Capital, SV, S.A. He left the company in September 2006 to found Troy
Consultores Asociados S.L. He is CEO and President of that company.
Mr.SmitwasappointedasaSupervisory Board member on28October 2005forafour-yearterm. Inthe
annual general meeting of Shareholders, that took place on May 24, 2007, Mr. Smit has been
re-appointed as supervisory board member for a period of four years. Reference is made to
Section4.10.3 (Future Composition ofthe Supervisory Board).Priortothisappointment hehas served
as Supervisory Board member of Endemol Holding N.V. from 1996 until early 2006. Mr. Smit holds
degrees in Economics and Accountancy from the University of Amsterdam. He was Chairman of the
Executive Board ofVedior N.V. until 2000. Until2006 hewasaSupervisory Board member of Transavia
Airlinesand Bührmann,aswellaschairman ofthe Supervisory Boardof MartinSchilder Holding,M.S.J.
Beheer, the cooperative Univé Regio+ U.A. and chairman of the Board of Advice of Haider Invest.
Furthermore, Mr.Smit isthesole Executive Board member of Schoutsbosch Beheer B.V.andTrifinance
Holding B.V.
Mr. Botman is proposed to be appointed as Supervisory Board member of Endemol effective on
5July 2007.He iscurrently the managing director of Cyrte Investments, which manages Cyrte FundII,
oneoftheOfferor Shareholders.CyrteInvestmentswasformerly knownasTalpaCapital.Priorto setting
up Cyrte Investments, hewasafounding managing director of HALCapital Management from 1994to
2000.Priortofounding HALCapitalManagement,heworkedasafundmanagerattheIBMpensionfund
fortheDutchequity portfolioandtheEuropeanventurecapitalportfolio.From 1989to1992heworkedin
investment management and research at HSBC. Mr Botman holds a bachelors degree in business
administration. Mr. Botman is a member of the supervisory board of Talpa Media Holding N.V. in The
Netherlands since2005,aboard member ofUDT(Jilin) LtdinChinasince2006andaboard member of
Hammer Film Productions Ltd in the United Kingdom since 2007.
8.9.2
Management Board
Authority, composition and functioning
During the year 2006 the Management Board consisted of four board members. Endemol's general
meeting of Shareholders appointed the Chief Financial Officer (CFO) as of 8 June, 2006and the Chief
Executive Officer (CEO) as of 5 July, 2006. As of 5 March, 2007 Endemol's Chief Operating Officer
resigned and per the date of this Offer he has not yet been replaced. The Management Board is
responsible for Endemol's day-to-day management. The Management Board is required to keep the
Supervisory Board informed, consult with the Supervisory Board on important matters and submit
certain important decisions to the Supervisory Board for its approval, as described in the Endemol
Articles of Association, which are available on Endemol's website.
Members of the Management Board
At the date of this Offer the table below details information regarding each of the members of the
Management Board:
Name
Age
Mr. Elfas Rodrfguez-Viiïa Cancio
Mr. Peter Bazalgette
Mr. Jan Peter Kerstens
Position
47 Chairman and Chief Executive Officer
54 Chief Creative Officer
44 Chief Financial Officer
Nationality
Spanish
English
Dutch
Mr.Rodrfguez-Viiïa Cancio holdsasupervisory board position inLycosEurope N.V.Theother members
of the Management Board do not hold a supervisory or non-executive position ina listed company or
carry on principal activities outside the Endemol Group which are significant with respect to the
Endemol Group.
8.9.3
Employees
The Endemol Group is a creative talent business. The Endemol Group's core business depends on
creating, delivering and exploiting original popular content. The success depends on the Endemol
Group's ability to attract and retain the best talent in all areas of the business. The vision for human
resources is one company, one team, one strategy reflected through every person.
35
In most of its markets the Endemol Group benefits from a high profile, a good reputation and an
attractive, exciting image.The Endemol Group istherefore able to attract high quality talent both inthe
core areas of creativity and production and in Endemol's corporate and commercial areas.
Only core production staff is hired on a permanent basis, whereas the majority of the production staff
thatworkwiththeEndemolGroupisfreelancers.ThisensuresthattheEndemolGrouphiresonly people
with the exact skill set for each project. As per 31 December 2006 the Endemol Group employs
1,485 permanent staff (2005: 1,178), 80%of whom are in the six main geographic markets.
The number of full time equivalents as of 31 December 2006, including both workers on temporary
contracts and workers on contracts for an indefinite term, was 4,316. As of 31 December 2006, the
number ofworkers on contracts for an indefinite term amounted to 1,485,which compares to 1,178 in
2005. The main increases occurred in Argentina and Spain. The number of workers on temporary
contractsamountedto2,831,whichcomparesto2,750in2005.Asof31December 2006,thenumberof
freelancers amounted to 1,165, which compares to 873 in 2005.
8.10
Share capital and dividend
8.10.1 Stock Exchange Listing
On22November2005,all125,000,000outstanding Shareswereofficially listedonEuronext Amsterdam
under the symbol EML. The offer introduction price per Share was EUR 9.00.
2007
2006
180%
aug
eept
oct
nov
dec | jan
fab
mar
apr
may
AEX
Endemol
Between 1January and 31 December 2006, an average of 213,472 Shares were traded per day.
Asof31December2006,thetotalnumberofoutstanding Shareswasunchangedat 125,000,000.Witha
Share price of EUR 17.30 per ordinary share, Endemol's market capitalisation at year-end 2006 was
EUR 2.16 billion.
8.10.2
Dividend and voting rights
Endemol has only one class of shares.All 125,000,000 Shares havea par value of EUR 0.10 and carry
full dividend rights ifandwhen declared andfromthe datethe holder acquires such rights. Each Share
entitles its holder to one vote at Endemol Shareholders' meetings.
8.10.3
Dividend proposal financial year 2006
Within the scope of the reservation and dividend policy of Endemol,the following proposal was made
and approved for the determination and distribution of dividend on the Shares at Endemol's annual
generalmeetingofShareholders heldon24May2007.Itwasdecidedtodetermineacash-dividendover
the financial year 2006 at EUR 56.25 million (equal to a 58.1% pay-out of the net profit attributable to
equity holders of Endemol). This dividend represented EUR 0.45 per Share, a dividend yield of 2.6%
(based on the year-end 2006 closing price). This dividend was paid on May 31, 2007.
36
8.11
Share plan
8.11.1
On 21 November 2005,the general meeting of Shareholders approved the adoption
of a long-term incentive Plan (the "Plan"). The Plan comprised two elements: a
performance shareplanandaperformance optionplan.UnderthePlan,upto6.5%of
Endemol's present total issued share capital could be applied for grants of
performance shares or performance options, of which up to 5.1%of Endemol's
present total issued share capital could be newly issued shares.
A certain group of employees (other than the members of the Management Board)
also participated in the performance share and performance option plan. On
22 November 2005 2,390,024 options were granted, on 28 April, 2006
1,006,602optionsweregrantedandon30April20071,697,769optionsweregranted.
On22November2005 870,317sharesweregranted,on28April2006 290,102shares
were granted and on 30 April 2007304,270 shares were granted (all numbers are
including the options and shares granted to the Management Board).
As aresult ofthe saleand purchase oftheTelefonica Stake in Endemol,achange of
control situation occurred in relation to the Plan. Inaccordance withthe terms of the
Plan, the Supervisory Board cancelled the Plan and the full value will be paid out in
cash to the participants. The performance options and the performance shares
grantedwill bepaidouttotheparticipants againstapriceequaltotheOffer Price.The
table below showsthetotal number of performance options and performance shares
granted to the Management Board and the group of other employees at the date of
cancellation of the Plan.
Year of granting
2005
Exercise price
2006
EUR 9.00
2007
EUR 13.81
EUR 23.12
# options # shares # options # shares # options # shares
E. Rodriguez-Vina Cancio
P.Bazalgette
J.P. Kerstens
82,813
31,250
82,813
31,250
Total Management Board
114,063
114,063
38,020
38,020
115,208
127,604
590,628
870,874
196,874 1,599,561
189,062
Other Employees
8.11.2
1,876,675
27,604
10,416
27,604
10,416
60,000
60,000
27,604
27,604
27,604
40,000
Telefonica share option plans
Employees within the Endemol Group participated in the Telefonica share option
plans ("EN-SOP"). Pursuant to the EN-SOP variable numbers of options on
Telefonica shares were granted to the beneficiaries, effective as per 1January2001,
2002, 2003 and 2004. The duration of the options was either three or four years
followingthe respective grant date.TheTelefonicastock options granted inthe years
2001,2002and2003areallfullysettledandpaidout.Accordingtothe EN-SOPrules,
thebeneficiaries mayexercise 100%ofthestock optionsafterfouryears,ordecideto
exercise 50% after three years and the other 50% after four years. Currently
outstanding are the remainder of the stock options granted in the year 2004,to the
extent notyetexercised inJanuary2007.Telefonica hascommitted itselfto reimburse
Endemol for the costs of the share options granted, by means of a share premium
contribution. Therefore the EN-SOP does not negatively impact Endemol's "equity
attributabletoshareholders",the number ofsharesoutstanding orthecashflow.This
has no cash flow effect for the Offeror nor for the Company as the settlement, like
previous years, has been fully compensated by Telefonica. As a result of the
Telefonica Share Purchase Agreement it was decided that there will be an early
exerciseofthe lasttranche oftheEN-SOPaftertheTelefonicaClosing Date.Theprice
forthe options granted isdetermined atfair marketvalue and representsthe average
of the share price of Telefonica from 18 June 2007 up and until 22 June 2007.
37
8.12
Main Shareholders
Undertheapplicablelaw,ShareholdershavetogivenoticetotheAFMoftheirholdingsinEndemolwhen
theseexceedcertainthresholds.Asof31December 2006,EndemolInvestment B.V, 99.7%indirectly
ownedbyTelefonica,wastheonlyholderofmorethan5%oftheShares.EndemolInvestmentB.V. holds
75%oftheShares.On3January2007,CyrteInvestmentsgavenoticetotheAFM ofitsholdingof5.15%
oftheShares.
On 14 May 2007Telefonica announced that it had agreed to sell the Telefonica Staketo the Offeror
pursuanttotheTelefonicaSharePurchaseAgreement.OntheTelefonicaClosing Date,theTelefonica
Stakeandthe Cyrte Stakeweretransferred to the Offeror.
On3July2007,CyrteInvestmentsgavenoticetotheAFM ofitstransfertotheOfferoroftheCyrteStake.
On3July2007,TelefonicagavenoticetotheAFM ofitstransfertotheOfferoroftheTelefonicaStake. On
3 July 2007, Edam Acquisition Holding I Coöperatief U.A. gave notice to the AFM of its holding of
approximately 81% of theShares.
38
9.
Information on the Offeror
9.1
Introduction
The Offeror hasbeen incorporated to complete the purchase ofthe Shares.Themanagement board of
the Offeror consists of Mr.S.R. Sher, Mr.M.A.E.A.Giordani,Mr. M. Musolino and Mr.RM.Schmitz.The
Offeror does not have a supervisory board.
TheOfferor representsapartnershipofCyrteFundII,GoldmanSachsCapitalPartners,and Mediacinco.
9.2
Acquisitions and Disposals
9.2.1
Acquisition of the Telefonica Stake in Endemol
On 14 May 2007, Telefonica signed the Telefonica Share Purchase Agreement to sell the Telefonica
Staketothe Offeror. TheTelefonica Stake isthe mainassetof Endemol Investment Holding.During the
auction process for Endemol Investment Holding conducted by Telefonica, bidders were required to
specifically price the Telefonica Stake.The price paidtoTelefonicafor itsstake in Endemol Investment
Holding isequaltothe Purchase Priceadjustedforthe cash,debt, receivables and payables related to
Endemol Investment HoldinganditssubsidiariesexcludingtheEndemolGroup,andistheoutcomeofa
competitive auction and negotiations with Telefonica.
The Telefonica Closing occurred on Telefonica Closing Date.
On 14 May 2007, Endemol announced that it had been informed by Telefonica that pursuant to the
TelefonicaShare PurchaseAgreementtheOfferor hasundertakentomaketheOfferforatleasttheOffer
Price atthefirst possible moment aftertheTelefonica Closing Date.Sincethen anagreement has been
reached between the Offeror and Endemol with respect to the Offer and the main terms of this
agreement are reflected in this Offer Memorandum.
By virtue of the Telefonica Share Purchase Agreement, the Offeror has undertaken to make an
unconditional public tender offer tothe minority Shareholders of Endemolfor aprice per Share at least
equaltothePurchase Price,notearlierthantheTelefonicaClosing Dateandnot laterthantheendofthe
period of three months commencing on the Telefonica Closing Date.
9.2.2
Acquisition of the Cyrte Stake in Endemol
Cyrte Fund Ihas sold and transferred to the Offeror the Cyrte Stake at a price per Share equal to the
Purchase Price. The completion of such sale occurred on the Telefonica Closing Date.
9.3
Shareholders
Asofthe date ofthis Offer,the Offeror has 18,000ordinary shares issued,eachataparvalue of EUR1.
The Offeror Shareholders are as follows:
Indirect Shareholder
Cyrte Fund II
GS Capital Partners
Mediacinco
9.3.1
Number of Edam
Acquisition shares
Percentage of issued
share capital
6,000
6,000
6,000
33.33%
33.33%
33.33%
Cyrte Fund II
CyrteFundIIisaninvestmentfundmanagedbyCyrteInvestments.TheinvestorsinCyrteFundIIinclude
CyrteFundI,TalpaBeheerB.V.andAAMerchant BankingB.V, awhollyownedsubsidiaryofABNAMRO
Bank N.V.
Cyrte Investments isaprivately held investment company, mainlyfocussing ontheTelecom,Mediaand
Technology sectors.Cyrte Investments, based in Naarden,The Netherlands, began in2000,under the
nameTalpaCapital,asamanagement companyfortheprivatecapitalofJohndeMol.Thecompany has
since developed from pure capital management into an investment company with expertise ina large
number of sectors, including the TMT sector. The philosophy of the company is to use proprietary
researchintospecificthemesrelatedtowavesofinnovationwhichleadtothere-allocationof disposable
income. Cyrte Investments' funds are managed by a dedicated team of investment professionals that
39
uses itsthorough understanding offinancial dynamics incompanies and capital markets as a basis to
elaborate on the unique Cyrte Investments philosophy.
The current shareholders of Cyrte Investments are Talpa Capital Holding B.V. and NIBC Asset
Management N.V.As announced ina press release dated 19June 2007, Delta Lloyd Group and Talpa
CapitalHolding B.V. havereachedagreement inprinciple onthesaleoftheshares inCyrte Investments
to Delta Lloyd Group.
9.3.2
Goldman Sachs Capital Partners
Goldman Sachs Capital Partners is the private equity vehicle through which The Goldman Sachs
Group, Inc. conducts its privately negotiated corporate equity investment activities. Since 1986, the
Principal Investment Area of Goldman Sachs, which manages Goldman Sachs Capital Partners has
raisedcorporate investmentvehiclesaggregating overUSD56billionofcapital.GoldmanSachs Capital
Partners is currently investing its USD 20 billion Goldman Sachs Capital Partners VI fund. Goldman
Sachs Capital Partners is a global private equity group with afocus on large, sophisticated business
opportunities in which value can be created through leveraging the resources of Goldman Sachs.
Goldman SachsCapitalPartners' philosophy isbasedonpartnershipand long-termvaluecreation,and
it seeks to provide access to the full capabilities of Goldman Sachs.
Goldman Sachs Capital Partners has a strong track record in the global TMT industry and an
experienced team of investment professionals. Recent investments include Sportfive (Europe's largest
sports rights intermediary), PagesJaunes (France's leading publisher of printed and online directories
andamongthe50largestcompaniesontheEuronextParisbymarketcapitalisation), Eutelsat (Europe's
leading satellite operator and atop 3 global provider of Fixed Satellite Services), Cablecom and Kabel
Deutschland (the leading cable companies in Switzerland and Germany respectively), Grupo Clarin
(agroup of market leading mediaassets inArgentina) andYankees Entertainment and Sports Network
(a United States sports broadcasting company). Most recently, Goldman Sachs Capital Partners
announced an impending investment in Alliance Atlantis, a leading Canadian broadcasting and
entertainment company.
9.3.3
Mediacinco
Mediacinco was recently created by Mediaset and Telecinco
(a)
Mediaset
Mediaset istheleadingcommercialtelevisionoperator inItalyandoneofthe Europe's
largest mediacompanies. Mediaset Group operates inthefollowing areas: analogue
free-to-air generalisttelevision,free digitalterrestrial thematic channels, pay-per-view
digital terrestrial, multimedia and other activities. The Group's principal activities are
the production of TV programmes and the acquisition and sale of television
broadcasting rights. The company was listed on the Italian stock exchange in 1996
and currently has a market capitalisation of approximately EUR 9.2 billion as of
12June 2007.
(b)
Telecinco
Telecinco is a Spanish television group. It acquires, produces and distributes
audiovisualcontent,itbeganbroadcasting in1990.Mediaset isthe major shareholder
with a share of 50.1%. Telecinco has played an absolutely determining role in the
development of Spanish commercial television, becoming—from 1996—the
benchmark in terms of scheduling, innovation and profitability. Today, it is Europe's
most profitable television company. The company was listed on the Madrid stock
exchange (Bolsa de Madrid) in 2004 and currently has a market capitalisation of
approximately EUR 5.2 billion as of 12 June 2007.
40
10.
Shareholders' meeting
TheShareholders' Meetingwill beconvenedto beheldatthe Mövenpick HotelAmsterdam CityCentre,
Piet Heinkade 11,Amsterdam, The Netherlands at 13:00 hours CEST on 23 July 2007. During the
Shareholders' Meeting, among other agenda items (as set out below), the Offer and the measures to
implement it will be explained and discussed in compliance with the provisions of Article 9q of the
Bte1995.TheinformationnecessaryfortheShareholderstoadequatelyassesstheOffer,asrequiredby
article 9q of the Bte 1995, is included inthis Offer Memorandum. Notice of the Shareholders' Meeting
has been given in accordance with the Endemol Articles of Association.
The agenda for the Meeting is as follows:
1.
Opening.
2.
Explanation ofthe recommended and unconditional allcashoffer by EdamAcquisitionforallthe
issued and outstanding shares of Endemol.
3.
Proposal todischarge Mr.Smitand Mr.BadfaAlmirallas members ofthe Supervisory Board and
to releasethemfrom liability inrespect oftheir performance oftheirsupervision dutiesduring the
financial year 2007.
4.
Closing.
41
11.
Further declarations pursuant to the Dutch Public Offer Rules
Inadditiontotheotherstatementssetout inthisOffer Memorandum,theOfferorwithregardto subjects
(ii) and (iii) and the Offeror and the Management Boardjointly with regard to subjects (i), (iv) and (v),
hereby declare as follows:
(i)
Therehavebeenconsultations betweentheOfferorandtheEndemolBoardsandtheir
respective representatives regarding the Offer, which have resulted in agreement
regarding the Offer between the Offeror and Endemol.
(ii)
With due observance of and without prejudice to the restrictions referred to in
Section 1(Restrictions and Important Information),theOffer concerns all outstanding
Shares.
(iii)
No transactions have taken place or will take place on the basis of concluded
agreements with individuals and/or legal persons within the meaning of article 9i
paragraph sand/ortand/or uofthe Bte 1995,other thanwith respect to members of
the Endemol Boards (see Sections 4.7 (Shareholdings of the members of the
Endemol Boards) and the Telefonica Share Purchase Agreement to acquire the
Telefonica Stake (see Section 9.2.1) and the agreement to acquire the Cyrte Stake
(see Section 9.2.2)).
(iv)
The information referred to inarticle 9p paragraph 1and 2 of the Bte 1995 has been
provided to the AFM.
(v)
The AFM and Euronext Amsterdam have been informed of the Offer.
42
12.
Tax aspects
12.1
General
Thefollowing isasummary of certain Dutchtax consequences relatingto the ownership ofthe Shares
andthe disposal ofthe Shares underthe Offer.Thesummary does notaddress any lawsotherthanthe
taxlawsofTheNetherlandsascurrently ineffectandinforceandasinterpreted inpublishedcaselawby
the courts of The Netherlands at the date hereof, and is subject to change after such date, including
changesthatcould haveretroactiveeffect.Thesummary doesnot purporttobecompleteandinviewof
the general nature ofthis summary, itshould betreatedwithcorresponding caution.Each Shareholder
shouldconsult hisorherprofessionaltaxadvisorwithrespecttothetaxconsequences ofthe ownership
of the Shares and the disposal of the Shares under the Offer.
For the purpose of the principal Dutch tax consequences described below, it is assumed that no
Shareholder hasasubstantial interestoradeemedsubstantial interestinEndemol.Generallyspeaking,
a holder hasasubstantial interest in Endemol if heor aqualifying connected person,aloneor together
withhispartner, hasdirectly orindirectly,theownershipof,orcertainrightsover,Sharesrepresenting5%
ormoreofthetotalissuedandoutstandingcapital(ortheissuedandoutstandingcapitalofanyclassof
Shares) ofEndemol,rightstoacquiresuchinterestinthesharecapital (whetherornotalready issued) of
Endemol,ortheownership ofprofit participating certificates (winstbewijzen) that relateto5%ormoreof
the annual profit or liquidation proceeds of Endemol.
12.2
Withholding Tax
Dividends distributed by Endemol in respect of the Shares are generally subject to a withholding tax
imposed by The Netherlands at a rate of 15%.The expression "dividends distributed by Endemol" as
used herein includes, but is not limited to:
(i)
distributions in cash or in kind, deemed and constructive distributions and
repayments of paid-in capital (gestort kapitaal) not recognized for Dutch dividend
withholding tax purposes;
(ii)
liquidationproceeds,proceedsofredemptionofSharesor,asarule,considerationfor
the repurchase of Shares by Endemol in excess of the average paid-in capital
recognized for Dutch dividend withholding tax purposes;
(iii)
the parvalueofShares issuedtoaholder ofSharesoranincrease ofthe parvalueof
Shares, asthe case may be,tothe extentthat itdoes not appear that acontribution,
recognized for Dutch dividend withholding tax purposes, has been made or will be
made; and
(iv)
partial repayment of paid-in capital, recognized for Dutch dividend withholding tax
purposes, if and to the extent that there are net profits (zuivere winst), unless (a) the
general meeting of shareholders of Endemol has resolved inadvance to make such
repayment and (b) the par value of the Shares concerned has been reduced by an
equal amount by way of an amendment of the articles of association of Endemol.
Aholder ofSharesthat isresident ordeemedto beresident inThe Netherlands, or ifheisanindividual,
who haselectedto betaxedasresident inTheNetherlandsfor Dutch incometax purposes, isgenerally
entitled, subject to the anti-dividend stripping rules described below, to a full credit against its
(corporate) income tax liability, or a full refund, of the Dutch dividend withholding tax.
A holder of Shares that is resident in a country other than The Netherlands and if a double taxation
convention isineffect betweenTheNetherlandsandsuchcountry,may,depending onthetermsofsuch
double taxation convention and subject totheanti-dividend stripping rulesdescribed below, be eligible
for afull or partial exemption from,or refund of, Dutch dividend withholding tax on dividends received.
According to the anti-dividend stripping rules, no exemption, reduction, credit or refund of Dutch
dividend withholding tax will be granted if the recipient of the dividend paid by Endemol is not
considered the beneficial owner (uiteindelijk gerechtigde) of the dividend as defined inthese rules. A
recipient of a dividend is not considered the beneficial owner of the dividend if such recipient:
(a)
paidconsideration (incashorinkind) inconnectionwiththedividenddistribution;and
43
(b)
suchpaymentforms partofasequenceoftransactions,whereby itislikelythat(i)and
individual or legal entity benefited in whole or in part from the dividend, and such
individual or legal entity is entitled to a lessfavourable exemption, refund or credit of
dividend withholding tax than the recipient of the dividend distribution; and (ii) this
individual or legal entity directly or indirectly retains or acquires a position in Shares
that iscomparablewithitsposition intheSharesthatithadbeforethesequenceofthe
transactions commenced.
Theterm "sequence oftransactions" includes transactions that have been entered into on a regulated
stock marketandtransactionswithrespecttothesoleacquisitionofoneormoredividendrightsorofthe
establishment of short-term rights of enjoyment on the Shares (e.g. usufruct).
12.3
Dutch Taxes on Income and Capital Gains
Dutch resident corporate entities
A holder of Shares that is resident or deemed to be resident in The Netherlands for Dutch corporate
income tax purposes, and that is:
(i)
a corporation;
(ii)
another entity with a capital divided into shares;
(iii)
a cooperative (association); or
(iv)
another legal entity that hasan enterprise or an interest inan enterprise to which the
Shares are attributable,
but which is not:
(v)
a qualifying pension fund;
(vi)
(vii)
a qualifying investment fund (fiscale beleggingsinstelling); or
another entity exempt from Dutch corporate income tax,will ingeneral be subject to
regular Dutch corporate income tax, generally levied at a rate of 25.5% (20% over
profits up to EUR 25,000 and 23.5% over profits between EUR 25,000 and
EUR 60,000) over income derived from the Shares and gains realised upon
redemption and,transfer of the Shares under the Offer, unless such holder benefits
from the participation exemption in respect of his interest in the Shares.
Dutch resident individuals
An individual holding Shares who is resident of The Netherlands, deemed to be resident of The
Netherlands, or who has elected to be treated as resident of The Netherlands for Dutch income tax
purposes isnotsubjecttoDutchincometaxinrespect ofany incomederivedfromtheSharesor capital
gains realised on the transfer of the Shares under the Offer, unless:
(i)
the Shareholder has an enterprise or an interest in an enterprise, to which the
Shares are attributable and/or;
(ii)
the income or gain qualifies as a "benefit from miscellaneous activities" (belastbaar
resultaat uit overige werkzaamheden) which, for instance, would be the case if the
activities with respect to the Shares exceed normal active portfolio management
(normaalactief vermogensbeheer).
If condition (i) or (ii) is met, the Shareholder will be subject to Dutch income tax with respect to any
income orcapitalgainsinrespect ofdividendsdistributed by Endemolorinrespect ofanygain realised
on the transfer of the Shares under the Offer at the progressive rates of the Income Tax Act 2001
(Wet inkomstenbelasting 2001).
Non-resident legal and other entities
AholderofShares,thatisalegalentity,anotherentitywithacapitaldividedintoshares,anassociation,a
foundation or a fund or trust, not resident or deemed to be resident in The Netherlands, will not be
subjecttoany Dutchtaxesonincome orcapitalgains inrespectofdividends distributed by Endemolor
in respect ofany gain realized onthetransfer ofthe Shares under the Offer (other thanthe withholding
44
taxdescribedunder 12.2above),unlesstheSharesareattributabletoanenterpriseorpartthereofthatis
either effectively managed in The Netherlands or carried on through a permanent establishment or a
permanent representative in The Netherlands, unless such holder benefits from the participation
exemption in respect of his interest in the Shares.
If the above-mentioned condition applies, income derived from the Shares and gains realized on the
Shares will, in general, be subject to regular Dutch corporate income tax, generally levied at a rate of
25.5%(20%overprofitsuptoEUR25,000and23.5%overprofitsbetweenEUR25,000andEUR60,000).
Non-resident individuals
An individual holding Shares who is not, is not deemed to be, and has not elected to be treated as,
resident of The Netherlands for Dutch income tax purposes will not be subject to Dutch income tax in
respectofanyincomeorcapitalgainsinrespectofdividendsdistributedbyEndemolorinrespectofany
gain realised onthetransfer of Shares under the Offer (other thanthewithholding tax described under
12.2 above) unless:
12.4
(a)
the Shares are attributable to an enterprise or part thereof that is either effectively
managed inThe Netherlands or carried on through a permanent establishment or a
permanent representative in The Netherlands; and/or
(b)
the dividend or gainqualifies asa "benefit from miscellaneous activities" (belastbaar
resultaat uitoverige werkzaamheden) inThe Netherlands which would,for instance,
be the case if the activities in The Netherlands with respect to the Shares exceed
"normal active portfolio management" (normaalactief vermogensbeheer).
Other taxes and duties
ThereisnoDutchregistrationtax,transfertax,stampdutyoranyothersimilartaxorduty,payable inThe
Netherlands in respect of or in connection with the execution, delivery and enforcement by legal
proceedings (including any foreign judgement in the courts of The Netherlands) of any agreement
relating to the Shares.
45
13.
Press releases
13.1
Press release date 18 June 2007
18June 2007
Not for release, publication or distribution, in whole or in part, in or into the United States, Canada,
Australia or Japan.
This isajoint press release of Endemol N.V. and EdamAcquisition B.V.This announcement isa public
announcement as referred to inArticle 9b par. 2(a) ofthe Dutch Securities Market Supervision Decree
(Besluittoezicht effectenverkeer 1995).This announcement and related materials do not constitute an
offer for any shares in Endemol N.V.
ENDEMOL AND EDAM ACQUISITION ANNOUNCE A RECOMMENDED UNCONDITIONAL ALL CASH
PUBLIC OFFER FOR ENDEMOL AT EUR 24.55 PER SHARE
Endemol N.V, a global leader in television and other audiovisual entertainment, and Edam
Acquisition B.V. ("Edam Acquisition" orthe "Offeror"), a holding company newly incorporated inthe
Netherlands, jointly announce that they have agreed to a recommended unconditional all cash public
offerfor Endemol N.V. ("Endemol" orthe "Company"), atEUR24.55 pershare (the"Offer Price"),the
same price as the Offeror will pay for the Telefonica Stake (as defined below). This price equals
EUR25.00 pershare lessthefinaldividendforthefinancialyear 2006ofEUR0.45 pershare,which was
paid on 31 May 2007 and values the Company, on a 100% basis, at EUR 3.1 billion.
The commencement of the Offer (as defined below) is subject only to the closing of the Telefonica
Transaction (as defined below) (the "Pre-Offer Condition"). The commencement of the Offer will be
early July 2007 at the earliest.
EdamAcquisition isjointly and equally owned by: (i) Mediacinco Cartera SL ("Mediacinco"), a newly
incorporated entity owned by Mediaset S.p.A ("Mediaset") and its quoted subsidiary Gestevision
Telecinco, S.A. ("Telecinco"); (ii) Cyrte Fund II B.V. ("Cyrte Fund II"); and (iii) funds affiliated to The
GoldmanSachsGroup,Inc.(beingGSCapitalPartnersVIFund,L.R,GSCapitalPartnersVIParallel,L.R,
GSCapitalPartnersVIGmbH&Co.KG, andGSCapitalPartnersVIOffshore Fund,L.R,collectively, "GS
Capital Partners") (each an "Investor" and together the "Consortium").
The agreement follows the announcements on 14 May 2007 that the Offeror had entered into an
agreement with Telefonica S.A. ("Telefonica") for the sale of its 99.7%interest in Endemol Investment
Holding B.V. ("Endemol Investment Holding") totheOfferor (the"TelefonicaTransaction"). Endemol
Investment Holding is a holding company that indirectly owns 93,750,000 shares in the Company,
representing 75%ofthesharesinEndemol (the"Telefonica Stake").TheTelefonicaTransaction valued
theshares inEndemol at EUR25.00 pershare includingthefinal dividend forthefinancial year 2006of
EUR 0.45 per share (the "Purchase Price").
As part of the agreement, the Consortium committed to launch, subject to closing of the Telefonica
Transaction, an unconditional public offer for the remaining 25%ofthe shares in Endemol at a price at
least equaltothe Purchase Price (adjustedfor any dividend paid by Endemol on orafter 14May 2007)
(the "Offer"), as soon as practicable after closing of the Telefonica Transaction (the "Telefonica
Closing Date").
Separately, the Offeror agreed to acquire, as per the Telefonica Closing Date, 7,505,760 shares in the
Company from Cyrte Fund I C.V. at the Offer Price, representing approximately 6% of the shares in
Endemol (the "Cyrte Stake").
TheexpectationthatEndemolwouldreachanagreementwiththeOfferorontheintended publicofferfor
all the Company's shares was realised after a meeting of Endemol's Supervisory Board and
Management Board (the "Boards") on 18June 2007.
Endemol will remain strategically and operationally independent.
After having duly considered the Offer,the Boards each consider the Offer to be inthe best interests of
theCompany andhavedecidedthatthey unanimously supporttheOffer.TheBoardseach unanimously
recommend to the shareholders in Endemol ("Shareholders") to accept the Offer. Mr. Santiago
Fernandez Valbuena, a member of Endemol's Supervisory Board, has not taken part in the
46
decision-making processreferredtointhisparagraphasheisalsothechieffinancialofficerofTelefonica
and accordingly a related party within the context of the Offer.
Mr. Elfas Rodrfguez-Vina, the Company's Chief Executive Officer said: "The Offer Price represents a
compelling value to Shareholders by extending to all Shareholders the same control premium as has
beenagreed withTelefonica.The Offer gives Shareholders the opportunity totag-along with Telefonica
and to have the full benefit of the competitive auction process conducted by Telefonica."
1.
Offer Highlights
The Offer will be an unconditional all-cash offer for all of the issued shares of the Company
(the"Shares").TheOfferPriceofEUR24.55 perShare (whichequalsEUR25.00perSharelessthefinal
dividend for thefinancial year 2006 of EUR 0.45 per Share which was paid on 31 May 2007) implies a
total equity value of EUR 3.1 billion for 100%of the Shares.
Further to an auction process conducted by Telefonica, the Offeror agreed to purchase Telefonica's
99.7% interest in Endemol Investment Holding on 14 May 2007.TheTelefonicaTransaction valued the
Telefonica Stake atthe Purchase Price. In its press release of 14May2007,Telefonica announced that
the sales process has been marked by "fiercely competitive bidding" and that Telefonica had used
objective selection criteria based on economic and financial factors to select the ultimate buyer.
Closing of the Telefonica Transaction is conditional upon clearance from competition authorities in
Austria and Germany. Upon the Telefonica Closing Date,the Offeror will own the Telefonica Stake and
the Cyrte Stake, representing approximately 81% of the Shares.
2.
Rationale for the Recommendation
The Boards' rationale for recommending the Offer to Shareholders for acceptance is:
• Control premium: the Offer Price is equal to the Purchase Price. The Offer gives the
Company's minority Shareholders the opportunity to tag-along with Telefonica, to selltheir
Sharesatapriceincludinga"controlpremium"andtohavethefullbenefitofthe competitive
auction process conducted by Telefonica;
• Unconditionalallcashoffer:theOffer,incomparisontoashare-for-share exchange,provides
Shareholders theopportunity to realise immediatevalue incashfortheir Shares, eliminating
significant price risk related to future investment, execution uncertainty and any liquidity
discount upon sale;
• Compellingvaluation:theOffer Pricerepresentsapremiumof75.3%ofthevolume weighted
average price calculated overthe period since the Company's IPOand upto and including
8 March 2007 or a premium of 172.8% to the Endemol IPO introduction price on
22 November 2005;
• Ongoing support of Endemol: the Investors support Endemol's strategy and comprise
investors who have extensive experience in the television industry and who can provide
significant support, expertise and capital in partnership with Endemol to support strategic
initiatives for the benefit of its employees, customers and other stakeholders;
• Fairness Opinion: N M Rothschild & Sons Limited has provided a fairness opinion to the
Boards astothefairnessfrom afinancial point ofview oftheOfferforthe Shareholders.The
terms of the fairness opinion are satisfactory to the Boards.
The Offer represents:
• attractive valuation metrics compared to the recent trading of peer company stocks and to
the recent trading of Endemol;
• a multiple of 24.1 times estimated earnings per share ("EPS") for 2007 based on
consensus broker estimates as recorded in Institutional Brokers Estimate System
as on 12 June 2007;
• on the basis of the implied enterprise value, a multiple of 14.4 times estimated
earnings before interest,taxes,depreciation and amortisation ("EBITDA") for 2007
basedonconsensus broker estimatesasrecorded inInstitutional Brokers Estimate
System as on 12June 2007;
47
• a premium of 12.6% to the closing Share price of Endemol on 8 March 2007, the last
business day priortotheannouncement on9March2007thatTelefonicawas considering a
possible total or partial divestiture of its stake in Endemol;
• a premium of 39.9%and 55.5%respectively over thevolume weighted average price of the
Shares of EUR 17.55 and EUR 15.79 during the sixand twelve months up to and including
8 March 2007, the last business day prior to the announcement on 9 March 2007 that
Telefonicawas considering apossible total orpartial divestiture oftheTelefonica Stake;and
• a premium of 172.8% to the Endemol IPO introduction price of EUR 9.00 on
22 November 2005.
The Investors have extensive experience inthetelevision industry and can provide significant support,
expertise and capital in partnership with Endemol to support strategic initiatives for the benefit of its
employees, customers and other stakeholders. The Offeror's strong intention isthat the Company will
remain strategically and operationally independent.
The Offeror does not anticipate that the Offer as such will have any negative consequences for the
employment situation at the Company or the Group.
3.
Governance and organisation
Mr. Santiago Fernandez Valbuena will resign from Endemol's Supervisory Board with effect from the
TelefonicaClosing Date.ItisproposedthathewillbereplacedasamemberoftheSupervisory Boardby
Mr. Frank Botman,whose appointment is on the agenda of an extraordinary meeting of Shareholders
called shortly after the date of this announcement and scheduled for early July 2007.
Mr. Gert Smit and Mr. Luis Badfa Almirall will resign from the Company's Supervisory Board upon
settlementoftheOffer.NewmembersoftheSupervisory BoardwillbenominatedbytheOfferor, ineach
case including, for as long as the Dutch corporate governance code applies to the Company,
"independent" members within the meaning of that code.
4.
Process and Indicative Timetable
As soon as reasonably practicable after the satisfaction of the Pre-Offer Condition, the Offer will be
formally announced and the Offer documentation will be available to Shareholders.
It is expected that the Offer will commence in early to mid-July and the Company expects to hold a
Shareholders' meeting to discuss the Offer sometime in mid-to late July 2007. It is expected that the
tender period will be completed in early to mid-August with acceptance and settlement of all tenders.
This indicative timetable is included for illustrative purposes only and may be subject to change.
5.
Advisors
Financial advisory services have been provided to the Offeror by Goldman Sachs International and by
Mediobanca - Banca di Credito Finanziario S.p.A.
Afairness opinion has been provided to the Boards by NM Rothschild & Sons Limited.
ABNAMRO Bank N.V; Barclays Capital;Credit Suisse, London Branch; Goldman Sachs International;
Lehman Brothers International (Europe); and Merrill Lynch International will be arranging the financing
for the Offer.
ABN AMRO Bank N.V. acts as exchange agent in connection with the Offer.
Clifford Chance LLP acted as legal advisors to the Offeror and the Consortium. De Brauw Blackstone
Westbroek N.V. acted as legal advisor to Endemol.
This announcement is a public announcement as referred to in Article 9b, par. 2(a) of the Dutch
Securities Market Supervision Decree (Besluit toezicht effectenverkeer 1995).
6.
Forward-looking Statements
Thisdocument containsforward-looking statements.Thesestatementsmaybeidentifiedbywords such
as 'expect', 'should', 'could', 'shall' and similar expressions. These statements are subject to risks and
uncertainties, and actual results and events could differ materially from what is presently expected.
48
Factors leading thereto may include without limitations general economic conditions, conditions inthe
markets Endemol is engaged in, behaviour of customers, suppliers and competitors, technological
developments, as well as legal and regulatory rules affecting Endemol's business.
7.
Press Contacts
Endemol Press Contacts
Endemol Corporate Communications
Peter Krenn
tel: +31 (0)35 5 39 94 37
e-mail: [email protected]
Endemol Investor Relations
Frank Jansen (a.i.)
tel. +31 (0)35 53994 16
Consortium Press Contacts
Alejandro Del Real Puyuelo
tel: +34 91396 67 87
e-mail1: [email protected]
e-mail2: [email protected]
About Endemol
Endemol (Euronext; EML) is a global leader in television and other audiovisual entertainment. The
Company creates premium entertainment ideas and sells them to the world's leading broadcasters.
Endemol then produces these shows to the highest standards, creating hits with strong brand value.
Subsequently, the company exploits the value of its brands across other media and communications
platforms, including, for example, mobile phones and the Internet.
Endemol,with its head office inHilversum,the Netherlands, now has subsidiaries andjoint ventures in
25countries, includingthe UK,the US,Spain,Italy,France,Germany andthe Netherlands,aswellasin
LatinAmerica, India, South Africa and Australia. Endemol is a publicly traded company on Eurolist by
Euronext Amsterdam. For more information, please visit www.endemol.com.
About the Consortium
(i)
Cyrte Fund II
Cyrte Fund II isan investment fund managed by Cyrte Investments. The investors in
CyrteFundIIincludeCyrteFundI,TalpaBeheer B.V.andAAMerchant Banking B.V, a
wholly owned subsidiary of ABN AMRO Bank N.V.
Cyrte Investments is a privately held investment company, mainly focussing on the
Telecom, Media and Technology sectors. Cyrte Investments, based in Naarden, The
Netherlands, began in 2000, under the name Talpa Capital, as a management
company for the private capital of John de Mol.The company has since developed
from pure capital management into an investment company with expertise ina large
number ofsectors,includingtheTMTsector.Thephilosophy ofthecompany isto use
proprietary research intospecificthemes relatedtowavesof innovationwhich leadto
the re-allocation of disposable income. Cyrte Investments' funds are managed by a
dedicated team of investment professionals that uses its thorough understanding of
financial dynamics in companies and capital markets as a basis to elaborate on the
unique Cyrte Investments philosophy.
(ii)
Goldman Sachs Capital Partners
Goldman Sachs Capital Partners is the private equity vehicle through which The
Goldman Sachs Group, Inc. conducts its privately negotiated corporate equity
investment activities. Since 1986, the Principal Investment Area of Goldman Sachs,
which manages Goldman Sachs Capital Partners has raised corporate investment
vehicles aggregating over USD56 billion of capital.Goldman Sachs Capital Partners
is currently investing its USD 20 billion Goldman Sachs Capital Partners VI fund.
GoldmanSachsCapitalPartnersisaglobalprivateequity groupwithafocusonlarge,
sophisticated business opportunities in which value can be created through
49
leveraging the resources of Goldman Sachs. Goldman Sachs Capital Partners'
philosophy is based on partnership and long-term value creation, and it seeks to
provide access to the full capabilities of Goldman Sachs.
Goldman SachsCapital Partners hasastrongtrack record intheglobalTMT industry
and an experienced team of investment professionals. Recent investments include
Sportfive (Europe's largest sports rights intermediary), Pages Jaunes (France's
leading publisher of printed and online directories and among the 50 largest
companies ontheEuronextParisbymarketcapitalisation),Eutelsat (Europe's leading
satellite operator and atop 3 global provider of Fixed Satellite Services), Cablecom
and Kabel Deutschland (the leading cable companies in Switzerland and Germany
respectively),GrupoClarin (agroupofmarketleading mediaassetsinArgentina) and
Yankees Entertainment and Sports Network (a US sports broadcasting company).
Most recently,Goldman SachsCapital Partnersannounced animpending investment
in Alliance Atlantis, a leading Canadian broadcasting and entertainment company.
(iii)
Mediacinco
Mediacinco was recently created by Mediaset and Telecinco
(a)
Mediaset
Mediaset istheleadingcommercialtelevision operator inItalyandone ofthe
Europe's largest media companies. Mediaset Group operates in the
following areas: analogue free-to-air generalist television, free digital
terrestrial thematic channels, pay-per-view digitalterrestrial,multimedia and
other activities. The Group's principal activities are the production of TV
programmes andthe acquisition and sale oftelevision broadcasting rights.
Thecompany was listed onthe Italianstock exchange in 1996and currently
has a market capitalisation of approximately EUR 9.5 billion.
(b)
Telecinco
Telecinco isaSpanishtelevisiongroup.Itacquires,producesand distributes
audiovisual content, it began broadcasting in 1990. Mediaset is the major
shareholder with a share of 50.1%. Telecinco has played an absolutely
determining role in the development of Spanish commercial television,
becoming—from 1996—the benchmark in terms of scheduling, innovation
andprofitability.Today,itisEurope'smostprofitabletelevisioncompany.The
company was listed on the Spanish stock exchange in 2004 and currently
has a market capitalisation of approximately EUR 5.4 billion.
13.2
Press release dated 14 May 2007
14 May 2007, Hilversum
TELEFONICA SELLS STAKE IN ENDEMOL
Endemol N.V. a global leader in television and other audiovisual entertainment, has been informed by
Telefonica, S.A. that it has entered into an agreement for the sale of its 99.7% stake in Endemol
Investment Holding BV ("Endemol Holding") to a newly incorporated vehicle. Endemol Holding is a
holding company that indirectly owns 75% of Endemol N.V.
The newly incorporated vehicle is jointly and equally owned by (i) Mediacinco Cartera SL, a newly
incorporated entity owned by Mediaset SpA and its quoted subsidiary Gestevision Telecinco, S.A.,
(ii) Cyrte Fund II B.V. and (iii) GS Capital Partners VI Fund, LP (together the "Consortium").
The total consideration for the sale of Endemol Holding amounts to €2,629 million for 75% of
Endemol N.V. valued at €25 per Share cum dividend and including the additional assets and liabilities
within Endemol Holdingand itssubsidiaries. This price implies a premium on Endemol's latest closing
price and represents a capital gain close to €1,400 million for Telefonica.
50
As part oftheagreement,the Consortium hascommittedto launchanunconditional public offer for the
remaining 25% of Endemol N.V. at a price at least equal to €25 per Share cum dividend, as soon as
practicable after closing of this transaction.
The agreement is subject to obtaining of the relevant regulatory authorisations.
In the coming period, Endemol N.V will enter into discussions with the Consortium on the intended
public offer for the remaining 25%of Endemol N.V. Further details will follow as soon as appropriate.
For more information:
Peter Krenn
tel: +31 (0)35 5 39 94 37
Frank Jansen (a.i.)
tel. +31 (0)35 53994 16
13.3
Press release dated 24 April 2007
Hilversum, The Netherlands, 24 April 2007
ENDEMOL SHOWS STEADY PERFORMANCE AND STRATEGIC PROGRESS IN 01
Endemol N.V. ('Endemol' or 'the Group') a global leader in television and other audiovisual
entertainment, today announcedsteady performance andstrategic progress inthefirstquarter of2007.
Endemol saw its Non-scripted business continue atthesame highlevelas in2006.Scripted and Digital
Mediasawfurther growth.Sound contributions camefrom countries likethe United Kingdom, Italy and
Spain,while Germany and France saw asomewhat slower than expected start. On balance,the overall
financial outlook for the full year 2007 remains unchanged.
Highlights per Strategic Priority
Progress has been made during the first quarter of 2007 on several elements of Endemol's strategy.
Endemol has enjoyed a solid first quarter of 2007 within its Core businesses. Deal or No Deal is now
Endemol's top format interms of turnover. The game show continues to deliver high viewer ratings in
countries like the United States, the United Kingdom and Italy. Big Brother also remains a sound
contributor, having returned to air in countries like Italy, Germany and Argentina. Fuelled by the
worldwide gameshow revival,1 vs. 100enteredourformatTop5inthefirstquarter andwillthisyear be
produced in approximately 20 countries.
Regarding NorthAmerica, Extreme Makeover: Home Edition continued to beamong the most popular
showsintheUnitedStates.Also, 1 vs.100,whichfirststartedairinginthefallof2006onNBCretainedits
strongratingsinthefirstquarter.Asindicatedearlier,theproductionandsyndicationofFearFactorinthe
United States ended in 2006.
In Scripted, Endemol saw strong growth fuelled by a host of new drama series and telenovelas in its
main scripted countries, likeThe Netherlands, Italy and Spain. Newseries include Julia'sTango inThe
Netherlands and Una Madre Detective in Italy. In addition, Guardia Costiera in Italy made a sound
contribution to first quarter performance.
Inlinewith Endemol's continuing searchforexpansion into newterritories,either organically or through
M&A, Endemol Francewasacquired and integrated back intothe Endemol Group as ofJanuary 2007.
The acquisition brings the total number of territories in which Endemol has an actual production
presence to 25.
In the Digital Media field, the continued success of formats like Deal or No Deal and Big Brother
generated substantial revenues oncallsandSMSs.ParticipationTVrevenues improved slightly despite
the recentcontroversy andrelated publicity aroundTVphone ingames inthe United KingdomandThe
Netherlands. Inthe field of non TV related content, Endemol continued to explore new initiatives and
develop specific content for mobile, online video and IPTV concepts. InApril, Endemol announced a
51
partnershipwithElectronicArtsonanew projectcalledVirtual Me,whichwill makesuccessful Endemol
TVformats available in an online virtual reality.
ElfasRodrfguez-Vina,CEOofEndemol:"Inthefirstquarterwehaveshownasteadyperformance across
theEndemolGroup.Inaddition,severalnewstepstowardsthefurtherdevelopmentand implementation
of our strategic priorities were made. On balance, our performance in the first quarter leads us to
reiterate our financial guidance for the full year 2007."
Endemol will publish its half year results on 26 July 2007, with more detailed financial information.
13.4
Press release dated 9 March 2007
Hilversum, 9 March 2007
Telefonica explores strategic initiatives Endemol N.V.
Telefonica announced today that it is exploring strategic alternatives in relation to its stake in
Endemol N.V, includingapossibletotalor partial divestiture of itsstake inthat company.Tothat effect,
Telefonica has retained Lehman Brothers as its financial advisor, and additionally, has asked Merrill
Lynch to offer stapled financing to the purchaser within the context of an eventual transaction.
IfTelefonica were to decide to divest its 75%stake in Endemol N.V, it is its intention to solicit from the
potential purchaser a public offer for the other 25%of the shares outstanding in Endemol N.V.
ABOUT ENDEMOL
Endemol then produces these shows to the highest standards, creating hits with strong brand value.
Subsequently, the company exploits the value of its brands across other media and communications
platforms, including, for example, mobile phones and the Internet.
Endemol,with its head office in Hilversum,the Netherlands, now hassubsidiaries andjoint ventures in
25countries, includingthe UK,the US,Spain,Italy,France,Germany andthe Netherlands,aswellasin
Latin America, India, South Africa and Australia. Endemol is a publicly traded company on Eurolist by
Euronext Amsterdam. For more information, please visit www.endemol.com.
Peter Krenn
Frank Jansen (a.i.)
tel: +31 (0) 35 53994 37
tel. +31 (0)35 53994 16
13.5
Press release dated 14 February 2007
Hilversum, 14 February 2007
SHAREHOLDERS approve acquisition of Endemol France
Endemol N.V. ('Endemol') announced that the Extraordinary General Meeting of Shareholders held
today, has approved the acquisition of Endemol France S.A.S. The transaction has been closed and
Endemol France will economically be consolidated as of 1January 2007.
ABOUT ENDEMOL
Endemol then produces shows basedonsuch ideasto highstandards, creating hitswithstrong brand
value. Subsequently, the company exploits the value of its brands across other media and
communications platforms, including, for example, mobile phones and the Internet.
Endemol,with its headoffice inHilversum,The Netherlands, now hassubsidiaries andjointventures in
25 countries, including the United Kingdom, the United States, France, Spain, Italy, Germany and The
52
Netherlands,aswellas in LatinAmerica, India,SouthAfricaandAustralia.Endemol isapublicly traded
company on Eurolist by Euronext Amsterdam. For more information, please visit www.endemol.com.
Frank Jansen (a.i.)
tel. +31 (0) 35 53994 16
Peter Krenn
tel: +31 (0) 35 53994 37
13.6
Press release dated 30 January 2007
Hilversum, 30 January 2007
ENDEMOL TO HOLD EGM ON acquisition of Endemol France
Endemol N.V. ('Endemol') today announced an Extraordinary General Meeting of Shareholders will be
held on Wednesday 14 February 2007, in which Endemol will seek shareholders' approval for the
acquisition of Endemol France.The Extraordinary General Meeting of Shareholders will be held at the
Sheraton Schiphol, at 10:30 CET.
Shareholders wishing to attend the Extraordinary General Meeting of Shareholders are requested to
follow the instructions in the advertisement giving notice of the meeting, which is published in Het
Financieele Dagblad, NRCHandelsblad and inthe Officiële Prijscourant of Euronext Amsterdam today.
The advertisement will also be placed on the corporate website of Endemol at www.endemol.com.
As of today the agenda and the shareholders' circular detailing the intended acquisition of Endemol
FrancewillbeavailableonthecorporatewebsiteofEndemolatwww.endemol.com andcanbeobtained
free of charge at the offices of Endemol or by contacting Endemol at the following address:
Endemol N.V.
Bergweg 70
1217 SC Hilversum
The Netherlands
Tel: +31 35 53 99 437
Email: [email protected] or [email protected]
The agenda and shareholders' circular are published in the English language only.
Annual results 2006
Endemol N.V. will publish its annual results 2006 on 22 February 2007 at 8.00 CET.
ABOUT ENDEMOL
Endemol then produces shows based on such ideasto high standards, creating hitswith strong brand
Endemol,with itsheadoffice inHilversum,The Netherlands, now hassubsidiaries andjointventures in
24 countries, including the United Kingdom, the United States, Spain, Italy, Germany and The
Netherlands, as well as in Latin America, South Africa and Australia. Endemol is a publicly traded
Frank Jansen (a.i.)
tel. +31 (0)35 53994 16
Peter Krenn
tel: +31 (0) 35 53994 37
53
13.7
Press release dated 9 January 2007
Hilversum, 9 January 2007
ENDEMOL AGREES TO ACQUIRE FRENCH ENDEMOL BUSINESS
Endemol N.V. ('Endemol') today announced that an agreement has been reached with Endemol
Investment Holding B.V, a subsidiary of Telefonica, on the acquisition of Endemol France.
Endemol intends toacquire Endemol Franceonthe basisofanenterprise value upto EUR450million.
Of this amount EUR 194 million will be deferred over a period of four years and will be subject to the
performance of Endemol France, linkedtothe realisation ofthe business plan 2007-2010 approved by
theBoardofEndemolFrance.Thetransactionwillbefinancedbybankdebtandfuturecashflow.Before
acquisition-related amortization,thetransaction isexpectedtobeearnings enhancingfor Endemol N.V.
from the first year.
In2006 Endemol France is expected to realize netturnover of around EUR 175 million at a normalized
EBITDA marginwhich isconsiderably abovetheaverageofthe Group. Endemol France's business mix
is 10%Digital Mediaand90%Non-scripted, led byformats suchasStarAcademy,DealorNoDealand
Watch YourStep.
Background
The French business was carved out before the IPO of Endemol N.V. in November 2005 because of a
disagreementwiththepreviousownersofEndemolFranceregardingthedeferredpurchasepriceforthe
French business.
On 6 September 2006 it was announced that Endemol had been informed that an agreement was
reached with the principals of Endemol France regarding the deferred purchase price for the French
business, creating an opening for a possible acquisition of Endemol France by Endemol.
Process and conditions
The acquisition of Endemol France is subject to shareholders' approval. An Extraordinary General
Meeting of Shareholders will be held inFebruary 2007,for which ashareholders circular will beissued.
ABOUT ENDEMOL
Endemol then produces shows based on such ideasto high standards, creating hitswith strong brand
Endemol, with its headoffice inHilversum,The Netherlands, now hassubsidiaries andjointventures in
24 countries, including the United Kingdom, the United States, Spain, Italy, Germany and The
Netherlands, as well as in Latin America, South Africa and Australia. Endemol is a publicly traded
Peter Krenn
tel: +31 (0) 35 53994 37
Frank Jansen (a.i.)
tel. +31 (0) 35 53994 16
54
14.
Dutch language summary
NEDERLANDSE SAMENVATTING
Dit Hoofdstuk 14 behelst de Nederlandse samenvatting van het Biedingsbericht, dat is uitgegeven ter
zake van het openbaar bod uitgebracht door Edam Acquisition op alle uitstaande en geplaatste
aandelen Endemol onder de bepalingen en restricties zoals beschreven in dit Biedingsbericht
(het "Bod"). De belangrijkste kenmerken van het Bod zijn beschreven in deze samenvatting.
De gedefinieerde termen in dit Hoofdstuk van het Biedingsbericht hebben de betekenis die daaraan
wordt gegeven in paragraaf 14.2. Deze Nederlandse samenvatting maakt deel uit van het
Biedingsbericht, maar vervangt dit niet. Deze Nederlandse samenvatting is niet volledig en bevat niet
alleinformatie dievoor houdersvaneenofmeeraandelenEndemol (de"Aandeelhouders") van belang
zou kunnen zijn om een afgewogen oordeel te vormen omtrent het Bod. Het lezen van deze
Nederlandse samenvatting mag derhalve niet worden beschouwd als een alternatief voor het
bestuderen van het volledige Biedingsbericht. Aandeelhouders wordt geadviseerd het volledige
Biedingsbericht zorgvuldig te bestuderen en zo nodig onafhankelijk advies inte winnen teneinde een
afgewogenoordeeltekunnenvormenomtrent hetBod,alsmedeomtrentdebeschrijvingvanhetBodin
deze samenvatting en in het Biedingsbericht. In geval van verschillen tussen deze Nederlandse
samenvatting en de Engelse tekst van het Biedingsbericht, prevaleert de Engelse tekst van het
Biedingsbericht.
14.1
Restricties en belangrijke informatie
Het uitbrengen van het Bod, de verkrijgbaarstelling van het Biedingsbericht en deze Nederlandse
samenvatting,alsmededeverspreidingvanenigeandereinformatie metbetrekkingtothetBod,kunnen
in bepaalde jurisdicties aan zekere restricties onderhevig zijn. Zie Hoofdstuk I (Restrictions and
Important Information) van dit Biedingsbericht. Dit Bodwordt niet,direct of indirect, gedaan in,en mag
niet worden geaccepteerd vanuit enige jurisdictie waarin het doen van het Bod of de aanvaarding
daarvan niet in overeenstemming is met de in die jurisdictie geldende wet—en regelgeving. Het niet
respecteren van deze restricties kan een overtreding van de effectenwet- en regelgeving van de
desbetreffende jurisdictie opleveren. Edam Acquisition, Endemol en hun adviseurs sluiten iedere
aansprakelijkheid uitterzakevanovertredingenvanvoornoemde restricties.Aandeelhouders dienenzo
nodig onverwijld onafhankelijk advies in te winnen omtrent hun positie dienaangaande.
Het Biedingsbericht bevat belangrijke informatie die menzorgvuldig dientte lezenalvorens een besluit
tenemenover hetaanmeldenvanAandelen onder hetBod.ZieHoofdstuk I(Restrictions and Important
Information) van dit Biedingsbericht. Aandeelhouders wordt aangeraden waar nodig onafhankelijk
advies in te winnen. Daarnaast zullen Aandeelhouders mogelijk hun belastingadviseur willen
raadplegen met betrekking tot de fiscale gevolgen van het aanmelden van Aandelen onder het Bod.
Deinformatieopgenomen indeHoofdstukken 1,2,4.2,4.3,4.4(behalve4.4.3),4.6,4.9,4.11,7,9,11(ii)
en 12van het Biedingsbericht isuitsluitend door EdamAcquisitionverstrekt. Deinformatie opgenomen
in de Hoofdstukken 4.4.3, 4.5, 4.7, 4.10.4, 6, 8, 10, 15.1 tot en met 15.4, 16.1 en 16.2 van het
Biedingsbericht isuitsluitend door Endemolverstrekt. Deinformatie opgenomen inde Hoofdstukken 3,
4.1, 4.8, 4.10 (behalve 4.10.4), 4.11, 4.12, 4.13, 11(i), 11(iii) tot en met 11(v), 13 en 14 van het
Biedingsbericht isdoor EdamAcquisition enEndemol gezamenlijk verstrekt. Deinformatie opgenomen
inde Hoofdstuk 5 isdoor NMRothschild verstrekt en isidentiek aande Fairness Opinie. De informatie
opgenomen in Hoofdstukken 15.5 en 16.3 isverstrekt door Ernst & Young Accountants en is identiek
aan de originele accountants verklaringen, welke door Ernst & Young Accountants zijn afgegeven op
dezelfde datum.
EdamAcquisition enEndemol zijn uitsluitendverantwoordelijk voor dejuistheid envolledigheidvan de
informatie die in het Biedingsbericht is opgenomen, elk voor de informatie die door haar zelf werd
verstrekt, engezamenlijk voor de informatie die door hengezamenlijk isverstrekt, metuitzondering van
informatie diedoor geenvan henisverstrekt (welke omvat defairnessopinion inHoofdstuk 5waarvoor
NMRothschildverantwoordelijk isendeinformatieopgenomen inHoofdstukken 15.5en16.3waarvoor
Ernst & Young Accountants verantwoordelijk is).
EdamAcquisition en Endemol verklaren beide, ieder ten aanzienvan de informatie die door hen in het
Biedingsbericht is verstrekt, dat de informatie in dit Biedingsbericht op de publicatiedatum van het
Biedingsbericht naar hun beste weten in elk wezenlijk opzicht in overeenstemming is met de
werkelijkheid,juist is,endat ergeen informatie achtenwege isgelaten waardoor enigeverklaring in het
55
Biedingsbericht in enig wezenlijk opzicht misleidend is. Getallen in het Biedingsbericht kunnen naar
boven of beneden zijn afgerond en dienen derhalve niet als exact te worden beschouwd.
Deinformatie inhetBiedingsbericht geeft desituatieweer op dedatumvan hetBiedingsbericht. Onder
geen beding houden de publicatie enverspreiding vanhetBiedingsbericht indatde hierin opgenomen
informatie ook nade datumvanhet Biedingsberichtjuist envolledig isofdat ersinds deze datum geen
wijziging isopgetreden indeinhetBiedingsbericht uiteengezette informatie of inde gangvanzaken bij
Edam Acquisition en/of Endemol en/of hun dochtermaatschappijen en/of aan hen gelieerde
ondernemingen. Het voorgaande laat echter onverlet de verplichting van zowel Edam Acquisition als
Endemolom,indienzulksvantoepassing is,eenpubliekeaankondigingtedoeningevolge artikel9b lid
1 Bte 1995, voor zover van toepassing.
14.2
Nederlandse definities
In dit Biedingsbericht zal een verwijzing naar gedefinieerde termen in het meervoud gelijk staan aan
verwijzingen naar dergelijk gedefinieerde termen in het enkelvoud envice versa.Alle grammaticale en
andere veranderingen benodigd bij het gebruiken van een definitie in het enkelvoud zullen worden
beschouwd hierin tezijn gemaakt enzullenworden toegepast alsof zulkeveranderingen zijn gemaakt.
De gedefinieerde termen in dit Hoofdstuk van het Biedingsbericht hebben de volgende betekenis:
Aandeelhouders
houder(s) van een of meer Aandelen;
Aandeelhouders van Edam
Acquisition
Cyrte Fund II, GS Capital Partners en Mediacinco, de indirecte
aandeelhouders van Edam Acquisition;
Aandelen
alle geplaatste en uitstaande gewone aandelen in het kapitaal van
Endemol, elk met een nominale waarde van EUR 0,10;
Aanmelding
de aanmelding van Aandelen door de Aandeelhouders ter
aanvaarding van het Bod;
Aanmeldingstermijn
de periode waarin de Aandeelhouders hun Aandelen kunnen
aanmelden bij Edam Acquisition, welke begint op 5 juli 2007 om
09:00 uur en eindigt op de Laatste Aanmeldingsdag;
AFM
de Stichting Autoriteit Financiële Markten;
Algemene Vergadering
de algemene vergadering van aandeelhouders van Endemol;
Biedingsbericht
dit Biedingsbericht (inclusief de Engelsetekst) met betrekking tot het
Bod;
Biedprijs
een bedrag van EUR 24,55 per Aandeel (wat gelijk staat aan
EUR25,00perAandeelverminderd methetuiteindelijke dividendvan
hetfinanciële jaar 2006 van EUR 0,45 per Aandeel, dat is uitgekeerd
op 31 mei 2007) voor elk Aandeel dat op juiste wijze is aangemeld
(of op onjuiste wijze, indien Edam Acquisition de Aanmelding
desalniettemin aanvaardt) en geleverd onder de bepalingen en
restricties van het Bod;
Bod
heeft de betekenis waarnaar wordt verwezen in paragraaf 14;
Bte 1995
het Besluit toezicht effectenverkeer 1995, zoals gewijzigd van tijd tot
tijd;
BW
het Burgerlijk Wetboek;
Cyrte Belang
heeft de betekenis waarnaar wordt verwezen in paragraaf 14.4;
Cyrte Fund I
CyrteFundIC V , eencommanditairevennootschap naar Nederlands
recht, gevestigd te Flevolaan 41A, 1411 KC Naarden, Nederland;
Cyrte Fund II
Cyrte Fund II B.V, een besloten vennootschap met beperkte
aansprakelijkheid naar Nederlands recht met statutaire zetel in
Amsterdam,Nederland,statutairgevestigdteFlevolaan41A, 1411KC
56
Naarden, Nederland en geregistreerd bij de kamer van koophandel
onder nummer 32122988;
Edam Acquisition
Edam Acquisition B.V, een besloten vennootschap met beperkte
aansprakelijkheid naar Nederlands recht met statutaire zetel in
Amsterdam,Nederland,statutairgevestigdteFlevolaan41A, 1411KC
Naarden, Nederland en geregistreerd bij de kamer van koophandel
Edam Acquisition Groep
gezamenlijk, Edam Aquisition, de vennootschappen die direct of
indirect 100% van de aandelen in Edam Acquisition houden en
dochterondernemingen van Edam Acquisition voor zover deze geen
deel uitmaken van de Endemol Groep;
Endemol
Endemol N.V, een naamloze vennootschap naar Nederlands recht
met statutaire zetel in Hilversum, Nederland, statutair gevestigd te
Bergweg 70, 1217 SC Hilversum, Nederland en geregistreerd bij de
kamer van koophandel onder nummer 32111483;
Endemol Groep
Endemol, haar dochterondernemingen en deelnemingen;
Endemol Investment
Holding
Endemol Investment Holding B.V, een besloten vennootschap met
beperkteaansprakelijkheid naarNederlands rechtmetstatutairezetel
in Hilversum, Nederland,statutair gevestigd te Bergweg 70, 1217SC
Hilversum, Nederland en geregistreerd bij de kamer van koophandel
Euronext Amsterdam
Euronext Amsterdam N.V. of Eurolist by Euronext Amsterdam N.V,
afhankelijk van de context;
Euronext Handelsdag
een dag waarop Euronext Amsterdam isgeopend voor de handel in
effecten;
Fairness Opinie
deoriginelefairnessopinionzoalsafgegeven door NMRothschild op
18juni 2007;
Fusiegedragsregels
SER-besluit Fusiegedragsregels 2000;
Fusieprotocol
het fusieprotocol tussen Edam Acquisition en Endemol zoals
overeengekomen en ondertekend op 18juni 2007;
Fusieregels
alletoepasselijke weten regelgeving, inclusief maar niet beperkt tot
detoepasselijke artikelenvandeWte 1995en het Bte 1995,alsmede
nadereregelgevingenbeleidsregels afgekondigd onder deWte 1995
en de Bte 1995, beleidsregels en aanwijzingen van de AFM, de Wet
op de Ondernemingsraden, de Fusiegedragsregels, het reglement
van Euronext Amsterdam, het Burgerlijk Wetboek of de Nieuwe
Fusieregels als en wanneer toepasselijk;
Gecombineerde Groep
decombinatievandeEndemolGroependeEdamAcquisitionGroep;
GS Capital Partners
gezamenlijk, GSCapital PartnersVIFund,L.R, GSCapital PartnersVI
Parallel, L.R, GSCapital PartnersVIGmbH &Co.KG,andGSCapital
Partners VI Offshore Fund, L.R, allen geadresseerd op 85 Broad
Street, New York, NY 10004, Verenigde Staten;
Informatiekantoor
Georgeson Sri., een vennootschap naar Italiaans recht, statutair
gevestigdteRome,ViaEmilia88,00187Rome,Italiëen geregistreerd
Juridische Fusie
heeft de betekenis waarnaar wordt verwezen in paragraaf 14.14.2;
Koopprijs
Laatste Aanmeldingsdag
3 augustus 2007 om 15:00 uur;
Mediacinco
Mediacinco Cartera S.L., een vennootschap naar Spaans recht,
statutair gevestigd te Carretera de Fuencarral a Alcobendas 4,
57
28049 Madrid,Spanje,waarvan deaandelen gehouden worden door
Mediaset en Telecinco;
Mediaset
Mediaset SpA, een beloten beperkte vennootschap naar Italiaans
recht en statutair gevestigd te Paleocapa 3, Milaan, Italië;
Nieuwe fusieregels
alle weten regelgeving volgend uit of in verband met de
implementatie van Richtlijn 2004/25/EC van 21 april 2004 in het
Nederlandse recht, inclusieftoepasselijke artikelenvandeWetop het
financieeltoezicht, hetWetsvoorstel uitvoeringswet overnamerichtlijn,
het Besluit openbare biedingen en het Burgerlijk Wetboek;
N M Rothschild
N M Rothschild & Sons Limited;
Officiële Prijscourant
Officiële Prijscourant van Euronext Amsterdam;
Omwissel- en
Betaalkantoor
ABNAMROBank N.V, eennaamlozevennootschap naar Nederlands
recht met statutaire zetel in Amsterdam, Nederland, statutair
gevestigd te Gustav Mahlerlaan 10, 1082 PPAmsterdam, Nederland
en geregistreerd bij de kamer van koophandel onder nummer
33220369;
Overdrachtsdatum
dedatumwaarop,overeenkomstig debepalingenvanhetBod,Edam
Acquisition deBiedprijszalbetalenaanAandeelhouders die opjuiste
wijze hun Aandelen hebben aangemeld (of op onjuiste wijze, indien
Edam Acquisition de Aanmelding desalniettemin aanvaardt) en
geleverd onder het Bod,welke datum ingeen geval later zalzijn dan
vijf Werkdagen na de Laatste Aanmeldingsdag;
Raad van Bestuur
de raad van bestuur van Endemol;
Raad van Commissarissen
de raad van commissarissen van Endemol;
Telecinco
Gestevision Telecino S.A., een vennootschap naar Spaans recht,
statutair gevestigd te Carretera de Fuencarral a Alcobendas 4,
28049 Madrid, Spanje;
Telefonica
Telefonica S.A., een vennootschap naar Spaans recht en
geregistreerd onder nummer A28015865, welke statutaire zetel
gevestigd is te GranVia 28, Madrid, E-28013, Spanje;
Telefonica Overdracht
Telefonica
Overdrachtsdatum
Telefonica Belang
heeft de betekenis waarnaar wordt venwezen in paragraaf14.4;
Telefonica
Koopovereenkomst
Toegelaten Instellingen
de tot Euronext Amsterdam toegelaten instellingen;
Uitkoopprocedure
heeft de betekenis waarnaar wordt venwezen in paragraaf 14.14.1;
Werkdag
een dag waarop banken gebruikelijk geopend zijn in Nederland;
Wte 1995
deWettoezicht effectenverkeer 1995,zoals gewijzigd vantijd tot tijd;
14.3
Introductie
Edam Acquisition isopgericht om de aankoop van de Aandelen tevoltooien envertegenwoordigt een
partnerschap welke bestaat uit Cyrte Fund II,GS Capital Partners en Mediacinco. De bestuurders van
EdamAcquisitionzijndeheerS.R.Sher,deheerM.A.E.A.Giordani,deheerM.MusolinoendeheerRM.
Schmitz. Edam Acquisition heeft geen raad van commissarissen.
58
14.4
Voorgeschiedenis van het Bod
Op 14 mei 2007 heeft Telefonica een overeenkomst ondertekend op grond waarvan Telefonica haar
99,7306% belang in Endemol Investment Holding, welke vennootschap een indirect belang houdt in
Endemolvan93.750.000aandelen (dit belang inEndemol hiernatenoemen het"Telefonica Belang"),
heeft verkocht aan Edam Acquisition (de "Telefonica Koopovereenkomst"). HetTelefonica Belang is
het belangrijkste actief van Endemol Investment Holding. Gedurende het door Telefonica geleide en
gecontroleerde veilingproces voor de aandelen in Endemol Investment Holding,werd aan de bieders
gevraagd om een specifieke waardering toe te kennen aan het Telefonica Belang. De waarde die op
grond van de Telefonica Koopovereenkomst istoegekend aan de Aandelen is EUR 24,55 per Aandeel
(watgelijkstaataanEUR25,00perAandeelverminderdmethetuiteindelijke dividendvanhetfinanciële
jaar 2006 van EUR 0,45 per Aandeel,dat is uitgekeerd op 31 mei 2007) (de "Koopprijs"). De prijs die
aan Telefonica werd betaald voor het Telefonica Belang is gelijk aan de Koopprijs aangepast met
inachtneming van de kaspositie, schuldvorderingen, rekening-courant vorderingen en crediteuren
gerelateerd aan Endemol Investment Holding en haar dochterondernemingen, exclusief de Endemol
Groep. Deze prijs is het resultaat van een competitief veilingproces onder leiding van Telefonica en
onderhandelingen die zijn gevoerd met Telefonica.
De voltooiing van de transactie zoals vermeld in de Telefonica Koopovereenkomst (de "Telefonica
Overdracht") vond plaats op 3 juli 2007 (de "Telefonica Overdrachtsdatum").
Op 14 mei 2007 kondigde Endemol aan dat zij door Telefonica was geïnformeerd dat conform de
TelefonicaKoopovereenkomst, EdamAcquisitionzichheeftverplichtomopheteerstmogelijke moment
nadeTelefonicaOverdrachtsdatum het Bod uitte brengenvoor eenprijs dieten minste gelijk isaan de
Biedprijs.SindsdienisermetbetrekkingtothetBodeenovereenkomsttotstandgekomentussen Edam
Acquisition en Endemol, waarvan de belangrijkste bepalingen zijn opgenomen in dit Biedingsbericht.
Onder deTelefonica Koopovereenkomst heeft EdamAcquisition zichverplicht om het Bodtedoen aan
de minderheidsaandeelhouders van Endemol voor een prijs die ten minste gelijk is aan de Koopprijs.
EdamAcquisitionzalhetBoddoennieteerderdandeTelefonicaOverdrachtsdatum,maarook nietlater
dan drie maanden na de Telefonica Overdrachtsdatum.
Op 26 maart 2007 heeft Cyrte Fund I haar 7.505.760 aandelen in Endemol (het "Cyrte Belang")
verkocht aan Edam Acquisition voor een prijs gelijk aan de Biedprijs. Devoltooiing van deze verkoop
vond plaats op de Telefonica Overdrachtsdatum.
14.5
Het Bod
Edam Acquisition brengt het Bod uit teneinde alle Aandelen te verwerven overeenkomstig de
bepalingen en beperkingen welke zijnvervat indit Biedingsbericht. Aandeelhouders die hun Aandelen
aanmelden onder het Bod zullen een bedrag in contanten ontvangen van EUR 24,55 per Aandeel
(watgelijk staataanEUR25,00perAandeelverminderd met hetuiteindelijkedividendvanhetfinanciële
jaar 2006 van EUR 0,45 per Aandeel, dat is uitgekeerd op 31 mei 2007).
14.6
Onderbouwing van het Bod
De Biedprijs is dezelfde prijs als de Koopprijs, welke is overeengekomen met Telefonica voor het
Telefonica Belangvolgend op eenveilingproces onder leidingvanTelefonica enonderhandelingen met
Telefonica.DeBiedprijsvertegenwoordigt eenaantrekkelijke waardevoorAandeelhouders doordataan
alle Aandeelhouders de mogelijkheid wordt geboden om aan te haken bij de prijs die is betaald aan
Telefonica voor hetTelefonica Belang en op die manier eenzogroot mogelijk voordeel tegenieten van
het competitieve veilingproces dat werd geleid door Telefonica.
14.7
Motivering van het Bod
14.7.1 Motivering van het Bod
(a)
HetiseensterkvoornemenvanEdamAcquisitiondatEndemolzoweloperationeelals
strategisch onafhankelijk zal blijven van de Aandeelhouders van Edam Acquisition.
(b)
Edam Acquisition heeft het Telefonica Belang gekocht voor de Koopprijs
overeenkomstig het veilingproces dat werd geleid door Telefonica. In Telefonica's
persbericht van 14 mei 2007, maakte Telefonica bekend dat het veilingproces kon
worden bestempeld als competitief en voorts dat Telefonica objectieve
59
selectiecriteria, gebaseerd op economische- enfinanciële factoren,had gebruikt om
de uiteindelijke koper te selecteren.
14.7.2 Endemol bevestigt dat de motivering van de Raad van Bestuur en van de Raad van
Commissarissen om Aandeelhouders Aanmelding aan te bevelen, gebaseerd is op de
volgende omstandigheden:
14.8
(a)
Controlpremie: de Biedprijs is gelijk aan de Koopprijs. Het Bod geeft
minderheidsaandeelhouders de mogelijkheid om aan te haken bij Telefonica, hun
Aandelen te verkopen tegen een prijs met inbegrip van een premie en om een zo
groot mogelijk voordeel te genieten van het competitieve veilingproces dat werd
geleid door Telefonica;
(b)
Onvoorwaardelijk bod in contanten: het Bod geeft Aandeelhouders de mogelijkheid
om, in tegenstelling tot een ruilbod voor aandelen in de betreffende bieder, hun
Aandelen onmiddellijk te verzilveren voor contanten. Aldus wordt niet alleen een
significant prijsrisico uitgesloten met betrekking tot toekomstige investeringen, maar
ook de onzekerheid met betrekking tot het verzilveren van Aandelen en
liquiditeitsverlies in het geval van een verkoop;
(c)
Aantrekkelijke waardering:de Biedprijsvertegenwoordigt een premievan75.3%over
degemiddelde prijsvanhetAandeelgewogen naarhandelsvolume berekendoverde
periode sinds de beursgang van Endemol op 22 november 2005 tot en met 8 maart
2007, welke gelijk is aan een premie van 172,8% over de introductieprijs van het
Aandeel ten tijde van de beursgang van Endemol;
(d)
Toekomstige ondersteuning vanEndemol:deAandeelhouders vanEdam Acquisition
onderschrijven de strategie van Endemol en betreffen investeerders met een
uitgebreide ervaring in de televisie-industrie die, in samenwerking met Endemol,
significante steun,expertise en kapitaal kunnenaanbieden bijdeverwezenlijking van
strategische initiatieven, hetgeen in het voordeel is van Endemol's werknemers,
klanten en andere belanghebbenden; en
(e)
Fairness Opinie: de voonwaarden van de Fairness Opinie zijn bevredigend naar het
oordeel van de Raad van Bestuur en de Raad van Commissarissen.
Aanbeveling van de Raad van Commissarissen en de Raad van Bestuur van Endemol
ZoalsvermeldinHoofdstuk 6(Recommendation bytheSupervisory BoardandtheManagement Board)
vanhetBiedingsbericht hebbendeRaadvanCommissarissen (metuitzonderingvandeheer Fernandez
Valbuena die, in zijn hoedanigheid van bestuurder van Telefonica en daarmee als niet-onafhankelijke
commissaris met betrekking tot het Bod, niet aan het besluitvormingsproces omtrent het Bod heeft
deelgenomen) endeRaadvanBestuur, nadatzedestrategische,financiëleensocialeaspectenvanhet
Bod inovenweging hebben genomen, besloten om het Bod unaniemte steunen ente concluderen dat
het Bod inhet beste belang isvan Endemol,deAandeelhouders enalleandere belanghebbenden van
Endemol. DeRaadvanCommissarissen ende RaadvanBestuur bevelendeAandeelhouders unaniem
aan om het Bod te accepteren.
14.9
Aanmelding
14.9.1 Geen aanmeldingsvoorwaarden
Het Bod is onvoorwaardelijk.
14.9.2 De Aanmeldingstermijn
De aanmeldingstermijn vangt aan op 5 juli 2007 om 09:00 uur en eindigt op 3 augustus 2007 om
15:00 uur Nederlandse tijd.
Aandelen die zijn aangemeld op of voor de Laatste Aanmeldingdag kunnen niet worden ingetrokken.
60
14.9.3
Na-aanmeldingstermijn
Opde LaatsteAanmeldingsdag heeftEdamAcquisitiondemogelijkheidomeen na-aanmeldingstermijn
aan te kondigen.
Aandeelhouders die hun Aandelen gedurende de Aanmeldingstermijn hebben aangemeld en welke
Aandelen onder de bepalingen en restricties van het Bodzijn geaccepteerd, nochAandeelhouders die
hun Aandelen hebben aangemeld gedurende de na-aanmeldingstermijn, hebben gedurende de
na-aanmeldingstermijn enig recht om hun Aanmelding in te trekken.
14.9.4
Overdracht
Op de Overdrachtsdatum zullen Aandeelhouders, die hun Aandelen hebben aangemeld en geleverd
aan EdamAcquisition,de Biedprijs ontvangenvoor elkAandeel dat opjuistewijze isaangemeld (of op
onjuiste wijze indien Edam Acquisition de Aanmelding desalniettemin aanvaardt) en geleverd.
Aandeelhouders die hun Aandelen hebben aangemeld en geleverd aan Edam Acquisition gedurende
de na-aanmeldingstermijn ontvangen voor elkAandeel dat opjuistewijze isaangemeld (of op onjuiste
wijze indien Edam Acquisition de Aanmelding desalniettemin aanvaardt) en geleverd de Biedprijs niet
later dan op de vijfde Euronext Handelsdag na de laatste dag van de na-aanmeldingstermijn.
14.10
Aanvaarding door Aandeelhouders
Aandeelhouders die Aandelen houden via een Toegelaten Instelling worden gevraagd om hun
Aanmelding via hun bank of effectenmakelaar bekend te maken op uiterlijk 3 augustus 2007 om
15:00 uur Nederlandse tijd. Uw bank of effectenmakelaar kan een eerdere deadline vaststellen voor
Aanmelding door Aandeelhouders zodat deze bank of effectenmakelaar voldoende tijd heeft om de
Aanmelding door te geven aan het Omwissel- en Betaalkantoor.
De desbetreffende Toegelaten Instellingen mogen de Aanmeldingen alleen indienen bij het Omwisselen Betaalkantoor en alleen in schriftelijke vorm. Bij het indienen van de Aanmeldingen dient iedere
Toegelaten Instelling te verklaren dat: (i) zij de aangemelde Aandelen in hun administratie hebben
opgenomen; (ii) iedere Aandeelhouder onherroepelijk garandeert dat hij/zij zal voldoen aan alle
restricties die worden genoemd in Hoofdstuk I (Restrictions and Important Information) van het
Biedingsbericht; en (iii) zij zich verplichten om de aangemelde Aandelen te leveren aan Edam
Acquisition op de Overdrachtsdatum.
14.11
Provisie
Toegelaten Instellingen zullen van het Omwissel- en Betaalkantoor, handelend namens Edam
Acquisition,eenprovisieontvangenvanEUR0,01628, metbetrekkingtotelkAandeel datopjuistewijze
isaangemeld (of op onjuiste wijze, indien Edam Acquisition de Aanmelding desalniettemin aanvaardt)
en geleverd, met een maximum van EUR 1.000 (duizend euro) per Aandeelhouder. De provisie per
Aandeel moet binnen30dagen nade Overdrachtsdatum via hetOmwissel-en Betaalkantoor bij Edam
Acquisitionwordengevorderd.IndieneenToegelaten InstellingbijdeAanmelding isbetrokken,zaldoor
Edam Acquisition aan de betreffende Aandeelhouder geen kosten worden doorberekend voor het
aanbieden en leveren van hun Aandelen.
14.12
Aandelenbezit van de Raad van Commissarissen en de Raad van Bestuur
van Endemol
Op de datum van dit Biedingsbericht worden 5.200 aandelen gehouden door de heer Bazalgette die
zich onherroepelijk heeft verplicht om zijn Aandelen aan te melden overeenkomstig de bepalingen en
restrictiesvanhetBodalsbeschreveninditBiedingsbericht. Behalvedeinformatiediedeeluitmaaktvan
dit Biedingsbericht, heeft de heer Bazalgette van Edam Acquisition, de Aandeelhouders van Edam
Acquisition ofvan elke andere persoon die valt binnen de definitie van bieder inartikel 1sub pvan de
Wte 1995, geen wezenlijke informatie ontvangen omtrent het Bod, die relevant zou zijn voor
Aandeelhouders bij hun overweging om Aandelen aan te melden onder het Bod.
Opdedatumvandit Biedingsbericht wordenergeenAandelengehouden door deheer Rodrfguez-Vina
Cancio, de heer Kerstens of door leden van de Raad van Commissarissen. Tevens worden er geen
Aandelen gehouden door de echtgenoten, geregistreerde partners of minderjarige kinderen van de
61
leden van de Raad van Bestuur en van de Raad van Commissarissen of door rechtspersonen die
gecontroleerd worden door deze personen.
14.13
Samenvatting van de risicofactoren volgend op het Bod
Aandeelhouders die hun aandelen niet aanmelden onder het Bod moeten deze paragraaf
aandachtig lezen. Deze paragraaf beschrijft bepaalde risico's die verbonden zijn aan het niet
accepteren van het Bod. Deze risico's zijn in aanvulling op de risico's die zijn verbonden aan het
uitoefenen van de onderneming Endemol Groep als zodanig, dit omdat de onderneming en
structuur van de Endemol Groep na de Overdrachtsdatum en van tijd tot tijd daarna zou kunnen
veranderen. Hieronder is eensamenvatting opgenomen van de belangrijkste additionele risico's:
(a)
Uitkoopprocedure
Zodra aan de relevante wettelijke bepalingen wordt voldaan, zou Edam
Acquisition de resterende Aandelen kunnen verkrijgen door middel van het
starten van een Uitkoopprocedure. Voor verdere uitleg wordt er verwezen naar
paragraaf 14.14.1 van deze samenvatting.
(b)
Verlies van liquiditeit
Zodra aan de relevante voorwaarden wordt voldaan, zou Edam Acquisition de
noteringvan Endemol aanEuronextAmsterdam kunnen beëindigen om Endemol
vervolgens om te zetten in een besloten vennootschap met beperkte
aansprakelijkheid. Dientengevolge zullen, onder andere, alle aandelen worden
onderworpen aan een blokkeringsregeling.
Ook of bijkomend,zou Edam Acquisition kunnen overwegen om een Juridische
Fusie tot stand te brengen hetgeen er toe kan leiden dat Aandeelhouders in
Endemol van rechtswege aandeelhouder worden van de verkrijgende
vennootschap. De verkrijgende vennootschap, in geval van een dergelijke
Juridische Fusie, zou een besloten vennootschap met beperkte
aansprakelijkheid kunnen zijnwaarvan deaandelen niet zijn genoteerd of niet in
het openbaar verhandelbaar zijn of waarvan de aandelen zijn onderworpen aan
een blokkeringsregeling.
Ook inhetgevaldatgeenomzettingofJuridische Fusietot standisgekomen,zal
vanwege het Bod de omvang van de vrij verhandelbare Aandelen substantieel
worden verlaagd. Hierdoor zal het handelsvolume en de liquiditeit van de
Aandelen wezenlijk worden aangetast.
(c)
Verhoging van schuldpositie
Vanwege één of meer Juridische Fusies of vanwege andere door Edam
Acquisition en Endemol na de Overdrachtsdatum genomen maatregelen, is het
aannemelijk dat de schuldpositie op de balans van Endemol of haar
rechtsopvolgers substantieel hoger is dan momenteel het geval is.
(d)
Beperking aandeelhoudersrechten
Zodra Endemol ofenigeander gefuseerde entiteit niet meer isgenoteerden haar
aandelen ook niet meer in het openbaar kunnen worden verhandeld, zullen de
statutaire bepalingen met betrekking tot ondernemingsbestuur, die van
toepassing zijnop openbare of beursgenoteerde ondernemingen, niet meer van
toepassing zijn en dientengevolge zullen ook de rechten van
minderheidsaandeelhouders beperkt wordentot hetwettelijk vereiste minimum.
(e)
Meerderheidsaandeelhouder
Sinds
de
Telefonica
Overdrachtsdatum
is
Edam
Acquisition
meerderheidsaandeelhouder in Endemol en daardoor beheerst Edam
Acquisition ook de benoeming van de leden van de Raad van Bestuur en de
leden van de Raad van Commissarissen.
62
(f)
Fiscale behandeling van uitkeringen
Edam Acquisition en Endemol hebben geen invloed en geen
verantwoordelijkheid met betrekking tot de fiscale behandeling van
Aandeelhouders met betrekking tot enige uitkering die wordt gedaan door
Endemol of haar rechtsopvolgers, hetgeen kan zien op dividenden, een
teruggave van hetgeen op aandelen is gestort en uitkeringen in het kader van
een liquidatie.
(g)
Dividendbeleid
Edam Acquisition is voornemens het dividendbeleid van Endemol wezenlijk te
wijzigen. Aandeelhouders dienen zich er van bewust te zijn dat Endemol in de
toekomst mogelijk geen dividend (in contanten) zal uitkeren aan haar
Aandeelhouders.
14.14
Juridische structuur van de Gecombineerde Groep volgend op het Bod
14.14.1 Uitkoopprocedure
EdamAcquisition behoudtzich hetrechtvoor omgebruiktemakenvanelkewettelijke mogelijkheid om
100%van de Aandelen te verkrijgen. In dit verband overweegt Edam Acquisition om, afhankelijk van
onder andere de hoeveelheidAandelen welke EdamAcquisition heeftverkregen onder het Bod,nade
Overdrachtsdatum,eenuitkoopproceduretestartenindezinvanartikel2:92aBWof, ondervoorbehoud
van implementatie van de relevante bepalingen uit de overnamerichtlijn in Nederlands recht, een
uitkoopprocedure te starten overeenkomstig het voorgestelde artikel 2:359c BW (en samen met de
uitkoopprocedure in de zin van artikel 2:92a BW de "Uitkoopprocedure").
Indien Edam Acquisition, volgend op de Overdrachtsdatum, 95% of meer van het geplaatste
aandelenkapitaal van Endemol heeft verkregen, zal Edam Acquisition zo snel als mogelijk een
Uitkoopprocedure starten teneinde de resterende Aandelen te verkrijgen welke niet zijn aangemeld
onder het Bod en, welke niet worden gehouden door Edam Acquisition of Endemol.
14.14.2 Juridische Fusie
Edam Acquisition zal ook overwegen om een juridische fusie in de zin van artikel 2:309 BW
(de "Juridische Fusie") te bewerkstelligen tussen Endemol en Edam Acquisition of een
dochteronderneming van Edam Acquisition, waarbij zowel Endemol als Edam Acquisition de
verdwijnende- of de verkrijgende vennootschap zou kunnen zijn.
Indien Edam Acquisition, volgend op de Overdrachtsdatum, minder dan 95% van het geplaatste
aandelenkapitaal van Endemol heeft verkregen, is het niet mogelijk om een Uitkoopprocedure te
starten. Edam Acquisition kan in de Algemene Vergadering met een absolute meerderheid van
stemmen een Juridische Fusie bewerkstelligen tussen Edam Acquisition of een 100%dochteronderneming vanEdamAcquisition enEndemol,waarbijzowel EdamAcquisition ofeen100%dochteronderneming van Edam Acquisition als Endemol de verdwijnende- of verkrijgende
vennootschap zou kunnen zijn.
IndieneenJuridische Fusietotstandisgekomen,zullenAandeelhouders diehunaandelen niet hebben
aangemeldonderhetBod,vanrechtswegeaandeelhouderswordenvandeverkrijgendevennootschap,
naast Edam Acquisition, een dochteronderneming van Edam Acquisition of de aandeelhouder(s) van
Edam Acquisition. Na de Juridische Fusie mag Edam Acquisition een Uitkoopprocedure starten
teneinde deaandelenteverkrijgen indeverkrijgende vennootschap welke nietworden gehouden door
Edam Acquisition.
14.14.3 Overige mogelijke maatregelen
Op enig moment nadat de notering van Endemol aan Euronext Amsterdam is beëindigd, zou men
kunnen besluiten dat Endemol wordt omgezet in een besloten vennootschap met beperkte
aansprakelijkheid, een en ander overeenkomstig Nederlands recht en de statuten van Endemol.
Edam Acquisition behoudt zich voorts het recht voor om voorstellen aan de Aandeelhouders voor te
leggen welke zien op eenwijziging van de bedrijfs- en de kapitaalstructuur van Endemol teneinde een
optimale financiële- of andere structuur te realiseren, waaronder begrepen: aanpassingen van
63
Endemol's statuten,een liquidatie, eensplitsing overeenkomstig artikel 2:334a BWof eenverkoop van
alle ofvrijwel alleactivavan Endemol,aldan niet gevolgd door een uitkering van de daarmee gepaard
gaandeverkoopopbrengsten aandeAandeelhouders, eenenander overeenkomstig Nederlands recht
en de statuten van Endemol.Tevens behouden Edam Acquisition en Endemol zich het recht voor om
eenactiva-inbreng tedoen inEndemoltegende uitgiftevanaandelen inhetkapitaalvan Endemol,met
dien verstande dat ook de voorkeursrechten vanAandeelhouders kunnen worden uitgesloten, een en
ander overeenkomstig deop dat moment geldendewettelijke bepalingen ende statutenvan Endemol.
Elke dergelijke uitkering zou kunnen plaatsvinden in de vorm van een uitkering uit de reserves, een
interim-dividend, een dividend, of, in geval Endemol wordt geliquideerd, een liquidatie-uitkering,
hetgeen gedaan zou kunnen worden om de bedrijfsstructuur van Endemol in lijn te brengen met de
nieuwe holding- en financieringsstructuur van de Gecombineerde Groep.
Ten slotte behoudt Edam Acquisition zich het recht voor om gebruik te maken van elke andere
mogelijkheid om alle Aandelen te verwerven (inclusief, maar niet beperkt tot, de hiervoor genoemde
Juridische FusieenUitkoopprocedure). Dezemaatregelenzullen opeenredelijke-enefficiënte manier,
vanuit zowel operationeel- als juridisch- en fiscaal perspectief, worden gestructureerd en
geïmplementeerd,waarbij allerelevanteomstandigheden,toepasselijke wetten enregels inacht zullen
worden genomen.
14.15
Future govemance en werknemersbelangen
14.15.1 Leden van de Raad van Bestuur
DeledenvandeRaadvanBestuurzullenookindetoekomstwordenbenoemdopbasisvanhetprincipe
"the best person for the job".
14.15.2 Leden van de Raad van Commissarissen
Deledenvan de RaadvanCommissarissen zullen,voor zolang de Nederlandse corporate govemance
code van toepassing is op Endemol, worden genomineerd door de aandeelhouders van Edam
Acquisition. Dit geldt tevens voor de benoeming van de onafhankelijke leden van de Raad van
Commissarissen in de zin van de Nederlandse corporate govemance code.
14.15.3 Toekomstige samenstelling van de Raad van Commissarissen
De heer Fernandez Valbuena is afgetreden als lid van de Raad van Commissarissen effectief per de
TelefonicaOverdrachtsdatum.HetisvoorgesteldomdeheerBotmanalsvervangertebenoementijdens
een buitengewone algemenevergadering vanaandeelhouders op 5juli 2007. Deheer Smit ende heer
Badia Admirall zullen aftreden op de Overdrachtsdatum, maar in ieder geval niet later dan
30 kalenderdagen na de Laatste Aanmeldingdag.
14.15.4 Vergoedingen voor de leden van de Raad van Bestuur en de Raad van
Commissarissen
De heer Smit en de heer Badfa Admirall zullen voor het gehele jaar 2007 de vergoeding ontvangen,
welke zij jaarlijks ontvangen als lid van de Raad van Commissarissen. Deze vergoeding bedraagt in
2007 voor zowel de heer Smit als de heer Badfa Admirall EUR 50.000,00.
14.15.5 Werknemers
Edam Acquisition heeft zich verplicht om na de Overdrachtsdatum de onderneming voort te zetten
binnen het stelsel van Nederlandse govemance regels met inbegrip van (maar niet beperkt tot):
(i)medezeggenschapsregels zoalsdiewordentoegepast door EndemolGroep,en(ii)debepalingen uit
de Wet op de ondernemingsraden.
Edam Acquisition verwacht niet dat het Bod negatieve gevolgen zal hebben voor de werknemers van
Endemol of van de Endemol Groep in de zin van artikel 9i Sub x Bte 1995.
14.16
Financiering van het Bod
Edam Acquisition gelooft dat de voorgenomen kapitaal- en schuldstructuur voor de Endemol Groep:
(i) de Endemol Groep eenadequate matevanfinanciëleflexibiliteit biedt; (ii) de Endemol Groep ruimte
64
geeft voor niet-autonome groei; en (iii) kan worden ondersteund door de onderneming van de
Endemol Groep.
14.17
Fusieprotocol
In het kader van het Bod, zijn Endemol en Edam Acquisition op 18 juni 2007 een Fusieprotocol
aangegaan.
14.18
Algemene Vergadering
DeAlgemene Vergadering zal naar verwachting plaatsvinden in het Mövenpick Hotel Amsterdam City
Centre, Piet Heinkade 11,Amsterdam, op 23 juli 2007 om 13:00 uur Nederlandse tijd. Tijdens deze
Algemene Vergadering zal, onder andere, het Bod worden toegelicht en besproken een en ander
overeenkomstig Artikel 9q van het Bte 1995.
14.19
Aankondigingen
ledere aankondiging met betrekking tot het Bodzalgeschieden door middelvaneen persbericht in de
Officiële Prijscourant eneenpublicatie inten minste éénlandelijk Nederlands dagblad (Het Financieele
Dagblad en/of het NRC Handelsblad). Onder voorbehoud van enige wettelijke vereisten op grond van
de Fusieregels en zonder afbreuk te doen aan de manier waarop Edam Acquisition een publieke
aankondiging zou willen doen, zal op Edam Acquisition geen enkele verplichting rusten om een
publieke aankondiging te verrichten anders dan zoals hierboven uiteengezet.
14.20
Beoogd tijdschema
Verwachte datum en tijd
Gebeurtenis
(Alle tijden zijn vermeld in
Nederlandse tijd)
09:00 uur, 4 juli 2007
Publicatie waarin de verkrijgbaarstelling van het
Biedingsbericht en het Bod wordt aangekondigd
09:00 uur, 5 juli 2007
Eerste dag van de Aanmeldingstermijn
13:00 uur, 23 juli 2007
De Algemene Vergadering waarin onder andere het Bod
wordt besproken
26 juli 2007
Beoogde datum voor publicatie door Endemol van de
interim resultaten van de eerste 6 maanden van het
financiële jaar 2007
15:00 uur, 3 augustus 2007
Laatste Aanmeldingdag
15:00 uur, 10 augustus 2007
Overdrachtsdatum
14.21
Verkrijgbaarheid informatie
Adressen:
Edam Acquisition
Edam Acquisition B.V.
Flevolaan 41A
1411 KC Naarden
Nederiand
Endemol
Endemol N.V.
Bergweg 70
1217 SC Hilversum
Nederiand
Het Omwissel- en Betalingskantoor
ABN AMRO Bank N.V.
AS Exchange Agency MF 2020
65
Kemelstede 2
4817 ST Breda
Nederiand
RO. Box 3200
4800 DE Breda
Nederiand
Tel: +3176579 9455
Fax: +3176579 9643
Email: So.servicedesk,c&[email protected]
Het Informatiekantoor
Georgeson Sri.
Via Emilia 88
Rome—00187
Italië
Tel: +3906421711
Tel: +31800657070 (gratis informatienummer Nederlandse retail Aandeelhouders)
Fax: +390645239163
Email: [email protected]
Exemplarenvandit Biedingsbericht zijnverkrijgbaar op de website vanEndemol (www.endemol.com).
Endemol's website maakt op geen enkele wijze deel uit van dit Biedingsbericht. Exemplaren van dit
Biedingsbericht zijn verkrijgbaar op de website van het Informatiekantoor (www.georgeson.it). De
website van het Informatiekantoor maakt op geen enkele wijze deel uit van dit Biedingsbericht.
Exemplaren van dit Biedingsbericht kunnen tevens kosteloos worden verkregen ten kantore van
Endemol, het Omwissel- en Betaalkantoor en het Informatiekantoor. Exemplaren van het
Biedingsbericht, alsmede andere informatie omtrent het Bod, zijn voor Nederlandse retail
Aandeelhouders tevens kosteloos verkrijgbaar door te bellen met het bovenstaand gratis
informatienummer van het Informatiekantoor.
ExemplarenvandestatutenvanEdamAcquisition kunnen kostelooswordenverkregentenkantorevan
Edam Acquisition door contact op te nemen met Edam Acquisition op bovenstaand adres of
telefoonnummer. Edam Acquisition is een nieuw opgerichte vennootschap en dientengevolge zijn er
geen jaarrekeningen beschikbaar.
Exemplaren van de statutenvan Endemol,definanciële informatie van Endemol met betrekking tot de
jaarrekeningen van Endemol voor het boekjaar 2006, eindigend op 31 december 2006, voor het
boekjaar 2005,eindigendop31december 2005 (inclusief devergelijkende cijfersmetbetrekkingtot het
boekjaar 2004, eindigend op 31 december 2004), zoals vastgesteld door de Algemene Vergadering,
kunnen kosteloos worden verkregen ten kantore van Endemol en het Omwissel- en Betalingskantoor
door contact optenemen metEndemolofhetOmwissel-enBetalingskantoor op bovenstaand adresof
telefoonnummer. DestatutenvanEndemolendefinanciëleinformatievanEndemolzijndoor middelvan
verwijzing opgenomen in dit Biedingsbericht en maken integraal deel uit van dit Biedingsbericht.
66
15.
Endemol financial information
15.1
Endemol consolidated financial information relating to the financial years 2006, 2005
and 2004
Balance sheet Endemol N.V.
EUR 1,000
31 December 2006
31 December 2005
31 December 2004
ASSETS
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Investments in associates
Other financial assets
Deferred tax assets
47,471
172,687
12,759
6,758
5,970
17,938
40,584
150,209
7,578
15,373
11,413
10,765
41,426
141,341
7,139
15,052
86,742
23,915
263,583
235,922
315,615
339,182
24,117
87,428
240,315
23,248
67,433
241,963
18,902
117,824
450,727
330,996
378,689
714,310
566,918
694,304
Equity attributable to equity holders of
Endemol N.V.
Issued share capital
Share premium
Other reserves
Profit for the year
12,500
104,592
23,211
96,820
12,500
25,886
18,515
82,620
151,994
13,078
64,458
Minority interests
Total equity
237,123
7,557
244,680
139,521
6,408
145,929
229,530
5,834
235,364
2,211
690
8,349
7,089
9,518
8,460
2,228
566
5,465
364
431
4,706
33,680
5,704
2,156
7,122
36,317
16,119
46,303
97,796
24,254
1,744
115,580
22,852
24,551
129,253
21,949
15,074
265,732
43,787
208,671
33,216
222,675
23,686
433,313
404,870
412,637
Total liabilities
469,630
420,989
458,940
Total equity and liabilities
714,310
566,918
694,304
Current assets
Trade and other receivables
Receivables from tax authorities
Total assets
EQUITY AND LIABILITIES
Long-term loans and borrowings
Employee benefit obligations
Deferred tax liabilities
Long-term earn-out obligations
Long-term put option liabilities
Other non-current liabilities
Current liabilities
Short-term loans and borrowings
Short-term provisions
Short-term earn-out obligations
Short-term put option liabilities
Trade and other payables
Payables to tax authorities
67
Income statement Endemol N.V.
2006
EUR 1,000
Netturnover
Cost of outsourced work andother external costs
Employee benefit expense
Other operating expense
2
005
2004
1,117,415
(698,263)
(171,490)
(70,531)
(940,284)
900,132
(546,948)
(139,500)
(60,917)
(747,365)
850,943
(508,962)
(137,097)
(72,468)
(718,527)
EBITDA
Depreciation and amortisation expense
Impairment of goodwill and intangible assets
177,131
(14,589)
(2,007)
(16,596)
152,767
(16,544)
(822)
(17,366)
132,416
(14,700)
(495)
(15,195)
Operating result
Netfinancial income (expense)
Share in profit of associates
Profit before tax
Income tax expense
Profit for the year
160,535
(6,200)
131
154,466
(53,214)
101,252
135,401
(1,664)
1,392
117,221
(7,736)
1,739
135,129
(48,806)
111,224
(41,451)
86,323
69,773
Attributable to:
Minority interest
Equity holders of Endemol N.V.
Profit for the year
4,432
96,820
101,252
3,703
82,620
5,315
64,458
86,323
69,773
68
Cash flow statement Endemol N.V.
EUR1,000
- J ^
Operating result
Adjustments for:
Depreciation and impairment property, plant and equipment
Amortisation and impairment intangible assets
Share-based compensation expense
Movement in provisions
Other items
160,535
2
^ -
135,401
12,315
13,622
4,281
3,744
13,154
(1,731)
1,402
903
407 (14,123)
31,559
2,415
Changes in working capital:
Receivables (increase) decrease
Other current assets (increase) decrease
Taxes and social security (increase) decrease
Payables increase (decrease)
Other accruals increase (decrease)
(88,466)
9,943
(6,517)
(8,475)
4,523
(1,448)
56,152
(5,887)
1,758
(8,254)
Income taxes (paid) received
(32,550) (14,121)
(59,793) (28,265)
Cash flow from operating activities
Purchase of property plant and equipment
Purchase of intangible assets
Divestments of property, plant and equipment
Divestments of intangible assets
Acquisition of business combinations
Acquisition of joint ventures, associates and share increases
Dividend received from associates
Payment of earn-out obligations
Repayment (issue) of loans receivable
Trust account reduced (increased)
99,751
95,430
(13,685) (14,314)
(250)
(220)
1,140
2,416
1,437
—
(8,387)
(2,143)
(6,399)
(2,388)
937
956
(24,502) (25,472)
179
(498)
2,333
(408)
Cash flow from investing activities
Dividends paid
Proceeds (repayments) of loans payable
Net interest paid
(47,197) (42,071)
(10,000) (90,000)
(17)
1,864
(4,758)
(1,941)
Cash flow from financing activities
Net cash flow
Cash and cash equivalents as of 1January
(14,775) (90,077)
37,779 (36,718)
(48,147) (11,429)
Cash and cash equivalents as of 31 December
(10,368) (48,147)
69
Equity statement 2006
EUR1000
Issued
share Share
capital premium
Balance as of 1January 2006 . . 12,500
Foreign currency translation . . . .
Amortisation hedge reserve . . . .
Other movements
Net profit
Income and expense recognised
in equity during the year . . . .
Distribution of pre-incorporation
profit Of2005
Distribution of profit previous year
Reclassification of amortisation on
re-valued assets
Dividend paid
Dividend of subsidiaries
Capital contribution Telefonica for
share option plans (Note 8) . . .
Business combinations resulting
from acquisitions
25,886
—
—
—
—
—
_
(474)
—
(2,596)
67,946
_
_
—
—
—
—
2,743
—
(2,596)
—
—
—
—
—
—
—
—
—
—
1,395
—
474
—
_—
13,743
—
—
—
—
474
—
—
—
(330)
—
—
_
(362)
—
—
—
—
—
—
—
—
—
—
—
—
78,706
—
—
(362)
—
12,500 104,592
147
—
96,820
362
(10,000)
—
96,842
4,257 101,099
—
—
—
—
—
—
—
— (10,000)
—
—
— (3,832)
—
(10,000)
(3,832)
—
—
—
—
10,760
—
—
—
5,036 (82,620)
13,413
6,408 145,929
(2,596) (121) (2,717)
474
—
474
—
2,144
(54)
2,090
96,820 96,820 4,432 101,252
—
—
Minority Total
interest equity
—
— (67,946)
14,674 (14,674)
—
1,033
82,620 139,521
—
—
2,474
2,474
—
_
—
—
—
1,108
—
—
(330)
—
—
_
—
—
—
10,760
Transactions with equity holders
during the year and
reclassifications
Balance as of 31 December
2006
Equity attributable to equity holders of EndemolN.V.
Legal reserves
Other
Profit
Translation Hedge Revaluation legal Retained for the
reserve reserve reserve reserves earnings year
Total
8,618
10,760
724
724
760 (3,108)
96,820 237,123
(2,348)
7,557 244,680
Equity statement 2005
EUR1000
Equity attributable to equity holdersof Endemol N.V.
Legal reserves
Issued
Other
Income
share Share Translation Hedge Revaluation legal Retained for the
capital premium reserve reserve reserve reserves earnings year
Total
Balance as of 1January 2005 . . .
Change in accounting (Note 2) . .
— 151,944 (2,039)
—
(271)
—
(948)
—
1,337
—
14,778
-
Revised opening balance as of
1 January 2005
— 151,673
(2,039)
(948)
1,337
Foreign currency translation
Amortisation hedge reserve
Other movements
Net income (loss)
—
—
—
—
4,782
—
—
—
—
474
—
—
—
—
—
—
Income and expense recognised
in equity during the year
Distribution of profit to share
premium
Incorporation Endemol N.V.
Reclassification of amortisation on
re-valued assets
Business combinations resulting
from acquisitions
Dividend paid
Dividend of subsidiaries
Capital contribution Telefonicafor
share option plans
Assignment loan and distribution in
kind
Transactions with equity holders
during the year and
reclassifications
—
—
(3,306)
—
—
(3,306
4,782
— 64,458
12,500 (12,500)
474
—
_^
14,778
—
—
—
—
—
—
—
—
—
(1,035) 1,035
—
—
(1,035) 1,035
—
—
—
—
—
—
—
—
—
—
—
529
—
—
(602)
—
73
—
—
—
—
(90,000)
—
—
—
—
—
—
—
660
—
—
—
—
—
—
—
—
—
(1,041)
—
—
—
—
—
—
(83,927)
—
12,500 (122,481)
—
Balance as of 31 December 2005 12,500
25,886
2,743
—
—
_—
58
(474)
1,395
70
=
—
—
13,743
64,458 229,530 5,834 235,364
(271) (288)
(559)
64,458 229,259
4,782
74
474
—
—
(3,306)
29
82,620 82,620 3,703
82,620
—
—
88,376
—
—
660
668
1,328
(90,000)
—
(90,000)
— (3,612) (3,612)
(1,041)
— (83,927)
73
234,805
4,856
474
(3,277)
86,323
84,570 3,806
—
—
—
1,108
5,546
—
(64,458)
—
Minority Total
interest equity
—
—
(1,041)
(83,927)
(64,458) (174,308) (2,944) (177,252)
82,620 139,521
6,408
145,929
15.2
Notes to the Endemol Consolidated financial information for the financial years 2006,
2005 and 2004
15.2.1 Basis of preparation
Thefinancial information discussedorincorporated by reference inthisOffering Memorandum isbased
on and derived from:
• Endemol N.V.'s audited consolidated financial statements for the year ended
31December 2006,includingthenotesthereto,that havebeenprepared inaccordance with
International Financial Reporting Standards ("IFRS") as adopted by the European Union.
Ernst & Young Accountants has issued an unqualified auditor's report on these financial
statements on 11April 2007.
• Endemol N.V.'s audited consolidated financial statements for the year ended
31 December 2005,includingthe notesthereto andthe comparative datafortheyear2004,
thathavebeenprepared inaccordancewithIFRS.Ernst&YoungAccountants hasissuedan
unqualified auditor's report on these financial statements on 19 April 2006.
In2006 Endemol N.V. adopted achange inaccounting policies relating to the accounting treatment of
call and put options.Theeffect ofthischange inaccounting policies has not been included inthe 2004
comparative financial information.
In preparation for the listing of the shares in Endemol N.V in November 2005 and for various other
corporate purposes, the corporate structure of Endemol Group was restructured in September and
October 2005 (the "Reorganisation"). As part ofthe Reorganisation Endemol N.V.was incorporated on
28October2005andwasassigned,throughacontribution inkind,theownershipoftheEndemol Group
companieswiththeexceptionofEndemol France HoldingS.A.S.anditssubsidiariesandparticipations.
The Reorganisation, including the incorporation of Endemol N.V, is considered as a business
combination under common control according to IFRS3, Business Combinations. IFRS3 requires the
use of the purchase method for all business combinations within the scope of the standard. Business
combinations under common control however, are excluded from the scope of IFRS3. Endemol has,
therefore, not applied the purchase method and alternatively applied the pooling-of-interest method in
the 2005 financial statements and its 2004 comparative information.
Using the pooling-of-interest method, Endemol accounts for the Reorganisation by uniting the
ownership interest of the combined activities. As a consequence, the book value of the assets and
liabilities of the combined activities are carried forward to the consolidated balance sheet of
Endemol N.V. at their recorded amounts.
Income of Endemol N.V. includes the income of the combined activities of the Endemol Group for the
entire financial year 2005.The reported income of the activities for 2004 is combined and restated as
income of Endemol N.V
As a result of the incorporation of Endemol N.V. on 28 October 2005, only the company financial
information for the year 2006 and the comparative data for the year 2005 have been presented.
Transition to IFRS in 2004
As of 1January 2004 (thetransition date),the Endemol Group decidedtoadopt International Financial
Reporting Standards (IFRS) as its basis of accounting. As a consequence, for the year 2004, financial
statements have been prepared under both DutchGAAPand IFRS.Endemol N.V. isfulfillingthe criteria
ofafirst-timeadopter statedinIFRS 1byanexplicitandunreservedstatement ofcompliance withIFRS.
Tocreateastartingpointfor itslateraccounting under IFRS,theEndemolGroup hasdecidedtoissueits
first IFRS consolidated financial statements for the year ending 31 December 2004, andto prepare an
IFRSOpening BalanceSheetatthedateoftransition,1 January2004,aswellasthefinancial information
for 2004,incompliance with IFRS.Thebasictransition rule requiresafullretrospective application ofall
IFRSprinciples ineffectatthetransitiondatewithalladjustments intheopeningbalancesheettoassets
and liabilities as stated under Dutch GAAP taken to retained earnings. In compliance with
IFRS 1,Endemol has, if applicable:
- de-recognised existingassetsand liabilities iftheydo notqualifyfor recognition underIFRS;
71
- recognised new assets and liabilities that were not recognised under Dutch GAAR and
should be recognized under IFRS;and,
- re-classified assets and liabilities if required under IFRS.
Inpreparing itsopening IFRSbalancesheet,Endemolhasadjustedtheamounts reportedpreviously by
theEndemolGroup inaccordancewithitsformer basisofaccounting (DutchGAAP).The reconciliations
toIFRSofthebalancesheetinformation,theincomestatementandthecashflowstatement,as included
in the consolidated IFRS 2004 financial statements, have been prepared based on the Dutch GAAP
consolidated financial statements.
15.2.2 Company Overview
Endemol isagloballeaderintelevisionandotheraudiovisualentertainmentactivein25countriesonfive
continents.We create premium entertainment ideas offering them tothe world's leading broadcasters.
We then use our ideas to produce high-quality shows, often creating hits with strong brand value.
Subsequently, we exploit the value of our brands across other media and communication channels,
including, for example, mobile telephones and broadband internet.
To create ideas and develop brands, we secure and motivate local entrepreneurs who are creative
self-starters and cultivate strong creative teams. We distribute our content via aggregators such as
broadcasters, who largely fund our productions, thus minimising the risk of our business model. We
earnour revenues principally throughfeesfrom broadcasters and,toalesserextent,throughfees from
advertisers andtelecom and internet companies. Being an ideas-led company enables usto minimise
our investment in costly equipment and infrastructure.
Endemol N.V. is a publicly traded company listed on Euronext Amsterdam (100% of our shares are
listed). Telefonica, S.A. ("Telefonica") indirectly holds 74.8%of our shares.
Main Business Areas
The content we create comprises Scripted, Non-scripted and Digital Media:
- Scripted programmes are programmes such asdrama,comedy and soap operasfor which
writers pre-determine the script and structure.
- Non-scripted programmes comprise realityTVentertainment, gameshowsandtalent shows
in which the main events within the programme are not pre-determined by writers and
producers but are the result of actual events happening during the show.
- Digital Media productsaremainly but notexclusively brandexploitations of Endemol's main
programmes,including ringtones,'wallpaper' for pc's,broadband streamingof programmes
over the Internet and mobile phones, mobile and online games and interactive viewing
services including Participation TV.
15.2.3 Significant accounting policies
(a)
Basis of preparation of the consolidated financial statements
Theseconsolidatedfinancialstatements havebeenpreparedinaccordancewithIFRS
andalsocomply withthefinancialreporting requirements includedinPart9ofBook 2
of The Dutch Civil Code.
The financial statements have been prepared by the Management Board of the
Company and authorised for issue on 11 April, 2007 and will be submitted for
approval to the Annual General Meeting of Shareholders on 24 May, 2007.
The consolidated financial statements are presented in Euro, the Company's
functional and reporting currency, roundedtothe nearestthousand. Historical cost is
used as the measurement, except for derivative financial instruments, earn-out
obligations and put option liabilities which are stated at fair value.
(b)
Critical accounting judgements and estimates
The preparation of the financial statements requires management to make
judgements, estimates and assumptions that affect the application of policies and
72
reportedamountsofassetsandliabilities,incomeandexpenses,whichmainly affects
intangible assets, goodwill, earn-out obligations and taxes. The estimates and
associated assumptions are basedon historical experience andvarious other factors
thatarebelievedto be reasonable underthecircumstances,the resultsofwhichform
thebasisformakingjudgementsaboutcarryingvaluesofassetsandliabilitiesthatare
not readily apparent from other sources. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisionstoaccounting estimates are recognised inthe period inwhichthe estimate
is revised, if the revision affects only that period, or inthe period of the revision and
future periods, if the revision affects both current and future periods.
Theaccounting policies,setoutbelow,havebeenappliedconsistently inthefinancial
statements and have been applied consistently by group entities.
(c)
Change in accounting policy
InJuly 2006 the International Financial Reporting Interpretation Committee ('IFRIC')
clarifiedbyanagendadecisiontheapplication ofaspecific paragraph in International
Accounting Standard 32 "Financial Instruments: Presentation" ("IAS 32", revised
2005). According to this clarification a parent company should recognise a liability
whenithasanobligationtopaycashinthefuturetopurchase minority'sshares,even
ifthe payment isconditional on the option being exercised by the holder. Ina limited
number of business combinations Endemol grantedtheseller/minority shareholder a
put option to sell inthe future (part of) the remaining shares to Endemol. Following
IAS32and despite the (legal) minority rights the related put option is now treated as
financial liability inEndemol's consolidatedfinancial statements,statedatfairvalueof
the amount to be paid upon exercise of the option.
The put option liabilities have been measured by applying a choice of different
valuationtechniques,basedonbestestimatescurrentlyavailable,andispresented in
a separate line on the consolidated balance sheet (Put option liabilities). Following
IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors", the
clarification ofthe revised IAS32istreatedasachange inaccounting policy effecting
Endemol's financial statements of 2006 with corresponding adjustments to the prior
periods presented.The related minority interests havebeen reclassifiedto put option
liabilitieswiththedifference betweenthetwoamountsaccountedforagainstgoodwill.
Dividend payments to minority shareholders aretreated asfinancial expense unless
the payment reduces the put option liability. All changes to the fair value of the put
option are treated as contingent consideration in a business combination in
accordancewithIFRS3"BusinessCombinations" andledtoadjustments ofgoodwill.
The Opening balance 2005 of Shareholders' equity and minority interest are
EUR 0.3 million and EUR 0.3 million lower, respectively, due to this change
in accounting.
The impact of this revised accounting policy on Endemol's consolidated financial
statements for 2005 and 2006 is as follows:
2006
EUR 1,000
Goodwill increase/(decrease)
Shareholders' equity increase/(decrease)
Minority interests increase/(decrease)
Other non-current liabilities increase/(decrease)
Put option liability increase/(decrease)
Net profit increase/(decrease)
2005
(1,233) 2,256
(1,552) (1,178)
(375)
(865)
— (1,405)
694 5,704
(374)
(907)
TherearenoothernewInternational FinancialReportingStandardsand amendments
or new interpretations that areapplicable asofJanuary 1, 2006that effect Endemol's
consolidated financial statements for 2006 other than some extended disclosures.
73
(d)
Basis of consolidation
Subsidiaries
The Consolidated financial statements include the financial statements of the
Companyanditssubsidiaries.SubsidiariesareentitieswheretheCompany exercises
a controlling influence. Control exists when the Company has the power, directly or
indirectly, to govern the financial and operating policies of an entity so as to obtain
benefits from its activities. Inassessing control, potential voting rights that presently
are exercisable or convertible are taken into account. The financial statements of
subsidiaries are included in the financial statements from the date that control
commences until the date that control ceases. A minority interest is recorded in the
consolidated balance sheet and the statements of operations for the minority
shareholders' share in the net assets and the profit or loss of subsidiaries. When
Endemol gains control in a subsidiary the purchase method (purchase price
allocation) isappliedtoaccountfortheacquisition,taking intoaccountthefairvalueof
assets, liabilities, possible intangible assets, goodwill and if applicable minority
interest.
Joint ventures and associates
Ajoint venture isacontractual arrangement whereby the Company and other parties
undertake an economic activity that is subject to joint control. Joint control exists
whenstrategicfinancialandoperating policydecisionsrelatingtotheactivities require
the unanimous consent of the parties sharing control. The consolidated financial
statements include the Company's share ofthe total recognised gains and losses of
joint ventures on a proportional consolidated basis, from the date that joint control
commences until the date that joint control ceases.
Associates arethoseentities inwhichthe Company hassignificant influence, but not
control, overthefinancial and operating policies.Significant influence isthe power to
participate in the financial and operating decisions of the entity but is not control or
joint control.The consolidated financial statements include the Company's share of
the total recognised gains and losses of associates on an equity accounted basis,
from the date that significant influence commences until the date that significant
influence ceases.
Special purpose entities
Special purpose entities ('SPE'), which are entities created to accomplish a narrow
and well-defined objective, are consolidated when the substance of the relationship
between the Company and the SPE indicates that the SPE is controlled by
the Company.
Intra-group transactions
Intra-group balances and any unrealised gains and losses or income and expenses
arising from intra-group transactions, are eliminated in preparing the financial
statements.
Unrealised gains arising from transactions with associates and joint ventures are
eliminated tothe extent ofthe Company's interest inthe entity. Unrealised losses are
eliminated inthesamewayas unrealised gains, but onlytothe extentthatthere isno
evidence of impairment.
(e)
Foreign currency translation
Subsidiaries, joint ventures and associates record transactions in their functional
currency. This is the principal currency of the economic environment in which they
operate.Transactionsincurrenciesotherthanthefunctionalcurrency arerecorded in
the accompanying statements of operations at the rate of exchange in effect at the
date of transaction. Monetary assets and liabilities denominated in currencies other
than thefunctional currency aretranslated at the rates of exchange prevailing at the
74
consolidated balance sheet date.Transaction foreign currency gains and losses are
reported in the statements of operations.
Upon consolidation, the assets and liabilities of foreign operations with a functional
currency otherthantheEuroaretranslatedtoEuroattheratesofexchange prevailing
atthebalancesheetdate.Thestatementsofincomedenominated incurrencies other
than Euro are translated using an average exchange rate. The resulting exchange
differences are recorded directly in consolidated shareholders' equity and are only
included in income upon sale or liquidation ofthe underlyingforeign subsidiary. The
Company records directly into shareholders' equity exchange gains or losses
resultingfrom re-valuing intra-group loansforwhichsettlement isneither planned nor
likelytooccur intheforeseeablefuture.Exchange gainsand losses resultingfromthe
translation of foreign operations with a functional currency other than the Euro are
recorded in shareholders' equity upon consolidation.
(f)
Items of property, plant and equipment are stated at historical cost or deemed cost
less accumulated depreciation and impairment losses. Where parts of an item of
property, plant and equipment have different useful lives,they are accounted for as
separate components of property, plant and equipment. Borrowing costs directly
attributable to the construction or production of assets are capitalised as part of
the relatedasset. Subsequent expenditure iscapitalized onlywhen itisprobable that
thefutureeconomic benefitsassociatedwiththeitemwillflowtotheCompany andthe
costoftheitemcanbemeasuredreliably.Allothercostsarerecognisedinthe income
statement as expense when incurred.
Depreciation is charged to the income statement on a straightline basis over the
estimated useful life of each part of an item of property, plant and equipment, taking
intoaccounttheestimated residualvalue.Landisnotdepreciated.Theasset's useful
lives and residual values are reviewed and adjusted if necessary, annually.
Based onthe estimated useful lifeofthe underlyingassets,thefollowing depreciation
periods apply:
- Land
- Buildings
- Plant and equipment
- Other
Indefinite
13-33 years
8-13 years
3-5 years
Leasedproperty, plantandequipment,forwhichtheCompany substantially assumes
all of the benefits and risks of ownership, are classified as finance leases. Finance
leases are capitalised at their fair value of the leased asset or at the estimated net
present value of the underlying lease payments, whichever is the lower. The
corresponding current and long-term rental obligations, net of finance charges, are
included in the balance sheet as current and long-term payables, respectively.
Finance costs are charged to the income statement over the life of each respective
lease.
Payments madeunderoperating leasesarechargedtotheincomestatement inequal
instalments over the life of the leases, except where an alternative method is more
representative of the time pattern from which benefits are derived.
An item of property, plant and equipment is derecognised whenever the company
disposes of it, or when no more future benefits are expected by its use or disposal.
Profit or loss from the de-recognition of an item of property, plant and equipment is
calculated as the difference between the net amount of the disposal and the book
value of the asset. The profit or loss is recognised in the income statement in the
period in which the de-recognition occurs,
75
(g)
Intangible assets
Goodwill
Goodwill represents the excess of the costs of an acquisition over the Company's
interestinthenetfairvalueofthe identifiableassets,liabilitiesandcontingent liabilities
atthe date of acquisition,and iscarried at cost lessaccumulated impairment losses.
Goodwill on acquisition of associates is included in investments in associates.
The Company typically acquires its subsidiaries at a purchase price that consists of
(an) initial cash payment(s) and estimated future earn-out obligations, based on
(orrelatedto)estimatesoffuture results.Earn-outobligations arerecalculatedatleast
annually on the basis of the expected future results of the respective company after
the business plancycleorearlier when updatedforecastswarrant arecalculation.An
adjustment in the earn-out obligation has a corresponding effect on the goodwill.
When abusiness combination isachieved instages by successive share purchases,
with or without the use of call and put options the fair value of identifiable assets,
liabilitiesandcontingent liabilitiesarefully recognised inthebalancesheet.A minority
interestisrecognisedforthenon-ownedshare,aswellasarevaluation reserve related
totheshareownedbytheCompany beforethebusinesscombinationforthefairvalue
of the identified assets, liabilities, and contingent liabilities. The related minority
interest is released in the income statement over a time period that is equal to the
amortisation period of the identified assets, taking into account income tax effects.
The revaluation reserve is recognised as retained earnings upon realisation.
Forthe purpose ofimpairment testing goodwill isallocatedtothesmallest identifiable
cash-generating units. Cash generating units to which goodwill has been allocated
aretestedforimpairmentannually,ormorefrequentlywhenthere isanindication that
the needforanimpairment mayhavearisen.Animpairment loss isrecognisedforthe
amount by which the asset's carrying amount exceeds its recoverable amount. The
recoverable amount isthe higher ofanasset's fairvalue lesscostto selland itsvalue
in use. In assessing value in use, the estimated future cash flows are discounted to
their presentvalue.Animpairment lossisallocatedfirsttoreducethecarrying amount
ofthegoodwillandthentotheotherassetsofthecashgenerating unitpro-rataonthe
basisofthecarrying amount ofeachasset inthe unit.Animpairment loss recognised
for goodwill is not reversed in a subsequent period.
Other intangible assets consist primarily of format rights, (TV) movie rights and
contracts with customers. These assets can either be purchased, acquired in a
business combination or internally developed if certain criteria for capitalisation
are met.
Purchased other intangible assets arestatedat historical cost,which isthe purchase
priceplusallnormalancillarycosts.Amortisationoccursovertheperiodthe Company
isexpectedtobenefitfromtheuseoftheintangibleasset.Formatrightsare amortised
asfromthetimetheformat istakenintoproduction andinproportiontothenumberof
episodes produced. (TV) movie rights are amortised to the extent to which the
revenue, generated in the period under review, contributes to the expected total
revenue.The amortisation offormat rights and (TV) movie rights does not exceed a
period of ten years.
Formatrights,(TV)movierightsandcontractsacquired inabusinesscombinationare
valued based on the cash flows expected to be generated from the assets over its
useful life. The amortisation period for these rights equals the period during which
cash flows are expected.
Anintangibleassetarisingfromthedevelopment expenditure onanindividual project
is recognised only when the Company can demonstrate the technical feasibility of
completingthe intangible assetssothat itwill beavailablefor useorsale,its intention
to complete and its ability to use or sellthe asset, how the asset will generate future
76
economic benefits,theavailabilityofresourcestocompletetheassetandtheabilityto
measure reliably the expenditure during the development.
Basedontheestimated usefullifeofthe underlyingassets,thefollowing amortisation
periods apply:
- Format rights
- (TV) movie rights
- Contracts
- Other
(h)
3-10 years
3-10 years
5-8 years
3-5 years
Financial assets
Any excessofthe cost ofacquisition over Endemol's share ofthe netfair value ofthe
identifiable assets, liabilities and contingent liabilities of the associate recognised at
the dateofacquisition isrecognisedasgoodwill. Forassociates goodwill is included
withinthe carrying amount ofthe investments and isassessedfor impairment as part
of the investment.
When the Company's share of losses exceeds its interest in an associate, the
Company's carrying amount is reduced to nil and recognition of further losses is
discontinued excepttotheextentthattheCompany hasincurred legalor constructive
obligations or made payments on behalf of an associate.
Unrealisedgainsarisingfromtransactionswithassociatesareeliminatedtotheextent
ofthe Company's interest inthe entity. Unrealised losses are eliminated inthe same
wayasunrealisedgains,butonlytotheextentthatthereisnoevidenceof impairment.
Other financial assets consist of loans and non-current receivables andare stated at
amortised cost, with any difference between cost and redemption value being inthe
income statement on an effective interest basis.
(i)
Impairment of non-current assets other than goodwill
The carrying amounts of the Company's non-current assets with finite lives are
reviewed annually to determine whether there is an indication for impairment. If any
such indication exists, the asset's recoverable amount is estimated.
The recoverable amount isthe higher of an assetsfair value less cost to sell and its
valueinuse.Inassessingvalueinuse,theestimatedfuturecashflowsare discounted
to their present value, using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. For an
asset that does not generate independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs. A
cash-generating unit isthe smallest identifiable group of assets that generates cash
inflows that are largely independent ofthe cash inflows from other assets or groups
of assets.
An impairment loss is recognised whenever the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. Impairment losses are
recognised in the income statement.
In subsequent years, Endemol assesses whether indications exist that impairment
losses previously recognised for non-current assets other than goodwill may no
longer exist or may have decreased. If any such indication exists, the recoverable
amount ofthatasset (orcash generating unit) isrecalculated and itscarrying amount
is increased to the revised recoverable amount. The increase is recognised in
operating result. A reversal is recognised only if it arises from a change in the
assumptions used to calculate the recoverable amount. An impairment loss is
reversedtothe extentthatthe asset's carrying amount does not exceedthe carrying
77
amount that would have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
(j)
Trade receivables
Tradereceivablesarecarriedatamortised cost,which isusually the nominalvalue.In
case necessary, allowances for bad debts are recorded when collection of the full
receivable is no longer probable.
Amounts due from/due to customers in relation to productions in progress
All revenues and expenditures for unfinished productions arecapitalised as amounts
duefrom/duetocustomersinrelationtoproductions inprogress.Foreach production
thenetamountofthesumofwork inprogressanduninvoicedturnover lessthesumof
deferredrevenuesandaccrued production costsiscalculated.Anassetisrecordedif
the sum of work in progress and uninvoiced turnover exceeds the sum of deferred
revenuesandaccrued production costs,presentedasamountduefromcustomers in
relation to productions in progress. A liability is recorded if the sum of deferred
revenues and accrued production costs exceeds the sum of work in progress and
uninvoicedturnover, presentedasamountduetocustomers inrelationto productions
in progress.
(k)
Cashandcashequivalents includeallcashonhandbalances,short-termhighly liquid
cash investments and time deposits with original maturities of three months or less.
(I)
Employee benefit obligations
In many of Endemol's business areas Endemol participates in pension and similar
plansfor itsemployees. Obligations for contributions to defined-contribution pension
plans are recognised as an expense in the income statement as incurred.
A net obligation or net asset recognised in the consolidated balance sheets for
defined benefit pension plans represents the present value of the defined benefit
obligations lessthefairvalueofplanassets,adjustedforunrecognisedactuarialgains
and losses and unamortised past service cost. Endemol applies the corridor
approach inrecognisingactuarialgainsandlossesrelatedtothese plans.Anetasset
recognised is limited to the net total of any unrecognised actuarial losses and past
servicecostsandthepresentvalueofanyfuturerefundsfromtheplanorreductions in
future contributions to the plan.
Endemol accountsfor multi-employer plans usingdefined benefit accounting,except
for those plans where sufficient and reliable information is not available.
For other long-term employee benefits, such as long-term service benefits, the net
obligationistheamountoffuturebenefitthatemployees haveearnedinreturnfortheir
service in the current and prior periods. Endemol's net obligation in respect of
long-termemployee benefits,otherthanpension plans,istheamountoffuture benefit
thatemployees haveearned inreturnfortheirservice inthecurrent and prior periods.
The obligation iscalculated usingthe projected unitcredit method and is discounted
to its present value and the fair value of any related assets is deducted.
(m)
Provisions
Aprovision isrecognisedinthebalancesheetwhentheCompany hasapresent legal
or constructive obligation as a result of a past event, it is probable that an outflow of
economic benefitswill be requiredto settlethe obligation andareliableestimate can
be made of the amount of the obligation.
Ifthe effect ismaterial,provisions aredetermined by discounting the expected future
cashflows ata pre-tax discount rate,that reflects current market assessments of the
78
time value of money and, where appropriate, the risks specific to the liability.
Recoveriesfromthirdparties,whicharelikelyto berealised,arerecorded separately,
and are not offset against the related liability.
A provision for restructuring is recognised when the Company has approved a
detailedandformal restructuring planandthe restructuring haseithercommenced or
has been announced publicly.
A provision for onerous contracts is recognised when the expected benefits to be
derived by the Company from a contract are lower than the unavoidable cost of
meeting its obligations under the contract and when such provision can be
reasonably estimated.
(n)
Loans and borrowings
Interest-bearing borrowings are recognised initially at the proceeds received less
attributable transaction costs. Subsequent to initial recognition, interest-bearing
borrowings are stated at amortised cost with any difference between cost and
redemption value being recognised in the income statement over the period of the
borrowings based on the effective interest method.
(o)
Earn-out obligations
In many of the Company's acquisitions part of the purchase price consideration
depends onfuture results. Forthis contingent consideration anearn-out obligation is
recognised atfair value upon acquisition date. Interest accretions are recognised in
the income statement asfinancial expense. Earn-out obligations are recalculated at
least annually based on expected future results ofthe respective company, or earlier
when indicators warrant a recalculation. Any adjustment of the earn-out obligations,
resulting from these recalculations, is accounted for against goodwill.
(p)
Put option liabilities
A put option liability is recognised in case the Company granted a minority
shareholder anoptiontoselltotheCompany itsremaining interest.Thisisconsidered
to be an obligation as the Company acquires its own equity, even if the exercise is
contingent and conditional. The liability is recognised for the present value of the
redemption amount. Interest accretions are recognised in the income statement as
financial expense. Tothe extent dividend payments to minority shareholders reduce
the redemptionamount,theyarerecognisedagainsttheputoption liability. Otherwise
dividend payments to minority shareholders are recognised as financial expense in
the income statement upon profit distribution.
(q)
Share-based payments
Telefonica stock option schemes ("EN-SOP")
Endemol accounts for the Telefonica stock option schemes as cash-settled sharebased payment transactions in accordance with IFRS 2. Upon inception of the
schemes, the equity component was considered to be non-existent or negligible.
Share options granted to employees are measured at fair value at the end of each
reporting period.Compensation expense isrecognised inthe income statement over
thevestingperiodoftheshareoptions.Thefairvalueoftheshareoptionsiscalculated
using the market price of the underlying shares and an option valuation model
(the Black-Scholes model). Changes in the fair value of the share options are
accounted for in the income statement as personnel expenses.
Endemol performance share and performance option plans
Endemol accounts for the Endemol performance share and option schemes as
equity-settled share-based payments transactions in accordance with IFRS 2.
79
The costs of equity-settled transactions with employees is measured by reference to
thefairvalueatthedateonwhichtheyaregranted.Thefairvalueisdetermined byan
external valuator using a Monte Carlo simulation. The cost of equity settled
transactions is recognised over the period in which the performance conditions are
fulfilled (vesting period), against equity. The cumulative expense recognised for
equity-settledtransactions atreportingdate untilthevesting datereflectstheextentto
whichthevesting periodhasexpiredandtheCompany's bestestimateofthe number
of equity instruments that will ultimately vest.
(r)
Turnover
Turnover from non-scripted television productions (i.e. entertainment and
infotainment) is recognised in the income statement in proportion to the stage of
completion of the production at the balance sheet date. The stage of completion is
assessed by reference to surveys of work performed.
Income recognition of scripted television productions (i.e. drama productions or
soaps) isbased onthedeliverables inthe production.The remaining part ofthe costs
and possible advance receipts are capitalised as amounts due from customers and
amounts due to customers, respectively.
Income recognition of other television productions is based on the income and
production costsofthecompleted episodes. Incomefrom merchandising,music and
other sources is recognised at the time of delivery.
Turnoverfromthesaleoflicensingrightsonintellectual propertyformats isrecognised
in the income statement when the significant risks and rewards of ownership have
been transferred to the buyer and the turnover can be reliably measured.
Turnover in the digital media business is recognised on the basis of the number of
callsorminutesspentoncalls,thenumber ofSMSmessages receivedorthe number
of Internet hits made. In addition, turnover is recognised for digital media business,
based on the number of games sold and/or subscriptions sold in relation to the
platforms provided.
(s)
Expenses
Expenses arerecognised inthe incomestatement onthe basisofadirect association
between the costs incurred and the earning of specific items of income.
(t)
Income tax
Income tax inthe income statement represents the sum of current and deferred tax
expense. Current tax isthe expected tax payable onthe taxable income for the year,
usingtaxratesenactedorsubstantially enactedatthe balance sheetdate,taking into
accountexempted profitconstituents,nondeductiblecostsandanyadjustmenttotax
payable in respect of previous years. Income tax is recognised in the income
statement, excepttothe extentthat it relatesto items recognised directly inequity, in
which case the related income tax is recognised in equity.
Deferred tax is accounted for using the asset and liability method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. Deferred
taxassetsandliabilitiesarenotrecognisedforgoodwill,which isnotdeductiblefortax
purposes,the initial recognition ofassets or liabilitiesthat affect bothaccounting and
taxable profit,anddifferences relatingto investments insubsidiariestotheextentthat
they will probably not reverse in the foreseeable future. The amount of deferred tax
provided isbasedonthe expected manner of realisation orsettlement ofthe carrying
amountofassetsandliabilities,usingtaxratesenactedorsubstantivelyenactedatthe
balance sheet date. A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against which the asset can be
utilised. Deferredtaxassetsarereducedtotheextentthatitisno longer probablethat
the related tax benefit will be realised.
80
(u)
EBITDA
TheCompany usesthe EBITDA heading inthe income statement.Wedefine EBITDA
as profitfor theyear beforedepreciation,amortisation, impairment, financial income,
financial expense, share in profit of associates and income tax. EBITDA is not a
measurement under IFRSand should not be considered as an alternative to (a) net
profit, (b) cashflowsfrom operating, investing orfinancing activities,orasa measure
of our ability to meet cash needs or (c) any other measures or performance under
IFRS. EBITDA is not a direct measure of our liquidity, which is shown by the
Company's cash flow statement and should be considered in the context of our
financial commitments. EBITDA may not be indicative of our historical operating
results, and may not be predictive of our potential future results. Because all
companies do not calculate EBITDA identically, the presentation of EBITDA may not
be comparable to similarly named measures of other companies.
(v)
Segment reporting
Asegment isadistinguishable component ofthe Company that isengaged either in
providing certaintypes ofservices (business segment) or inproviding services within
aparticulareconomic environment (geographicalsegment) andthatissubjecttorisks
and rewards that are different from those of other segments.
(w)
Financial instruments
Derivative financial instruments and hedging activities
The Company usesderivative financial instruments principally inthe management of
its foreign currency and interest rate risks. The Company measures all derivative
financial instruments based onfair values, derivedfrom market prices or a valuation
model.
Gains or losses arising from changes in the fair value of the instruments are
recognisedintheincomestatementduringtheperiodinwhichtheyarise,totheextent
that the derivatives have been designated asafair value hedge, orto the extent that
the derivatives have no hedging designation or are ineffective. Gains and losses on
derivatives designated as cash flow hedges are included in the hedge reserve, a
component of shareholders' equity. The gains and losses on the designated
derivatives substantially offset the changes in the values of the recognised hedged
items, which are also recognised as gains and losses in the income statement.
This process includes linking all derivatives that are designated as fair-value,
cash-flow orforeign-currency hedgestospecific assetsand liabilities onthe balance
sheet or to specific firm commitments or forecasted transactions.
Changes inthefairvalue of aderivative that is highly effective and that is designated
and qualifies as a cash-flow hedge, are recognised directly in equity until income is
affected by the variability in cash flows orforecasted transactions of the designated
hedged item. Changes in the fair value of derivatives that are highly effective as
hedgesandthataredesignatedandqualify asforeign-currency hedgesare recorded
ineithertheincomestatementorrecogniseddirectlyinequity,depending onwhether
the hedge transaction is a fair-value hedge or a cash-flow hedge.
Ifderivatives qualifyandaredesignatedasahedge,theCompanyformallyassesses,
bothatthe hedge's inceptionandonanongoing basis,whetherthesederivatives are
highly effective inoffsetting changes infair values orcashflows ofthe hedged items.
When itisdetermined thataderivative isnot highly effective asahedge orthat ithas
ceasedto bea highly effective hedge,the Company discontinues hedge accounting
prospectively.When hedge accounting isdiscontinued because it isdetermined that
the derivative no longer qualifies as an effective fair-value hedge, the Company
continues to carry the derivative on the balance sheet at itsfair value,and no longer
adjuststhe hedgedassetorliabilityforchanges infairvalue.When hedge accounting
is discontinued because it is probable that a forecasted transaction will not occur
within a period of two months from the originally forecasted transaction date, the
81
Company continues to carry the derivative onthe balance sheet at itsfair value, and
gainsandlossesthatwererecogniseddirectlyinequityarerecognisedimmediately in
the income statement. In all other situations in which hedge accounting is
discontinued, the Company continues to carry the derivative at its fair value on the
balance sheet, and recognises any changes infair value in the income statement.
Call and put options relating to acquisition contracts (embedded derivatives)
Endemol hasentered intovarious calland put options inconnection with some of its
acquisitions.Calloptionsarevaluedatfairvalueand recognised inthe balance sheet
whenthe option exercise price is lower than the underlying fair value ofthe potential
future investee. Granted put options to joint venture partners and shareholders of
entitieswhere Endemol does not havecontrol arevaluedatfairvalueand recognised
when the option exercise price is higher than the underlying fair value of the entity
involved. The fair value of the options is re-measured at each reporting date. All
changes infairvaluesareaccountedfor inthe income statement, asfinancial income
or expense.
(x)
Compilation of cash flow statement
In the statement of cash flows, cash flows from operating activities are presented
using the indirect method.The net result for the period is adjusted for the effects of
non-cash transactions, accruals and items of income or expense associated with
investing or financing cash flows. Cash and cash equivalents comprise cash at the
bank (both debit and credit) and (call) deposits.
(y)
Recent IFRS pronouncements
During 2006, the IASB issued new International Financial Reporting Standards and
amendments and the IFRIC issued new interpretations with an effective date on or
after January 1, 2007, of which the following are applicable to the consolidated
financial statements of Endemol:
IFRS7"Financial Instruments: Disclosures" requires disclosure ofthesignificance of
Financial instruments for an entity's position and performance and qualitative and
quantitative information on risks arising from financial instruments. The Standard is
effective from 2007 onwards. The effect on Endemol's disclosure is expected to be
limited because many of the required disclosures are already supplied.
IAS 1 "Presentation of Financial Statements" is amended in order to disclose
informationaboutEndemol's objectives,policiesandprocessesformanagingcapital.
The Standard is effective from 2007 onwards.
IFRS8"Operating Segments" isanewstandardthatiseffectiveonorafterJanuary1,
2009andreplaces IAS 14"Segment Reporting".Thenewstandardrequires segment
information to be presented similar to information management uses internally for
evaluating the performance of the operating segments and allocating resources to
those segments. Endemol does not expect the new standard will materially alter the
current segment information disclosure.
IFRIC 9 "Reassessment of Embedded Derivatives" requires an entity to assess
whether a contact contains an embedded derivative at the date the entity first
becomesapartytothe contractand prohibits reassessment unlessthere isachange
andthecontractsignificantly modifiesthecashflows.Theinterpretation iseffectivefor
annual periods beginning on or after June 1, 2007. Endemol is in the process of
evaluation the impact, if any, on the Company's consolidated financial statements.
IFRIC 11 "IFRS 2—Group and Treasury share transactions" requires arrangements
whereby an employee is granted rights to an entity's equity instruments to be
accountedforasanequity-settledscheme bytheentity.Theinterpretation is effective
forannual periods beginning on orafter March 1,2007. Endemol isinthe process of
evaluating the impact, if any, on the Company's consolidated financial statements.
82
15.2.4
Acquisitions
2006
InJanuary 2006, Endemol increased its stake in Nijenhuis en de Levita Holding B.V. ("NL Film & TV")
from 40%to 51%. NL Film &TV is a Dutch production company, which focuses on scripted television
drama, comedy and feature films.
NLFilm &TV has been proportionally consolidated as of 1January 2006,since Endemol considers to
have joint control.
In Italy, Endemol participated in a start-up company end February 2006, called Yam,to strengthen its
Digital Mediaactivities inthis market. Inadditionto reinforcing Endemol Italy's current business,Yamis
focusing on creating new content for various digital platforms, especially mobile phones. Endemol
acquired 51%oftheshares. Inaddition,Endemol acquired calloptionsforthe remaining shares ofYam
andgrantedthesellersaputoptiontoselltheirremainingshares,whichisexercisableafterexpirationof
the last call option exercise term. Yam has been fully consolidated as from the date of acquisition.
In Spain, Endemol acquired 100% of the shares of Portalmix, a digital media company, on
30 March 2006. Portalmix has been fully consolidated as from that date.
InJune 2006 the acquisition of afurther stake in SNP Holding inThe Netherlands increased our stake
from 85% to 100%. The results of SNP Holding were already consolidated in our accounts prior to
that date.
InAugust2006EndemolincreaseditsstakeinEndemolAndino (Colombia)from51%to85%.Theresults
of Endemol Andino were already consolidated in our accounts prior to that date.
InAugust2006,Endemolacquired 100%ofthesharesofEstudio MayorinArgentina.Estudio Mayorhas
been fully consolidated as from the date of acquisition.
InOctober 2006 Endemol acquired 51% ofthe shares ofthe German company Callactive. Callactive is
one of the market leaders in Participation TV formats in Germany and Switzerland. In addition to the
acquisition of the shares, Endemol acquired call options for the remaining shares of Callactive and
grantedthesellersaputoptiontoselltheir remaining shares,which isexercisableafterexpiration ofthe
last call option exercise term. Callactive has been fully consolidated as from the date of acquisition.
InNovember 2006Endemolacquiredaninterestof 51% inJoeCartoon intheUnitedStates.JoeCartoon
develops and creates tailor-made (animation) content for distribution via various platforms, including
internet, wireless networks and television. JoeCartoon is fully consolidated as from the date of
acquisition. Inadditiontotheacquisition oftheshares,Endemol acquired calloptionsforthe remaining
shares of JoeCartoon.
InDecember 2006 Endemol increased itsstake inEndemolArgentinafrom65%to80%andbought out
one of the other shareholders. The results of Endemol Argentina were already consolidated in our
accounts prior to that date.
83
InDecember 2006 Endemol increased itsstake inEndemol Chilefrom 65%to 80%and bought out one
oftheothershareholders.Theresultsof EndemolChilewerealready consolidated inouraccounts prior
to that date.
Aggregate of business combinations
EUR 1,000
Initially re
recorded
amounts subsidiary
Non-current assets
Current assets
Current liabilities
2,723
3,689
(61)
(3,449)
Net assets
Interest acquired
Fair value call options acquired
2,902
Application of
accounting for
business combinations
Recognised
at fair value
12,302
15,025
3,689
(4,769)
(3,449)
(4,708)
7,594
10,496
10,404
74
Goodwill
10,478
13,281
Total
23,759
Purchase price
Initial payments
Deferred payments
8,387
2,830
3,811
8,731
Total
23,759
These business combinations contributed EUR 0.3 million to Endemol's net profit in 2006.
The consideration paid in cash for the other acquisitions in 2006 was EUR 6.4 million (2005:
EUR 2.4 million), with a related goodwill of EUR 11.3 million.
2005
Theacquisition ofanadditional 25%ofthe shares in MetaEntertainment increased our staketo65%in
January 2005, and, as from 1January 2005, its results have been fully consolidated with a minority
interest.
As of 1 January 2005, Endemol exercised a call option to acquire 30% of the shares of the Dutch
company TVBVB.V, bringing Endemol's ownershipto70%.AsEndemol did notobtaincontrol butjoint
control, the share in TVBV B.V. is consolidated proportionally as of the date of exercise of the option.
Endemol reported its share in TVBV B.V. until 2004 as "interest in associates".
The acquisition of afurther stake in Stokvis & Niehe Producties inApril 2005 increased our stake from
80%to85%.The resultsofStokvis &Niehe Producties werealready consolidated inouraccounts prior
to that date.
As of 1May 2005, Endemol USA exercised a call option to acquire an additional 16%of the shares of
True Entertainment, bringing Endemol's ownership to 67%. True Entertainment was already fully
consolidated with a minority interest. As of 1July 2005, Endemol UK acquired 75% of the shares of
Showrunner,astart-upscriptedcompany intheUnitedKingdom.Itsresultshavebeenfully consolidated
with a minority interest since that date.
As of 1November, 2005 Endemol acquired the remaining 50%of the shares of Endemol Neovision, a
joint-venture company inPoland. Itsresults have beenfully consolidated sincethat date.The company
was re-named Endemol Polska.
84
The allocation of net assets acquired in business combinations and the goodwill arising at the
acquisition date are stated below in the aggregate.
Aggregate of business combinations
EUR 1,000
Initially recorded
amounts subsidiary
Non-current assets ..
Current assets
Current liabilities. . ..
3
1,083
(140)
(289)
Net assets acquired
657
Application of
accounting for
business combinations
Recognised
at fair value
3,171
—
(1,245)
—
1,926
3,174
1,083
(1,385)
(289)
2,583
Interest acquired
Initial goodwill
1,392
2,635
Total
4,027
Purchase price
Initial payment
Options exercised
2,143
730
—
1,154
Total
4,027
Divestments
In November 2005 Endemol signed a share sale and purchase agreement for the divestment of
Overloaded Pocket Media,asmallDutchcompany involvedinthedesignandproduction of information
and entertainment for mobile platforms. Share transfer took place in the first week of January 2006.
15.2.5 Subsequent events
Financing
On 19 November 2005 Endemol entered into an agreement in respect of a EUR 250.0 million
multicurrency revolving creditfacility.TheEUR250.0million multicurrency revolving creditfacilitywitha
number of banks has a three-year term (with options to extend to a maximum of five years), which is
available to fund our working capital, acquisition and other cash needs. Loans under the facility are
guaranteed by several of our operating subsidiaries.
The multicurrency revolving credit facility requires us to maintain certain financial ratios and has
customary terms restricting our ability to makefundamental changes to our business, sell and acquire
assets (including formats) and incur debt above a maximum aggregate amount of EUR 300.0 million,
including amounts drawn under the facility. We are restricted in paying dividends and making other
distributions if certain financial conditions are not satisfied. Covenants relate primarily to senior debt/
EBITDA, interest-bearing debt/EBITDA, EBIT/interest paid and solvency.
In connection with the acquisition of Endemol France the multicurrency revolving credit facility was
renegotiated in January 2007. Thereby the facility amount was increased from EUR 250.0 million to
EUR 400.0 million. The maximum financial indebtedness was increased from EUR 300.0 million to
EUR 600.0 million. The markup, duration, terms and covenants remained almost unchanged.
Endemol long-term incentive plan
Endemol intends to issue a new grant under the long-term incentive plan asof 30April 2007for atotal
number of approximately 2.0 million shares and options.
Endemol Chief Operating Officer steps down
On 5 March 2007 Endemol announced that Endemol and Tom Barnicoat have mutually agreed that
Mr. Barnicoat will step down with immediate effect as member of the Management Board and Chief
Operating Officer (COO) of Endemol N.V.
85
Mr.Barnicoat has receivedthe severance payment andapension contribution towhich hewas entitled
according to his contract (respectively GBP 2,599,999 and GBP 191,042). In accordance with the
Long-term Incentive Plan of the Company, Mr Barnicoat has received the pro rata parte portion of the
performance shares and stock options granted to him during his tenure with Endemol N.V.
15.2.6 Segmentation information
Primary segmentation 2006
Endemol's primary segmentation is based on type of product (genre). Endemol's genres are
Non-scripted, Scripted and Digital Media.
Non-scripted
Scripted
Digital
Media
Turnover
Operating result
Segment assets
Investment in associates
838,435
149,722
378,316
6,758
142,248
12,848
71,783
136,732
29,386
74,527
(31,421)
182,926
Consolidated assets
Consolidated liabilities
Depreciation and amortisation
Impairment
Expenditure on PPE
385,074
153,204
9,040
—
—
71,783
27,177
3,351
2,007
74,527
36,962
1,011
182,926
252,287
1,187
EUR 1,000
Unallocated
Total group
1,117,415
160,535
707,552
6,758
714,310
469,630
14,589
2,007
13,686
13,686
Inestablishing the operating result per type of product, assumptions were used to make a reasonable
allocation of costs to the different types of product, this relates especially to general costs. Where
appropriate,turnover wasusedasanallocation basis.There isnointer-segmentturnover recognised in
the primary segmentation.
Primary segmentation 2005
Digital
Media
Non-scripted
Scripted
Turnover
Operating result
Segment assets
Investment in associates
686,301
124,388
322,365
6,448
131,119
10,080
53,136
8,925
82,712
15,247
22,601
Consolidated assets
Consolidated liabilities
Depreciation and amortisation
Impairment
Expenditure on PPE
328,813
186,769
10,249
745
—
62,061
36,228
2,013
22,601
16,752
1,500
77
EUR 1,000
Unallocated
Total group
(14,314)
153,443
900,132
135,401
551,545
15,373
566,918
420,989
16,544
822
14,314
153,443
181,240
2,782
14,314
The secondary segmentation is based on geographical areas.
Secondary segmentation 2006
EUR 1,000
Total turnover
Segment assets
Expenditure on PPE . . .
Netherlands Germany
151,956
106,728
3,004
71,027
45,852
563
Spain
United
Kingdom
Italy
154,920 137,798
161,247 83,555
4,590
404
86
247,534
132,726
1,205
USA
InterUnalOther
entities segment located
Total
group
202,746 202,920
(51,486)
—
1,117,415
65,484 118,718
675
2,377
—
868
714,310
13,686
Secondary segmentation 2005
NetherEUR 1000
Total turnover
Segment assets
Expenditure on PPE . . . .
lands
150,222
108,188
2,250
German
y
Spain
82,871
19,694
867
Italy
United
Kingdom USA
126,346 105,911
132,801 70,592
5,847
9
173,000
111,490
1,408
Other
InterUnalTotal
entities segment located group
138,449 166,218 (42,885)
50,978 73,175
—
861
1,331
—
— 900,132
— 566,918
1,741
14,314
Wages and salaries
Compulsory social security contributions
Pension andearly retirement costs
Cash settled Telefonica stock option plans
Endemol Long-term Incentive Plan and cash award
Other personnel costs
Total employee benefit expense
2006
2005
113,652
13,892
103,440
13,342
2,942
3,166
9,451
8,000
23,553
(1,976)
4,565
16,963
171,490
139,500
The number of full time equivalents as of 31 December 2006, including both workers on temporary
contracts and workers on contracts for an indefinite term, was 4,316, compared to 3,928 at year-end
2005.This represents anincrease of9.9%, primarily asaresultofahighervolume inSpain,resulting in
more workers on temporary contracts.
As of 31 December 2006,the number ofworkers on contractsfor an indefinite term amounted to 1,485
(2005:1,178), mainly increasing inArgentinaand Spain,thenumber ofworkersontemporary contracts
amounted to 2,831 (2005: 2,750). As of 31 December 2006, the number of freelancers amounted to
1,165 (2005:873).
The geographical breakdown of full time equivalents is as follows:
31 December 2006
31 December 2005
Spain
The Netherlands (incl. holding entities)
United Kingdom
Italy
Germany
USA
Other countries
1,712
791
617
301
250
58
587
961
884
910
512
274
45
342
Total number of full time equivalents
4,316
3,928
15.2.7 Director's remuneration
Remuneration Supervisory Board
Remuneration relating to the members of the Supervisory Board amounted to EUR 100,000 (2005:
EUR 53,333). The remuneration of the individual members of the Supervisory Board was as follows:
2006
G. Smit
S. Fernandez Valbuena
L. Badfa Almirall (as from 28 October, 2005)
Former Supervisory Board members
2005
50,000 25,000
—
—
50,000
8,333
20,000
=
Total remuneration Supervisory Board
100,000
87
53,333
Remuneration Management Board
Remuneration and pension charges relating to the members of the Management Board amounted to
EUR 3,169,026 (2005: EUR 1,704,163). In 2006, an additional amount of EUR 1,153,488 (2005:
EUR 1,207,784) was paid in the form of other compensation. The remuneration of the individual
members of the Management Board was as follows:
2QO 6
E. Rodnguez-Viiïa
T. Barnicoat
R Bazalgette
J.R Kerstens
Former members of the Management
Board
Total remuneration Management
Board
2QQ 5
Annual
incentive
Pensions
305,434
746,826
746,826
270,321
150,000
298,730
298,730
132,500
30,543
74,683
74,683
39,750
—
—
—
66,831
485,977
1,120,239
1,120,239
509,402
—
—
—
1,086,657
1,086,657
879,960 219,659
1,153,488
4,322,514
Other
compensation
Total cash
Salary
2,069,407
Annual
incentive
Salary
Pensions
Other
Compensation
Total cash
T. Barnicoat
R Bazalgette
Former Management Board members .
437,190 145,730
43,719
—
626,639
437,190 145,730
43,719
—
626,639
255,218 170,145
25,522
1,207,784
1,658,669
Total remuneration Management
Board
1,129,598 461,605
112,960
1,207,784
2,911,947
ThetotalpensionchargesofthemembersoftheManagementBoardin2006amounttoEUR0.2million
(2005: EUR 0.1 million).
Remuneration key management
Asof22November2005,wegrantedkeymanagement inaggregate590,628performancesharesandin
aggregate590,628performance options.Asof28April2006,wegranted keymanagement inaggregate
196,874 performance shares and in aggregate 196,874 performance options.
The remuneration charged to the income statement for other key management was EUR 6.8 million
(2005:EUR6.3million).InadditiontotheirsalariesamountingtoEUR2.5million(2005:EUR2.3million),
this amount includes bonuses amounting to EUR 3.4 million (2005: EUR 3.5 million), contributions to
pension plans amounting to EUR 0.1 million (2005: EUR 0.1 million), EN-SOP expenses amounting to
EUR 0.4 million (2005: EUR 0.1 million) and other expenses amounting to EUR 0.4 million (2005:
EUR 0.3 million).
Shares and stock options
Membersofthe Management Boardhavebeengrantedstock optionsonTelefonicashares.The options
can be exercised in two tranches, falling three and four years respectively after the original year
of granting.
Year of granting
2002
No Of
options
E. Rodriguez-Viiïa
T. Barnicoat
R Bazalgette
J.R Kerstens
Former members of the Management
Board
Total
23,790
23,790
15,860
47,580
111,020
88
2003
Exercise
price
No of
options
11.8827
11.8827
11.8827
11.8827
27,685
132,890
160,575
2004
Exercise
price
No of
options
Exercise
price
8.853
8.853
29,425
12.24
29,425
As part of the Endemol Long-term Incentive Plan as of 22 November 2005 and as of 28 April 2006 we
granted each member of the Management Board the right to receive performance shares and
performance options. As per 31 December 2006 the following shares and options were outstanding:
Year of granting
No of
shares
T. Barnicoat
R Bazalgette
J.R Kerstens
Total
2005
No of
options
82,813
82,813
31,250
82,813
82,813
31,250
196,876
196,876
Exercise
price
No of
shares
2006
No of
options
Exercise
price
9.00
9.00
9.00
27,604
27,604
10,416
27,604
27,604
10,416
13.81
13.81
13.81
65,624
65,624
Share-based compensation
Telefonica share option plans ("EN-SOP")
Employees within the Endemol group participate in the Telefonica share option plans ("EN-SOP").
EN-SOPconsists ofgrantstothe beneficiaries (allthe Endemol's group permanent employees who do
not participate inother similar stock option plans), effective 1January 2001, 2002,2003 and 2004,of a
variable number (based on the various wage and functional categories) of purchase options on
Telefonica, S.A. shares. The duration of the options isthree or four years from the grant date and the
options may be exercised at a rate of 50%on years three and four after the related grant date.
The option exercise price will bethe related annual reference value, and the exercise terms will be the
customary terms inprogrammes ofthis nature.Thebeneficiaries must remainpermanent employees of
Endemolwithoutinterruption,untiltheoptionsareexercised,without prejudicetotheregulationofcases
of early settlement of the options in certain cases in which the employment relationship is interrupted
prior to the exercise of the options.
The options may be settled through the acquisition by the beneficiary of the underlying shares or,
alternatively, by receiving a net amount in cash. Endemol accounts for the option scheme as a
cash-settled share-based payment transaction in accordance with IFRS2 and usesvesting periods of
three and four years.
Allshare options aremeasured atfairvalueatthe reporting date,taking into consideration the extentto
which employees have rendered service to that date. In accordance with paragraphs 32 and 33 of
IFRS2,theexpenses relatedtothe optionschemesareaccountedfor inthe income statement overthe
vesting period.Changes inthefairvalueoftheshareoptions areaccountedfor intheincome statement
as employee benefit expenses.
Telefonica has committed itselfto reimburse Endemolfor the costs ofthe share options granted. Inthe
consolidatedfinancial statements asof31December 2006and intheconsolidated financial statements
as of 31 December 2005,a receivable from Telefonica and a capital contribution equal to that amount
have therefore been included in the balance sheet.
Thetotalnumberofgrantedandnon-cancelled shareoptionsasof31December2006is2,542,421.The
following table shows the movement of the outstanding options:
Number of
share options
Weighted average
exercise price
ÊÜR
Granted options outstanding as of 1 January 2005
5,586,774
Exercised in 2005
Cancelled in 2005
Granted options outstanding and exercisable as of
31 December 2005
4,544,878
10.78
Exercised in 2006
Cancelled in 2006
(1,706,131)
(296,326)
10.34
10.81
Granted options outstanding and exercisable as of
31 December 2006
2,542,421
11.07
89
(438,270)
(603,626)
10.87
11.88
10.75
The recognised fair value of the share options outstanding as of 31 December 2006 amounts to
EUR 13.0 million (2005: EUR 8.1 million) and is included in the accrued bonuses.
2006
EUR 1,000
Share options granted in 2002—total fair value
2005
0
6,970
6,879
702
7,017
2,304
Total fair value of granted and non-cancelled share options
13,849
10,023
Accrued personnel related expense EN-SOP as of 1 January
Expense arising from increase of accrued liability for all options granted
Effect of changes in the fair value of share options
8,089
1,594
7,857
11,017
5,685
(7,660)
Total expense recognised as costs
Effect arising from the options vested
9,451
(4,536)
Accrued personnel related expense EN-SOP as of 31 December
13,004
Total intrinsic value
(1,975)
(953)
8,089
—
—
Totalfairvalue representsthefullfairvalueoftheoptions outstanding asiftheywere completelyvested,
i.e. without considering the extent to which the employees have rendered service to date.
In2006 1,706,131 (2005:438,270) options were exercised and 296,326 options were cancelled (2005:
603,626). In total EUR 4.9 million was paid in cash to Endemol employees.
Thedifference betweenthetotalfairvalueofgranted and non-cancelled share options andthe accrued
personnel-related expenses asof31December 2006,correctedforfuturefairvalueadjustments,will be
accountedfor intheincomestatementaspersonnelexpenses infutureyears,duringthevestingperiod.
Theweightedaverageexercisepriceasof31December2006oftheoutstanding options (intherangeof
EUR8.85—EUR 12.24)isEUR11.07.Theweightedaverageremainingcontractuallifeoftheseoptionsis
0.62 years.
Thefairvalueoftheshareoptions granted intheperioduntil31December 2006isdetermined usingthe
Black-Scholes model.Thefairvalueofthe liability isre-measured ateach balance sheetdateandatthe
settlement date.
Weobtainthe expected volatility from a report published by afinancial institution regarding options on
shares of Telefonica, S.A. Therefore, no historical volatility is considered.
Thefairvalueoftheoptionsoutstandingasof31December2006andthemodel inputsthatwereusedin
its measurement as of 31 December 2006 are the following:
Outstanding options
as of 31 December 2006
Fair value of share options and assumptions
Weighted average fair value at measurement date
(EUR per option)
Share price (EUR)
Weighted average exercise price (EUR)
Weighted average expected volatility
Weighted average option life (years)
Expected dividend yield
Range of risk-free interest rate
Outstanding options
5.05
2.20
16.12
11.07
19.67%
0.62
3.10%
3.63%-4.03%
12.71
10.78
17.16%
0.83
3.93%
2.18%-2.75%
Endemol Long-term Incentive Plan
As of 21 November 2005, Endemol adopted an equity-based Long-term Incentive Plan ("the Plan").A
new grant under the Long-term Incentive Planwas issuedatthe endofApril 2006.The Plan comprises
two elements: a performance share plan and a performance option plan.
Performance Share Plan
A performance share is a grantee's right to receive one share for no consideration subject to (i) the
grantee remaining in our service for a period of three years following the date of grant (the "Vesting
90
Period") and (ii) apredetermined performance condition basedontotalstockholder return (including
dividend per share) ("TSR") being met on the date following the last day of the Vesting Period
(the "Vesting Date"). Ifthe performance condition has not been met,allor some of the performance
sharesmaylapseonaslidingscale basis.Forthe performancesharesgranted,ifthecumulativeTSR
overthethree-yearVestingPeriodislessthan25%,noperformanceshareswillvest.IfTSRperformance
is25%,then50%oftheperformanceshareswillvest.IfTSRperformanceis35%ormore,100%ofthe
performance shares will vest. For TSR performance between 25% and 35%, the percentage of
performance sharesthatvestwill be determined by linear interpolation.
Uponvesting,thegranteewillreceiveoneshareforeachperformanceshare.Suchsharesmaynotbe
traded during the two-year period following the Vesting Date, or until termination of the grantee's
employment, whichever isearlier.
As of 21 November 2005, 870,317 performance shares were granted,including 31,250 performance
shares that were reserved for the Chief Financial Officer. The fair value of the performance share is
calculated at EUR4.50 per performanceshare.
Asof28April2006,290,102performancesharesweregranted.Thefairvalueoftheperformanceshare
iscalculated at EUR6.71 per performanceshare.
Performance OptionPlan
Aperformanceoptionisagrantee'srighttoacquireoneshareatapresetprice (the"ExercisePrice").
TheExercisePricewillbeequaltotheaverageclosingpriceofEndemol'sordinaryshares,asstatedin
the daily official listing, on the five days (during which the stock exchange was open for business)
immediately preceding the dateonwhichthe performance options aregranted.Forthe performance
options granted as of 21 November 2005, the exercise price isthe offer price of EUR9.00. Forthe
performance options granted asof 28April2006,the exercise price is EUR 13.81.
Aperformance option will be granted by our Supervisory Boardand may only be exercised if (i) the
grantee has remained in our service during a period of three years following the date of grant
(the"VestingPeriod")and(ii)apredeterminedperformanceconditionbasedonTSRhasbeenmeton
thedatefollowingthelastdayoftheVesting Period(the"Vesting Date").Vestedperformance options
may be exercised during a period of five years from the Vesting Date. For the performance options
grantedallorsomeoftheperformanceoptions maylapseonaslidingscalebasis,iftheperformance
conditionhasnotbeenmet.IfthecumulativeTSRoverthethreeyearVestingPeriodislessthan25%, no
performanceoptionswillvest.IfTSRperformanceis25%,then50%oftheperformanceoptionswillvest.
IfTSRperformance is35%ormore,100%oftheperformance optionswillvest.ForTSRperformance
between25%and35%,the percentage of performance optionsthatvestwill bedetermined bylinear
interpolation.
Asof21November 2005,2,390,024 optionsweregranted.Thefairvalueoftheperformance optionis
calculated at EUR2.11 per performanceoption.
As of 28 April 2006, 1,006,602 options were granted. The fair value of the performance option is
calculated at EUR3.24 per performanceoption.
Under the plan, up to 6.5% of the present total issued share capital may be applied for grants of
performance shares or performance options, of which up to 5.1% of our present total issued share
capital may be newly issued shares. As of 31 December 2006, 1,050,002 performance shares and
3,040,933 options were outstanding, representing 3.27%of the presenttotal issued sharecapital.
Number of
shares
Number of
share options
Weighted average
exercise price
options
EUR
Granted shares and options outstanding asof
1 January 2006
870,317 2,390,024
Granted shares andoptions in2006
290,102 1,006,602
Returned/cancelled in2006
(110,417)
(355,693)
Granted options outstanding asof31December 2006 . 1,050,002 3,040,933
91
9.00
13.81
9.64
10.52
Mainassumptions asof 31 December 2006
Valuation method used
Grant price (EUR)
Weighted average expected volatility
Vesting/performance period (years)
Weighted average expected life
(years)
Expected dividend yield
Range of risk-free interest rate
Performance
Shares
Plan IPO grant
Performance
Options
Plan IPO grant
Performance
SharesPlan
2 nd grant
Performance
Options
Plan 2 nd grant
Monte Carlo
9.00
40%
3
5
Black Scholes
9.00
40%
3
5
Monte Carlo
13.81
40%
3
5
Black Scholes
13.81
40%
3
5
3.977%
3.106%
3.977%
3.106%
3.977%
3.915%
3.977%
3.915%
Rewards grantedto other beneficiaries
EligibleemployeeswhodonotparticipateinthePlanparticipateinaninitialpublicoffering celebration
cashaward,theamountofwhichdependsonthelevelofthe employeeand istobepaidinequalpartsin
December 2005 and January 2007. The total amount of awards granted as of 31 December 2006,
includingbothinstalments,amountedtoEUR8.6million.Ofthisamount,EUR4.3millionwasincluded
inthe employee benefit expenseof 2005.The remaining amountof EUR4.3 million hasbeenspread
over thevesting period until December2006.
15.2.8 Other operating expenses
2005
2006
EUR 1,000
Building expenses
Representation andselling expenses
Total other operating expense
20,034
20,545
29,952
70,531
16,823
18,026
26,068
60,917
15.2.9 Financial income and expenses
2006
Financial income
Interest income
Net result onfairvalue adjustments offinancial instruments
Financial expenses
Interest expense
Interest expense on put option liabilities
Interest expense on earn-out obligations
Netforeign currency exchange results
Otherfinancial result
2005
2,462
5,080
966
4,242
3,428
9,322
(7,219) (7,021)
(537)
(635)
(563) (1,333)
(1,045) (1,633)
(264)
(364)
(9,628) (10,986)
Totalfinancial income and expenses
(6,200)
(1,664)
15.2.10 Income taxes
Endemol'soperationsaresubjecttoincometaxesinvariousjurisdictions.For2006theeffectivetaxrate
amounted to 34.5% (2005:36.1%). Excluding non-deductible items such as impairment of goodwill,
results on fair value adjustments, interest expense on earn-out obligations and share in profit of
associates,the effective tax ratewould be34.0%for 2006 (2005:36.9%).
92
Reconciliation tax expense:
EUR 1,000
2005
J!?!-
Current tax expense
Current year (expense relating to current period based on tax filing calculations) . 62,030 56,957
Adjustments for prior years (expense/profit relating to prior periods based on
updated or final tax filing calculations)
(1,763) (1,549)
58,267
Deferred tax expense
Origination and reversal of temporary differences
Reduction in tax rate (impact on deferred tax position of change of (future)
applicable tax rate in the respective country)
(5,091)
55,408
(6,620)
39
18
(5,052) (6,602)
Total income tax expense in income statement
53,214 48,806
Reconciliation effective tax rate:
2006
EUR 1,000
Profit before tax (reconcile to income statement)
Local corporate tax rates in %
Income tax using the local corporation tax rate
Non-deductible expenses
Tax exempt revenues
Tax incentives not recognised in the income statement
Undercover) provided in prior years
2005
154,466
135,129
17%-40% 17%-40%
53,655
45,245
5,770
4,768
(2,691)
(1,225)
(1,601)
—
(1,920)
18
Effective tax
53,214
48,806
Effective tax rate
34.5%
36.1%
Deferred Tax Assets and Liabilities
Deferredtaxassets consist primarily oftaxlossescarriedforwardandtemporary differences in revenue
and cost recognition.
Deferred tax liabilities consist primarily of deferred tax liabilities arising from step acquisitions and
temporary differences in revenue and cost recognition.
Inassessingtherecoverability ofdeferredtaxassets,management considerswhether itisprobable that
some portion or all of the deferred tax assets will be realised. The ultimate realisation of deferred tax
assets is dependent upon the generation offuture taxable income during the periods inwhich the net
operating losses can be utilised or the temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax
strategies in making this assessment. In order to fully realise deferred tax assets related to the net
operating losses, Endemol will needto generate sufficient futuretaxable income inthecountries where
these net operating losses exist. Based upon projections for future taxable income over the periods in
which the net operating losses can be utilised or the temporary differences become deductible,
management believes it is probable that Endemol will realise the deferred tax assets as of
31 December 2006.
93
31 December 2006
EUR 1000
Assets
Liabilities
Net
Intangible assets
Other investments
Inventories
Other current assets
Employee benefits
Provisions
Other items
Taxvalue of loss carry-forwards recognised
Taxassets/liabilities
149 1,456
(1,307)
779 5,485 (4,706)
1,175
—
1,175
—
303
(303)
2,307
572
1,735
7,674
—
7,674
3,025
—
3,025
967
533
434
1,862
—
1,862
17,938 8,349
9,589
Offsetting taxassets and liabilities
Nettax assets/liabilities
—
17,938
—
9,589
=
8,349
31 December 2005
Assets
Liabilities
Net
Intangible assets
Other investments
Inventories
Employee benefits
Provisions
Other items
Taxvalue of loss carry-forwards recognised
Taxassets/liabilities
Offsetting taxassets and liabilities
38
10
2,955 3,159
649
—
—
483
82
42
4,628
591
798
—
2,552 2,151
34
—
11,736 6,436
(971)
(971)
28
(204)
649
(483)
40
4,037
798
401
34
5,300
—
10,765
5,300
5,465
Movement in recognised deferredtaxes:
taxes:
EUR 1,000
Intangible assets
Other investments
Inventories
Employee benefits
Provisions
Other items
Taxloss carry-forwards utilised
Balance as
of
31 December
2005
Acquisitions
Reclassification
to current tax
Recognised
in income
Balance as
of
31 December
2006
28
(204)
649
(483)
40
4,037
798
164
271
(1,424)
(3,103)
—
—
—
—
—
—
—
—
106
(18)
2,757
(1,904)
1,653
100
1,069
89
(1,399)
420
198
(1,062)
5,541
574
170
522
(1,307)
(4,706)
1,175
(303)
1,735
7,674
3,025
434
1,862
5,300
(4,527)
3,763
5,052
9,589
94
EUR 1,000
Balance as
of
31 December
2004
Property, plant and equipment.
Intangible assets
Other investments
Inventories
Employee benefits
Provisions
Other items
Tax loss carry-forwards utilised.
16
(2,186)
253
(73)
(27)
7,220
433
821
12,753
Net tax assets/liabilities
19,210
Reclassification
to current tax
Recognised
in income
Balance as
of
31 December
2005
Recognised
in equity
—
—
—
—
(5,140)
—
—
(14,159)
12
3,213
396
(410)
67
1,957
365
(657)
1,677
(1,231)
—
—
—
—
—
—
—
28
(204)
649
(483)
40
4,037
798
164
271
(19,299)
6,620
(1,231)
5,300
15.2.11 Earnings per share
Basic earnings per share
The calculation of the basic earnings per share as of 31 December 2006 is based on the net profit
attributabletoordinary shareholders intheamount ofEUR96.8millionandaweightedaverage number
of ordinary shares outstanding during 2006 of 125,000,000.
EURx 1.000
2
_J??5
Net profit attributable to ordinary shareholders of Endemol N.V.
96,820
82,620
Net profit attributable to ordinary shareholders of Endemol N.V
96,820
82,620
2006
(in thousands of shares)
Number of outstanding shares
2005
125,000
Weighted average number of ordinary shares
Basic earnings per share (EUR)
^ -
125,000
125,000
125,000
0.77
0.66
Diluted earnings per share
The calculation of the diluted earnings per share as of 31 December 2006 is based on the net profit
attributable to ordinary shareholders in the amount of EUR 96.8 million and the number of ordinary
shares outstanding end 2006 of 128,040,933.
EUR, 1,000
-JÏSÏ
2
Net profit attributable to ordinary shareholders of Endemol N.V.
96,820
82,620
Net profit attributable to ordinary shareholders of Endemol N.V
96,820
82,620
2006
Number of ordinary shares as of 31 December
Effect of share options on issue
^ -
2005
125,000 125,000
3,041
2,346
Number of ordinary shares (diluted) as of 31 December
Diluted earnings per share (EUR)
128,041
0.76
95
127,346
0.65
15.2.12 Property, plant and equipment; movement schedule 2006
Land and
buildings
Balance as of 31 December 2005
Cost (gross carrying amount)
Accumulated depreciation and impairment
Net carrying amount
Plant and
equipment
34,187
(18,284)
30,768
(19,739)
15,903
11,029
Other
Total
48,919 113,874
(35,267) (73,290)
13,652
40,584
Cost
Additions
Additions through business combinations
Disposals, reclassifications and other movements
Currency exchange effects
34,187
30,768
48,919 113,874
1,049
4,574
8,063
13,686
6,219
265
158
6,642
(1,281)
(787)
(1,833)
(3,901)
(183)
(177)
(525)
(885)
39,991
Depreciation and impairment losses
Depreciation
(18,284) (19,739) (35,267) (73,290)
(2,696)
(3,070)
(6,549) (12,315)
1,198
66
2,032
3,296
13
113
238
364
(19,769)
Net carrying amount
96
34,643
(22,630)
39,991
(19,769)
34,643
(22,630)
20,222
12,013
54,782
129,416
(39,546) (81,945)
54,782 129,416
(39,546) (81,945)
15,236
47,471
Property, plant andequipment; movement schedule 2005
Land and
buildings
Balance asof 31 December 2004
Accumulated depreciationand impairment
Netcarrying amount
Plant and
equipment
Other
Total
32,375
25,987 51,343 109,705
(14,680) (16,190) (37,409) (68,279)
17,695
9,797 13,934 41,426
Cost
Balance asof31 December 2004
Additions
Disposals, reclassifications andother movements
32,375 25,987
2,699
5,583
—
19
(1,090) (1,248)
203
332
34,187 30,673
Balance asof 31December 2004
Depreciation
Disposals, reclassifications andother movements
(37,409) (68,279)
(14,680) (16,190)
(6,461) (13,622)
(4,695) (2,466)
8,641
8,785
1,088
(944)
81
40
3
(44)
(18,284) (19,644) (35,148) (73,076)
Net carrying amount
51,343 109,705
6,032
14,314
19
38
(8,827) (11,165)
233
768
48,800
113,660
34,187 30,673 48,800 113,660
(18,284) (19,644) (35,148) (73,076)
15,903 11,029 13,652 40,584
97
15.2.13 Goodwill and other intangible assets; movement schedule 2006
Goodwill
Format
rights
Other
rights
Total
Accumulated amortisation
151,526 10,701
12,396 174,623
(1,317) (4,838) (10,681) (16,836)
Net carrying amount
150,209
5,863
1,715
157,787
Cost
Additions
Additions through business combinations and other
acquisitions
Revised contingent purchase price consideration
151,526
10,701
12,396 174,623
—
164
86
250
175,766 10,849
24,550
(2,000)
1,690
—
Amortisation/depreciation
Impairment
23
—
(23)
(16)
8,246
32,819
—
(2,000)
(269)
1,398
(10)
(26)
20,449
207,064
(1,317)
(4,838) (10,681) (16,836)
— (1,563)
(711)
(2,274)
(2,007)
—
—
(2,007)
—
—
(756)
(756)
245
8
2
255
(3,079) (6,393) (12,146) (21,618)
Accumulated amortisation and impairment
175,766 10,849 20,449 207,064
(3,079) (6,393) (12,146) (21,618)
Net carrying amount
172,687
4,456
8,303
185,446
Goodwill
Revised contingent purchase price considerations relate to both earn-out obligations and put option
liabilities. Disposals, reclassifications and other movements includes EUR 7.3 million relating to the
reclassification ofthe goodwillofNLTVuponacquisition (frominvestments inassociates) andEUR(5.6)
million is relating to step acquisitions.
98
Movement schedule 2005
EUR 1000
Goodwill
Format
rights
Other
rights
Total
Accumulated amortisation
146,577
7,426
12,129 166,132
(495) (2,315) (10,101) (12,911)
Net carrying amount
146,082
Cost
Additions
Additions through business combinations and other
acquisitions
Revised contingent purchase price consideration
5,111
146,577
7,426
153,221
—
—
12,129 166,132
220
220
6,593
(3,268)
—
1,624
3,282
—
—
(7)
208
10,083
—
(3,268)
(173)
(173)
12
1,629
151,526
Amortisation/depreciation
Impairment
2,028
10,701
12,396
174,623
(495)
(2,315) (10,101) (12,911)
— (2,533)
(389)
(2,922)
(822)
—
—
(822)
—
—
(191)
(191)
—
10
—
10
(1,317) (4,838) (10,681) (16,836)
Accumulated amortisation and impairment
151,526 10,701 12,396 174,623
(1,317) (4,838) (10,681) (16,836)
Net carrying amount
150,209
5,863
1,715
157,787
Goodwill
Under previousGAAR goodwillacquiredthrough businesscombinations andotheracquisitions withan
acquisition date before 1August 2000 was deductedfrom equity. Goodwill acquired through business
combinations and acquired businesses after 1August 2000, has been capitalised and allocated to the
following cash generating units.
31 December 2006
EUR 1,000
United Kingdom
Spain
The Netherlands
Germany
USA
Argentina
Italy
Various other cash generating units
Total
31 December 2005
68,300
51,636
26,271
12,045
6,727
5,604
1,578
526
67,835
51,636
14,313
739
6,664
6,768
2,007
247
172,687
150,209
Goodwill of these cash generating units has been tested for impairment at year-end 2006. The
recoverable amounts of the cash generating units have been determined based on a value-in-use
calculation. To determine the value-in-use, cash flow projections are based on financial budgets,
approved by senior management, covering afive-year period.The discount rates, applied to the cash
flowprojections,varybetween 10%and 14%. Thisratehasbeencalculated usingtheweightedaverage
cost of capital methodology. The main parameters are the targeted debt to equity ratio, the risk-free
interest ratebasedongovernment bondsandariskpremium of45basispoints.Thecashflows beyond
99
the budget horizon are based onthe last budget period and an assumed growth ratevarying between
0%and 10%,which isconsidered to bethe best available projection of the business cycle.Totest the
current asset base,anormalised cashflow iscalculated by adjusting incidental cashflow impacts and
cash flow impacts of strategic projects.
Goodwill impairment charges for the year 2006 amount to EUR 2.0 million,which relates to one of the
Italian subsidiaries. This impairment loss was recognised following a deteriorated future outlook.
With regard to thevalue in use ofthe cash generating units, management believes that no reasonably
possible change of the key assumptions (discount rates and growth rates) would cause the carrying
value of any other cash generating units to materially exceed its recoverable amount.
In 2005 impairment charges amounted to EUR 0.8 million and related to the 'various other cash
generating units'.
No expenditures for development were capitalised in 2006 and 2005. The aggregate amount of the
researchanddevelopment expenditure recognisedasanexpense in2006amountsto EUR 13.3 million
(2005: EUR 9.2 million). Research and development expenditure mainly consists of personnel
expenses.
15.2.14 Investments in associates and joint ventures
As of year-end 2006 and 2005 Endemol held a number of investments in associates. Investments in
associates are accounted for using the equity method. Following are the movements in investments
in associates:
Share in net
equity
EUR 1,000
Share in net profit
Dividends declared
Change in classification due to share increase
Additions and other movements
Share in net profit
Dividends declared
Change in classification due to share increase
Foreign exchange
7,965
1,392
(956)
(291)
—
8,110
131
(937)
(539)
(7)
6,758
Goodwill
7,087
—
—
—
176
7,263
—
—
(7,263)
—
—
Total
investment
15,052
1,392
(956)
(291)
176
15,373
131
(937)
(7,802)
(7)
6,758
A condensed balance sheet and a condensed income statement of Endemol's investments in
associates intheaggregate as ofandfor theyears ended December 31, 2006and December 31, 2005
are presented below:
Condensed balance sheet data
31 D e c e m b e r 2006
EUR 1000
18,002
22,465
(20,569)
(1,023)
Non-current assets
Current assets
Current liabilities
Net assets
18,875
100
31
December 2005
16,945
27,888
(6,283)
(16,026)
22,524
Condensed income statement
31 December 2006
EUR 1,000
Turnover
Net operating expenses
31 December 2005
115,916
(114,813)
115,225
(110,712)
1,103
(205)
4,513
(973)
898
3,540
Profit before tax
Income taxes
Net profit for the period . . ..
Joint ventures
A condensed balance sheet and a condensed income statement of Endemol's joint ventures in the
aggregate as of and for the years ended 31 December 2006 and 31 December 2005 are presented
below:
Condensed balance sheet data
EUR 1000
31 December 2006
31 December 2005
Non-current assets
Current assets
Current liabilities
1,910
29,117
(270)
(14,466)
728
29,132
—
(13,308)
Net assets
16,291
16,552
Condensed income statement
EUR 1000
31 December 2006
31 December 2005
Turnover
Net operating expenses
Profit before tax
Income taxes
79,958
(65,970)
13,988
(5,427)
86,838
(66,055)
20,783
(7,088)
Net profit for the period
8,561
13,695
15.2.15 Other financial assets
Loans
receivable
EUR 1000
Additions
Sale/redemption
Transfer to current assets
Revaluation
Trust
accounts
Long term
call options
Total
80,895
3,102
2,745
86,742
498
408
—
906
(80,000)
—
—
(80,000)
—
—
—
—
—
—
3,765
3,765
1,393
3,510
6,510
11,413
Additions
Sale/redemption/reclassification
Acquired in business combinations
Transfer to current assets Revaluation
Revaluation
Currency exchange results
401
(580)
139
—
—
(6)
1,347
—
-443
844
(2,333)
—
(2,913)
—
—
139
—
(3,121)
(3,121)
—
(247)
(247)
—
(139)
(145)
1,177
3,446
5,970
Trust Accounts
TheCompany receivescashfrom customersforspecific productions inproductiontrustaccounts, held
by Endemol. Duetothe nature ofthe restrictions onthe use ofthese cash items,thetrust accounts are
101
qualifiedaslong-termdepositsandguarantees (non-currentassets).TheCompany receivesamarketbased interest onthesedeposits.
Long-term call options
Calloptionsarevaluedatfairvalueandrecognisedinthebalancesheetwhentheoptionexerciseprice
is lowerthanthe underlyingfairvalue.Reference ismadeto Note26,Financial instruments.
15.2.16 Trade and other receivables
31December 2006
EUR 1,000
Trade receivables
Amounts duefrom customers
Amounts receivablefrom related companies
-Associated companies
Other receivables andaccrued expenses
Totaltrade and other receivables
31 December 2005
193,169
87,072
28,065
145
30,731
119,813
80,201
17,300
380
22,621
339,182
240,315
Trade receivables
Trade receivables as of 31 December 2006 amounted to EUR 200.2 million (31 December 2005:
EUR 129.5 million).Allowances for doubtful debts asof 31December 2006aredeductedfromtrade
receivablesandamountedto EUR7.0 million (31December 2005:EUR9.7 million),resulting inanet
receivable of EUR 193.2million.
Amounts duefrom customers inrelationtothe productions in progress
Thegrossamountsduefromcustomersasofyear-endrelatetocapitalisedexpenses(workinprogress)
andturnover that has notyet been invoicedto customers
The following table summarises the production status with a reconciliation to the positions on a
project-by-project basis as presented inthe consolidated balance sheet:
31 December 2006
EUR 1,000
31December 2005
Work inprogress
Uninvoiced turnover
Deferred revenues
Accrued production costs
Net amount
57,091
104,259
(91,948)
(115,302)
21,670
81,829
(51,184)
(75,338)
(45,900)
(23,023)
Amounts duefrom customers
Amounts dueto customers
Net amount
87,072
(132,972)
80,201
(103,224)
(45,900)
(23,023)
Cashand cash equivalents
31December 2006
EUR 1,000
Cashat bank and in hand
Short-term deposits
Total cash and cash equivalents
31 December 2005
78,970
8,458
58,552
8,881
87,428
67,433
Notional cashpool
Positiveand negative bank balancesofalegalentitywithonebank arenotoffset, eventhoughthese
balances are part of a notional cash pool, unless there is a legally enforceable right to offset the
recognisedamountsandtheentityintendseithertosettleonanetbasisortorealizetheassetandsettle
the liability simultaneously. Notional cash pools form an integral part of the Company's cash
management. Based on the above Endemol is required to report the cash balances and the bank
102
overdrafts on a gross basis. For interest calculation purposes these amounts are netted. The effect
amounts to EUR 28.4 million as of 31 December 2006 (EUR 21.8 million as of 31 December 2005).
All cash is at the free disposal of the Company.
Short-term deposits
Short-term deposits in the amount of EUR 8.5 million were placed for periods less than one month.
15.2.17 Shares and share capital
Authorised share capital comprises:
2006
Ordinary shares of EUR 0.10 par value each
125,000
Total
2005
125,000
125,000
125,000
The issued share capital of EUR 12,500,000 consists of 125,000,000 ordinary shares with a nominal
value of EUR 0.10.
Share premium
The previous year result istransferred to share premium intheamount of EUR67.9 million. Inaddition,
Telefonica contributed EUR 10.8 million related to share-based compensation (EN-SOP).
Translation reserve
Thetranslation reserve comprises ofallforeign exchange differences arisingfromthetranslation of the
financial statements of foreign operations.
Hedge reserve
The hedge reserve comprises the effective portion of the cumulative net change in the fair value of
cash-flow hedge instruments, related to hedged transactions that have not yet occurred.
Revaluation reserve
The revaluation reserve relates to the re-valued intangible assets arising from business combinations.
Other legal reserves
The other legal reserve is formed for the retained profits from investments in joint ventures and
associates,which arenot paid intheform ofdividends and payment ofwhichcannot berealised bythe
Company itself.
15.2.18 Loans and borrowings
31
EUR 1000
Current liabilities
Other bank debt
Total loans and borrowings
December 2006
31 December 2005
2,211
2,228
2,211
57,171
40,625
2,228
52,259
63,321
97,796
115,580
100,007
117,808
Credit facilities
On 19 November 2005 Endemol entered into an agreement in respect of a EUR 250.0 millionmulticurrency revolving creditfacility.TheEUR250.0 million multicurrency revolving creditfacilitywitha
103
number of banks has athree-year term (with options to extend to a maximum of five years), which is
available to fund our working capital, acquisition and other cash needs. Loans under the facility are
guaranteed by several of our operating subsidiaries.
The multicurrency revolving credit facility requires us to maintain certain financial ratios and has
customary terms restricting our ability to make fundamental changes to our business, selland acquire
assets(including formats) and incur debt above a maximum aggregate amount of EUR 300.0 million,
including amounts drawn under the facility. We are being restricted in paying dividends and making
other distributions if certain financial conditions are not satisfied. Covenants relate primarily to senior
debt/EBITDA, interest-bearing debt/EBITDA, EBIT/interest paid and solvency.
In connection with the acquisition of Endemol France the multicurrency revolving credit facility was
renegotiated in January 2007. Thereby the facility amount was increased from EUR 250.0 million to
EUR 400.0 million. The maximum financial indebtedness was increased from EUR 300.0 million to
EUR 600.0 million. The markup, duration, terms and covenants remained almost unchanged.
The interest rate on the amounts due to credit institutions is variable and based on Euribor plus a
company specific mark-up. The multicurrency revolving credit facility includes interest charges at
Euribor + 45bp.
In addition, we maintain a number of bilateral facilities in amongst others Italy, Argentina, Chile,
Colombia and India with other interest rates than the multicurrency facility that is currently in place.
Other non-current bank debt
Based on IAS 32.42, positive and negative bank balances of a legal entity with a bank are no longer
offset, eventhoughthesebalancesarepartofanotionalcash pool, unlessthere isalegally enforceable
rightto offset the recognised amounts andthe entity intends either to settle on anet basis orto realize
the asset and settle the liability simultaneously. Notional cash pools form an integral part of the
Company's cash management. Based on the above, Endemol is required to report the cash balances
andthe bank overdrafts on agross basis. For interest calculation purposes these amounts arenetted.
15.2.19 Employee benefit obligations
The provision for employee benefit obligations amount to:
EUR 1000
31 December 2006
Severance liabilities
690
Total employee benefit obligations
690
31 December 2005
566
566
Except for the Dutch group companies, all of Endemol's employees are covered by several defined
contribution plans. In The Netherlands Endemol participates in a defined benefit plan for nearly all
employees in The Netherlands at Pensioenfonds PNO Media ("PNO Media"). This plan is a multiemployer defined benefit pension plan,which isaccounted for asa defined contribution plan because
sufficient information for defined benefit accounting is not available. PNO Media is a multiemployer
pension fund andfor that reason PNO Media is not ableto provide Endemol with sufficient information
onthe presentfairvalue ofthe benefit obligations,thefair value of planassetsandthefunded status of
Endemol. At year end 2006 there are no indications for additional contributions by Endemol to PNO
Media due to deficits of the pension fund and no liability is recorded accordingly.
In Italy, employees are covered by a severance plan (post-employment benefit plan) provided for in
accordance with local legislation. Severance pay is considered normal remuneration that has been
deferredandapproximates onemonth's payforeachyearofservice,valuedeachyearonabasis linked
to cost-of-living indices.The severance liability as of 31 December 2006 of EUR 0.7 million, represents
the accumulated amount due to employees upon termination based on service to date.
104
15.2.20 Provisions
EUR 1000
Restructuring
Additions
Utilisation
Reversal
5,339
966
—
(3,723)
(650)
Additions
Utilisation
Reversal
—
Total
16,610 21,949
6,215
6,215
— (3,723)
(939) (1,589)
21,886 22,852
—
(966)
—
Other
4,071
(146)
(1,557)
24,254
4,071
(1,112)
(1,557)
24,254
As of 31 December 2005 the provisions were classified as follows:
Restructuring
- Current
- Non-current
966
—
Other
Total
21,886 22,852
—
—
As of 31 December 2006 the provisions were classified as follows:
Restructuring
- Current
- Non-current
—
—
Other
Total
24,254 24,254
—
—
Restructuring
The restructuring provision related primarily to the restructuring of the operating companies in The
Netherlands that has been effected in 2005 and 2006.
Other provisions
IntheotherprovisionsanamountofEUR 18.4millionforlegalandtaxdisputesisrecognised.Inaddition
EUR 5.8 million has been recognised for an onerous contract.
15.2.21 Put option liabilities
Ina number of business combinations Endemol grantedthe seller/minority shareholder aput option to
sellinthefuture (partof)theremainingsharestoEndemol.Theseputoptionsareregardedasafinancial
liability inEndemol's consolidatedfinancial statements,statedatthefairvalueoftheconsiderationto be
paid upon exercise of the options.
2006
EUR 1,000
2005
Beginning of the year
Changes as a result of recalculations
Settlement
Dividend payments
Interest accretions
5,704 7,337
8,731
1,154
79 (3,065)
(5,208)
—
—
(57)
212
335
End of the year
9,518
The additions in2006 relate to acquisitions done in2006.The settlement relates tothe increase of the
shareinterest inaDutchsubsidiaryfrom85%to 100%.Theputoptionliabilitiesarenon-current liabilities.
105
5,704
15.2.22 Earn-out obligations
The liabilities with respect to acquisitions (earn-out obligations) are estimated on the basis of the
expectedfuture resultsofthe respective companies (performance relatedcriteria).Earn-out obligations
are recognised at the net present value of management's best estimate of the expected future cash
flows.Thenetpresentvalueiscalculatedusingtheapplicable historical interest rateincludingamark-up
reflecting the risks of the market in which the Company operates. Discount rates used vary between
4.0%and 4.3%.The main liabilities relatetothe companies acquired inThe Netherlands and Germany.
The movement in the long-term earn-out obligations is as follows:
2006
EUR 1,000
Beginning of the year Additions through business combinations
Interest accretions
^ 1
8,256 —
(1,268) —
101 —
End of the year
7,089
—
The movement in the short-term earn-out obligations is as follows:
2
EUR 1,000
-J!??.
Beginning of the year
Payments
Interest accretions
24,551
48,754
2,194
—
(811)
(317)
(24,502) (25,472)
462
1,333
(150)
253
End of the year
1,744
^L.
24,551
Reported on the balance sheet as of 31 December:
2006
EUR 1,000
7,089
1,744
2005
—
24,551
Thechanges asaresultoftherecalculationoftheearn-outobligations in2006havebeenaccountedfor
against goodwill. The long-term earn-out obligations outstanding as of 31 December 2006 are due in
2008 and 2009, the short-term earn-out obligations are all payable in 2007.
15.2.23 Trade and other payables
31 December 2006
EUR 1000
31
December 2005
Trade payables
Amounts due to customers
Financial payables
Amounts payable to related companies:
- Related companies
-Affiliated companies
Other liabilities
Accruals and accrued bonus allowances employees
43,708
132,972
29,788
103,224
399
8,639
291
15,336
64,786
38
358
19,722
55,142
Total trade and other payables
265,732
208,671
For amounts due to customers reference is made to Note 17Trade and other receivables.
Inthe accrued bonus allowances anamount of EUR 13.0 million (2005: EUR8.1 million) is recorded in
relation to the Telefonica share option plans (EN-SOP). Reference is made to Note 8, Share-based
compensation. Also included is an amount of EUR 2.7 million (2005: 8.8 million) corresponding to
Telefonica welcome bonus.
106
15.2.24 Financial Instruments
Exposure to credit, interest-rate and currency risks arises in the course of the Company's business.
Derivative financial instruments are used to hedge exposure to fluctuations in foreign exchange rates
and interest rates.
Foreign currency risk
Endemol assesses foreign currency risk by identifying and monitoring changes in exchange rate
exposures that may adversely impact the income statement. Endemol maintains risk management
control systems to monitor foreign currency risk attributable to both Endemol's outstanding foreign
currency positions and commitments, as well as Endemol's offsetting hedge positions. The risk
management control systems involve the centralisation of Endemol's foreign currency exposure
management, the netting of offsetting exposures from different group companies and the use of
analytical techniques, including sensitivity analyses, to estimate the expected impact of changes in
foreign currency rates on Endemol's income statement.
Endemol group companies enter intotransactions denominated incurrenciesotherthanthe functional
currency of the group company concerned. These transactions expose Endemol to foreign currency
resultsduetochangesinforeigncurrency rates.Endemolentersintoforeigncurrencyforward contracts
to minimise exchange results due to the foreign currency risk on receivables, payables and expected
future cash-flows denominated in currencies other than the functional currency.
Although foreign currency forward contracts are used to economically hedge the net exchange results
dueto changes inforeign currency rates,Endemol does not apply hedge accounting under IAS39for
these contracts. Changes in the fair value of foreign currency forward contracts are reported in the
income statement asfair value adjustments on derivative financial instruments and (partially) offset the
exchange results recognised as foreign exchange results on the assets and liabilities denominated in
foreign currencies.
Credit risk
The Company trades onlywith recognised,creditworthy third parties. Itisthe Company's policy thatall
customers who wish to trade on credit terms are subject to credit verification procedures. Inaddition,
receivable balancesaremonitored onanongoing basiswiththe resultthatthe Company's exposure to
bad debts is not significant.
Liquidity risk
The Company's objective isto maintain a balance between continuity offunding andflexibility through
the use of bank overdrafts, bank loans and the multi currency facility.
Interest rate risk/interest rate swaps
InSeptember 2002 Endemol entered into a multicurrency revolving credit facility for EUR 250.0 million
with an interest rate based on three months Euribor plus a company specific mark up (+ 45bp). To
mitigate the impact ofadverse interest rate movements on Endemol's interest expenses,the Company
entered into a series of interest rate swaps in 2002 for a nominal amount of EUR 120.0 million.These
swaps,with durations ofthreeand liveyears,wereentered intotoeconomically hedge adverse interest
movements.AsEndemolchoosesnottoapply hedgeaccounting,thefairvaluechangesare recognised
in the income statement.
Bythe end of 2006,two ofthe original six interest rateswaps have matured.The remaining term of the
four activeswaps,amountingtoEUR80.0million,isuntiltheendof2007.Atyear-end2006thefairvalue
of the interest rate swaps amounts to EUR (0.1) million.
Call and put options relating to acquisition contracts
Endemol has entered into various call and put options inconnection with some of itsacquisitions. The
consideration to be paidfor the interest to be acquired is based on the performance of the respective
company. Under IAS39Endemolvaluesthesederivativesatfairvalue usingavaluation model.Thefair
value of the call options as of 31 December 2006 was EUR 6.6 million (31 December 2005
107
EUR 6.5 million). The fair value of the put options as of 31 December 2006 was EUR 0.4 million
(31 December 2005 EUR nil).
Call options
2006
2005
EUR 1 000
Put options
2006 2005
Balance at 1 January
Exercised
Acquired
Revaluation
6,510 4,895
— —
— (2,281)
— —
74
—
— —
122 3,896 (432) —
(139)
—
— —
Balance at 31 December
6,567
6,510
Balance as of 31 December
Long-term options
3,446
6,510
Short-term options
3,121
—
(432)
—
(432)
—
—
—
The call options have exercise terms that range from 2007 to 2011. The put options are exercisable in
2010and 2011. Putoptions on acquisition of minority interests are not included inthe above overview.
Effective interest rates and re-pricing analysis
Inrespect of income-earning financial assetsand interest-bearingfinancial liabilities,thefollowing table
indicates their effective interest rates at the balance sheet date and the periods in which they re-price.
EUR 1,000
As of 31 December 2006
Cash and cash equivalents. ..
Financial payables to affiliated
companies
Other bank debt long-term . ..
Other bank debt short-term ..
Net interest bearing debt . . .
Effective
interest rate
3.75%
3.50%
6.31%
Total
6 months
or less
6-12 months
More than
1-2 years
87,428
87,428
—
—
(57,170)
(2,211)
(40,625)
(57,170)
—
—
(2,211)
(12,578)
(10,367)
—
(2,211)
—
2-5years
Morethan
5years
—
—
(40,625)
Financial instruments inthe consolidated balance sheet, other than the derivative instruments, include
cash, cash equivalents, shares held for option plans, accounts receivable, accounts payable and
accrued liabilities and short-term and long-term debt.
The estimated fair values approximate their carrying amounts because of the short-term maturity of
these financial instruments. Some of these instruments are already recorded at fair values and other
financial instruments bear interest at variable rates that are re-priced frequently.
Estimation of fair values
In estimating the fair values of financial instruments, the following methods are applicable.
Theforwardexchangeandinterestrateswapcontractsarevaluedagainst bankquotes.Thecalland put
options relating to acquisitions are valued using a valuation model. For earn-out obligations and put
option liabilities the fair value iscalculated based on discounted expected future principal and interest
cashflows usingapplicable interestrates.Fortrade receivablesandtradepayableswitharemaining life
of lessthan one year,the notional amount is deemed to reflect thefair value.All other receivables and
payables are discounted to determine the fair value.
15.2.25 Commitments, litigation and other matters
No accrual has been recorded on Endemol's consolidated balance sheet for commitments and
contingencies unless otherwise indicated.
108
Rent commitments
Endemol leases office facilities, vehicles, computers, and other equipment under long-term operating
leases. Some leases contain renewal provisions, purchase options and escalation clauses.The annual
costs of rentals and operating leases for 2006 were EUR 11.0 million (2005: EUR 8.2 million).
The aggregate amounts of rental commitments to third parties as of December 31, 2006 under
non-cancellable operating lease contracts are as follows:
31 December 2006
Land and
buildings
EUR 1000
Expiring within one year
Expiring in years two to five
Expiring thereafter
Other
assets
31 December 2005
Land and
buildings
Other
assets
11,187 4,092 11,487 2,489
31,970 4,654 29,772 3,279
7,561
47 11,593
—
Total rent commitments
50,718
8,793
52,852
5,768
Guarantees
On 31 December 2006, Endemol had outstanding guarantees to commercial banks and other
guarantees for a total of EUR 25.1 million (2005: EUR 8.2 million).
Endemol participates ina number of partnerships where Endemol isjointly liablefor debts incurred by
these partnerships. The external financial exposure from these liabilities is limited.
Litigation and other matters
Endemol group companies are involved in various legal proceedings and other claims considered
typical for its businesses. Inthejudgement of management, no losses inexcess of provisions made or
covered by insurance programmes,whichwould be material inrelationto Endemol's financial position,
are likelyto arise inrespect ofthese matters,althoughtheir occurrence may haveasignificant effect on
periodic results.
Call and put options
Endemol has entered intovarious calland put options inconnection with some of itsacquisitions. The
consideration to be paid for the interest to be acquired is based on the performance of the respective
company. The estimated cash payment related to call options as of 31 December 2006 was
EUR 12.7 million (2005: EUR 17.9 million). The estimated cash payment related to put options as per
31 December 2006 was EUR 6.0 million (2005: EUR 3.2 million). The valuation of the options is
discussed in Note25.Putoptions to purchase minority's sharesare not included astheyare presented
in a separate line on the consolidated balance sheet.
15.2.26 Related party transactions
Transactions betweentheCompany anditssubsidiaries,whicharerelatedpartiesofthe Company, have
beeneliminated onconsolidation andarenotdisclosed inthis note.Details oftransactions betweenthe
Company and its subsidiaries on one hand and related parties on the other are disclosed below.
During 2006 and 2005, the Company and its subsidiaries entered into the following transactions with
unconsolidated related parties.
For the year ended 31 December, 2006
EUR 1000
Sale of
goods or
services
Endemol Investment Holding B.V.
Endemol Investment B.V.
Endemol France Holding S.A.S
Endemol France S.A.S
Telefonica S.A
—
—
—
6,056
—
109
Receivables
from
Payables
related
to related
parties
parties
1,708
744
11
11,611
13,990
—
31,588
2,608
31,614
—
Fortheyearended31December,2005
EUR 1000
Sale of
goods or
services
Receivables
from
Payables
related
to related
parties
parties
Endemol Investment B.V.
Endemol France S.A.S
Telefonica S.A
—
9,374
—
196
9,014
8,089
29,291
23,326
38
The nature of the relationship with the above mentioned related parties is as follows:
- Endemol Investment Holding is the parent company of Endemol Investment
- Endemol Investment is the parent company of Endemol N.V.
- Endemol France Holding is the parent company of Endemol France
- Endemol France is a 100% owned entity of Endemol Investment
- Telefonica has via intermediaries a controlling interest in Endemol N.V. of approximately 75%.
- Telefonicahascommitteditselftoreimburse Endemolforthe costsoftheshareoptions granted
(EN-SOP). Inthe financial statements as of 31 December 2006, a receivable from Telefonica
and a capital contribution equal to that amount have therefore been included in the
balance sheet.
- During part of 2006 a secondment agreement with Telefonica was in place regarding the
services rendered to the Company by Mr. Agut, the former Chief Executive Officer.
15.2.27 List of subsidiaries, joint ventures and associates
Thefollowing are Endemol's significant subsidiaries,joint ventures and associates asof December 31,
2006. Ownership percentage is 100% unless stated otherwise.
Consolidated subsidiaries
The Netherlands
Endemol Holding B.V, Hilversum
Hilversum Endemol International B.V, Hilversum
Hilversum Endemol Finance B.V, Hilversum
Endemol Nederiand Holding B.V, Hilversum
Endemol Nederiand B.V, Aalsmeer
SNP Holding B.V, Laren
625 TV Produkties B.V, Almere
Endemol International Distribution B.V, Hilversum
Germany
Endemol Deutschland GmbH, Cologne
META Productions Gesellschaft fur Film- und Fernsehproduktion GmbH, Cologne (65%)
Callactive GmbH, Munich (51%)
Spain
Endemol Espana Holding S.L., Barcelona
Gestmusic Endemol S.A., Barcelona
Diagonal Television, S.A.,Barcelona (65%)
Zeppelin Television S.A., Madrid
Zeppelin Media S.A., Madrid
Linze Television, S.A., Madrid (80%)
Portalmix S.A., Barcelona
Italy
Endemol Italia Holding S.p.a., Rome
Endemol Italia S.p.a., Rome
Palomar S.p.a., Rome (68.5%)
Yam S.r.L, Milan (51%)
110
United Kingdom
Endemol UK Holding Ltd, London
Endemol UK Plc, London
Brighter Pictures Ltd, Brighton
Zeppotron Ltd, London
Hawkshead Ltd, London
Victoria Real Ltd, London
Showrunner Ltd, London (75%)
United States
Endemol USA Holding, Inc, Los Angeles
Endemol USA, Inc, Los Angeles
Lock and Key Productions, Inc, Los Angeles
Coconunu Productions, Inc, Los Angeles
Our House Productions, Inc, Los Angeles
True Entertainment, LLC, New York (67%)
Distance Productions, Inc, Los Angeles
JoeCartoon.com, LLC, Los Angeles (51%)
Other
Endemol Belgie N.V, Mechelen, Belgium
Endemol Portugal Lda., Lisbon, Portugal
Endemol Polska Sp. Z.o.o., Warsaw, Poland
OOO Endemol Moscow, Moscow, Russia
Endemol South Africa Holding (Pty) Ltd, Johannesburg, South Africa (66.66%)
Endemol Argentina S.A., Buenos Aires, Argentina (80%)
Estudio Mayor, S.A., Buenos Aires, Argentina
Endemol Chile S.A., Santiago, Chile (80%)
Endemol Andino S.A., Bogota, Colombia (85%)
Endemol Southern Star Pty Ltd, Sydney, Australia (51%)
Endemol Southern Star (New Zealand) Ltd,Auckland, New Zealand (51%)
Endemol Thailand Ltd, Bangkok, Thailand (99.9%)
Endemol India Private Ltd, Bombay, India
Endemol Hellas S.A., Athens, Greece
Joint ventures and associates
TeVerkopen Bewegend Video B.V, Almere, The Netherlands (70%)
Nijenhuis & De Levita Holding B.V, Amsterdam, The Netherlands (51%)
Mediavivere S.r.L., Milan, Italy (50%)
B&B Endemol A.G., Zurich, Switzerland (50%)
Endemol Mexico S.A. de CV, Mexico City, Mexico (50%)
Endemol Globo S.A., Sao Paolo, Brazil (50%)
Metronome Film & Television AB, Stockholm, Sweden (35%)
Afull listof names,the locations and Endemol's interest insubsidiaries,jointventuresandassociates is
filed separately at the Chamber of Commerce Gooi- en Eemland in Hilversum.
111
15.3
Endemol company financial information for the financial years 2006 and 2005
as of 31 December 2006 and 31 December 2005
31 December 2006
EUR 1,000
31 December 2005
ASSETS
Non-current assets
Investments in subsidiaries
237,181
139,521
237,181
139,521
Current assets
1,057
—
1,057
Total assets
—
238,238
139,521
Capital and reserves
Share premium
Translation reserve
Hedge reserve
Revaluation reserve
Retained earnings
Profit for the year
12,500
104,592
147
—
1,033
13,413
8,618
96,820
12,500
93,832
2,743
(474)
1,395
13,743
1,108
14,674
237,123
139,521
Current liabilities
769
346
1,115
238,238
139,521
for the financial year ended 31 December 2006 and 31 December 2005
2006
EUR 1,000
Share in the results of subsidiaries (after taxation)
Other income and expenses
Taxation
2005
96,898 14,674
(110)
—
32
—
Net profit for the year
96,820
14,674
As Endemol N.V. was incorporated on 28 October 2005, the shortened financial year 2005 is from
28 October 2005 until 31 December 2005.
112
15.4
Notes to the Endemol company financial information for the financial year 2006
General
The financial data of Endemol N.V. (the parent company) are included in the consolidated financial
statements. Therefore, in accordance with section 402, Book 2 of the Dutch Civil Code, the separate
financial statements of the parent company are presented in a condensed form.
Thefinancial statements ofthe parent company Endemol N.V. have been prepared inaccordance with
Part9, Book 2,ofThe Netherlands Civil Code.The Company usesthe option ofArticle 362.8 of Part9,
Book2,ofTheNetherlandsCivilCodetopreparethesefinancialstatements,usingthesame accounting
policiesasintheconsolidatedfinancialstatements.Valuationisbasedonrecognitionand measurement
requirements ofaccounting standardsadopted bytheEuropean Unionasexplainedfurther inthe notes
to the consolidated financial statements.
TheCompany presentsacondensed incomestatement, usingthefacilityofArticle402ofPart9,Book2,
of The Netherlands Civil Code.
All amounts reported are in thousands of Euro.
Significant accounting policies
Change in accounting policy
In July 2006 the International Financial Reporting Interpretation Committee ('IFRIC') clarified by an
agenda decision the application of a specific paragraph in International Accounting Standard 32
"Financial Instruments: Presentation" ("IAS 32", revised 2005). According to this clarification a parent
company should recognise a liability when it has an obligation to pay cash in the future to purchase
minority's shares, even if the payment is conditional on the option being exercised by the holder.
Following IAS8"Accounting Policies,Changes inAccounting EstimatesandErrors",theclarificationof
the revised IAS32istreated asachange inaccounting policy effecting Endemol's financial statements
of 2006 with corresponding adjustments to the prior periods presented.
The impact ofthisrevisedaccounting policy ontheparentfinancial statementsofEndemol N.V.for2005
and 2006 is as follows:
2006
EUR 1,000
2005
Subsidiaries (decrease)
(1,552) (1,178)
Shareholders' equity increase/(decrease)
(1,552) (1,178)
Net profit increase/(decrease)
(374)
113
—
Investments insubsidiaries
The investments insubsidiaries are stated at net equityvalue (equity method).
Movement insubsidiaries
Themovement insubsidiaries canbespecified asfollows:
EUR 1,000
Net equity value as of 28October 2005
Result of subsidiaries
Movement incapital contribution EN-SOP
Release hedge reserve
Exchange rate differences
Net equity value as of 31December 2005
125,483
14,674
(1,041)
79
326
139,521
Result of subsidiaries
Movement incapital contribution EN-SOP
Long-term incentive plan equity settled
Release hedge reserve
Dividends paid by subsidiaries
Exchange ratedifferences
Net equity value as of 31December 2006
96,898
10,760
2,144
474
(10,020)
(2,596)
237,181
Capital andreserves
Forthefinancial year ended31December2006.
Equity attributable to equity holders of Endemol N.V.
Legal reserves
Other
Translation Hedge Revaluation
legal
Retained
reserve
reserve
reserve
reserves earnings
EUR 1,000
Issued
share
capital
Share
premium
Balance as of
1 January 2006 . . .
12,500
93,832
2,743
(474)
—
—
(2,596)
—
—
—
—
—
—
—
—
—
—
—
—
474
—
—
—
—
(330)
2,474
Foreign currency
translation
Amortisation hedge
reserve
Other m o v e m e n t s . . . .
Net Profit
Income and expense
recognised in
equity during the
year
Distribution of profit
previous year
Reclassification of
amortisation on
re-valued assets . . .
Dividend paid
Capital contribution
Telefonica for share
option plans
1,395
—
~~~
13,743
1,108
—
—
Profit
for the
year
14,674
Total
139,521
—
(2,596)
—
96,820
474
2,144
96,820
—
—
—
(2,596)
474
—
—
—
—
—
—
—
—
—
—
—
—
—
10,760
—
—
Transactions with
equity holders
during the year and
reclassifications. . .
—
10,760
—
—
.~
Balance as of
31 December 2006 .
12,500
104,592
147
—
114
(330)
2,474
96,820
96,842
—
—
14,674
(14,674)
—
(362)
—
—
362
(10,000)
—
—
(10,000)
—
—
—
10,760
—
5,036
(14,674)
760
13,413
8,618
96,820
—
—
—
(362)
1,033
237,123
Number of issued shares
Number of shares
Number of issued shares as of 1 January 2005
Issue of share capital as of 28 October 2005
—
125,000,000
Number of issued shares as of 31 December 2005
125,000,000
Issue of share capital in 2006
—
Number of issued shares as of 31 December 2006
125,000,000
Endemol N.V. was incorporated on 28 October 2005 with an issued share capital of EUR 12,500,000,
consisting of 125,000,000 ordinary shares with a nominal value of EUR 0.10.
Share premium
The share premium isformed duetothe contribution ofthe shares inEndemol Holding B.V. in2005 by
the former shareholder Endemol Investment B.V. The result for the period January 2005 until
October 2005 is included inthe amount of share premium. This result is included inthe consolidated
statements inthe profitfor the year asthe consolidated statements have been prepared based on the
pooling of interest method.
Translation reserve
Thetranslation reserve comprises ofallforeign exchange differences arisingfromthetranslation of the
financial statements of foreign operations.
Hedge reserve
The hedge reserve comprises the effective portion of the cumulative net change in the fair value of
cash-flow hedge instruments, related to hedged transactions that have not yet occurred.
Revaluation reserve
The revaluation reserve relates to the re-valued intangible assets arising from business combinations.
The other legal reserve is formed for the retained profits from investments in joint ventures and
associates,which arenot paid intheform of dividends and payment ofwhichcannot berealised by the
Company itself.
Commitments and guarantees
Endemol N.V. has issued liability statements within the framework of Article 403, Book 2 of The
Netherlands Civil Code regarding all wholly-owned domestic subsidiaries.
115
15.5
Auditor's report
To:theSupervisory Boardandshareholders of Endemol N.V.
AUDITOR'S REPORT
Inouropinion,thefinancialinformationofEndemolN.V.fortheyear2006andthecomparativedatafor
the years 2005 and 2004, as included in sections 15.1 to 15.4 in the Offering Memorandum dated
4July2007,areconsistent, inall material respects,withthefinancial statementsforthoseyearsfrom
whichtheyhavebeenderived. Weissuedunqualifiedauditor'sreportsonthesefinancialstatementson
11April2007and 19April2006 respectively.
For an understanding of the company's financial position and results and for an adequate
understandingofthescopeofouraudit,thefinancialinformationshouldbereadinconjunctionwiththe
financial statementsfromwhich they have been derived andour auditor's reportsthereon.
Amsterdam,4July2007
for Ernst&YoungAccountants
Signed by M.vanDam
116
16.
Endemol consolidated interim financial information for the first quarter of 2007
16.1
Endemol consolidated interim financial information relating to the 3 month period
ended 31 March 2007
As of 31 March 2007
EUR 1000
31 March 2007
31 December 2006
ASSETS
Non-current assets
Goodwill
Deferred tax assets
47,381
504,833
133,915
6,758
5,065
14,118
47,471
172,687
12,759
6,758
5,970
17,938
712,070
Current assets
352,141
30,605
128,484
263,583
339,182
24,117
87,428
511,230
Total assets
450,727
1,223,300
714,310
Equity attributable to equity holders
of Endemol N.V.
Share premium
Other reserves
Profit for the year
12,500
104,671
117,958
22,291
12,500
104,592
23,211
96,820
257,420
4,230
261,650
Minority interests
Total equity
Long-term loans and borrowings
Emloyee benefit obligations
Deferred tax liabilities
Long-term put option liabilities
Other non-current liabilities
2,211
1,034
50,592
167,741
12,957
10,306
237,123
7,557
244,680
2,211
690
8,349
7,089
9,518
8,460
244,841
Current liabilities
Short-term provisions
Short-term put option liabilities
Payables to tax authorities
354,520
24,254
288
31,472
228,972
77,303
97,796
24,254
1,744
—
265,732
43,787
716,809
Total liabilities
961,650
1,223,300
117
36,317
433,313
469,630
714,310
for the financial period ended 31 March 2007
EUR 1,000
March 2007
Net turnover
Cost of outsourced work and other external costs
341,883
(221,494)
(49,311)
(17,688)
(288,493)
EBITDA
Depreciation and amortisation expense
Impairment of goodwill and intangible assets
53,390
(10,155)
—
(10,155)
Operating result
Net financial income (expense)
Share in profit of associates
43,236
(5,189)
12
Profit before tax
Income tax expense
38,059
(15,552)
Profit for the period
22,506
Attributable to:
Minority interest
Equity holders of Endemol N.V.
215
22,291
Profit for the period
22,506
Summarised statement of changes in equity for the period ended 31 March 2007
Equity attributable to equity holders of Endemol N.V.
Legal reserves
mio -,nnr,
Issued
Share
capital
Other
Translation Revaluation
legal
reserve
reserve
reserves
Share
premium
Retained
earnings
income (or
the year
Minority
Interest
Total equity
8,618
96,820
237,123
—
—
22,291
(1,249)
(824)
22,291
(27)
(19)
243
(1,276)
(843)
22,534
22,291
20,218
197
20,415
(96,820)
—
—
—
Total
CL/n l,UUU
Balance as of
1 January 2007 .
Foreign currency
translation . . . .
Other movements. .
Net income (loss) . .
12,500
104,592
147
1,033
—
—
—
—
—
—
(1,257)
—
—
—
—
—
—
—
—
—
—
(1,257)
—
—
—
—
—
—
Income and
expense
recognised In
equity during the
year
Distribution of
income previous
year
Reclassification of
amortisation on
re-valued assets .
Dividend of
subsidiaries....
Capital contribution
Telefonica for
share option plans
—
79
—
—
Transactions with
equity holders
during the year
and
reclassifications .
—
79
—
(24)
Balance as of
31 March 2007 . .
13,413
—
—
—
12,500
—
104,671
—
—
(24)
—
(1,110)
—
—
1,009
8
(824)
—
(816)
96,820
24
—
—
—
13,413
118
—
—
—
96,844
104,646
(96,820)
22,291
244,680
(0)
—
—
(3.524)
(3,524)
—
79
—
—
7,557
79
79
257,420
(3,524)
4,230
(0)
(3,445)
261,650
16.2
Notes to Endemol consolidated interim financial information relating to the 3 month
period ended 31 March 2007
Basis of preparation
Endemol N.V.("Endemol" or"Company"), incorporatedinHilversum,isagloballeaderintelevisionand
other audiovisual entertainment active on 5 continents. This interim consolidated financial information
for the first quarter of the financial year 2007 of Endemol ('financial information') is prepared in
accordance with IFRS but does not follow all disclosure requirements under International Accounting
standard ("IAS") 34,Interim Financial Reporting.Asthe company acquired Endemol France inthefirst
quarter of2007 its business expanded considerably and comparative informationfor thefirst quarter of
2006 is not included in this financial information section.
Summary of significant accounting Policies
Endemol has IFRS as its primary accounting basis for its consolidated financial statements as of
1 January 2005.The accounting policies and critical accounting judgments and estimates followed in
thefinancial information arethe sameasthosefollowed inthe consolidated financial statementsfor the
year ended 31 December 2006 as described in Section 15.2.
Business combinations—Endemol France S.A.S.
In September 2006, Endemol was informed that a settlement agreement had been entered into in
respect of the earn-out arrangement with the former shareholders of Endemol France S.A.S. This
created an opening for a possible acquisition by Endemol of Endemol France S.A.S. The subsequent
negotiations were successfully concluded on 8 January 2007. On 14 February 2007, shareholders
approvedtheacquisition of 100%ofthe sharecapitalofEndemol FranceS.A.S.('Endemol France') that
was previously held by an indirect subsidiary of Telefonica S.A. The Endemol France business will be
consolidated into Endemol's financial statements as from January 2007.
Endemol France creates premium entertainment formats or licenses formats from Endemol and third
parties and sells them to leading French broadcasters. Endemol France produces shows based on
theseformats tohighstandards, creating hitswithstrong brandvalue.Italsoexploitsthevalueofthese
formats across other media and communication channels like mobile or broadband internet. From a
customer perspective Endemol Francesells itscontentto mostofthe broadcasters inthe Frencharena,
both public and private,althoughTF1—the leading broadcaster inFrance—isthemost important client.
From a genre perspective, Endemol France is active in the production of non-scripted shows, which
represent the largest part of its total revenues, as well as in the digital media field. Turnover reached
EUR 175.2 million in 2006.
Endemol France employs 174 employees as of 31 December 2006, of which 50 have a temporary
contract. Also 342 freelancers are contracted as of 31 December 2006.
The assets and liabilities arising from the acquisition are as follows:
EUR 1000
Initially
recorded
amounts
subsidiary
Application
of accounting
for business
combinations
Non-current assets
Current assets
Current liabilities
Net assets acquired
31,410
133,653
(22,405)
(90,846)
51,812
131,077
—
(45,130)
—
85,947
Goodwill
Total
Recognised at
fair value
162,487
133,653
(67,535)
(90,846)
137,759
296,812
434,571
Purchase consideration settled in cash (including escrow) .
Fair value of contingent considerations (earn outs)
Total Consideration
292,045
142,526
434,571
119
Changes infair valueswill be shown asanadjustment tothe initially identified goodwill within one year
afteracquisitiondate.Thegoodwill isattributabletonewformats,eitherdeveloped byEndemol France,
Endemol or externally, that are expected to be sold to current or new customers in the future, the
workforce oftheacquired business,deferredtaxes resultingfromthevariousfairvalueadjustments and
thesynergies expectedtoariseafter Endemol's acquisition of Endemol France.Furtheranalysis aspart
of the purchase price allocation exercise has resulted in the recognition of further assets limiting the
initial goodwill amount to EUR 296.8 million.
Following the acquisition of Endemol France goodwill of Endemol increased by EUR 296.8.
Furthermore,thistransaction caused intangiblefixedassetsto increase by EUR 131.1 million and long
term earn out obligations to increase by EUR 142.5 million.
InadditionthegoodwillofEUR28.2millionandtheputoption liabilityofEUR31.7millionincluded inthe
balance sheet of Endemol France are now incorporated in Endemol's consolidated financial
information.
Subsequent events
Subsequent eventsaredisclosed inthe notestothe Endemol consolidatedfinancial informationfor the
financial year 2006 as reflected in Section 15.2.5.
Endemol acquired Endemol France on the basis of an enterprise value up to EUR 450 million. Of this
acquisition amount,theearn-out obligation of EUR 194million plus interest isfully subjecttothe annual
performance of Endemol France. The likelihood exists that the earn-out obligation will be adjusted
downwards when preparing the 02 2007 interimfinancial information,following a revisedturnover and
EBITDA forecast of Endemol France for 2007, mainly as a result of the rescheduling of the new Star
Academy series till later in the TV season. The series which initially was anticipated to start airing in
August is currently expected to start airing in October. Consequently, approximately half of the
production and broadcasting of this series will be deferred to 2008.
As a result of the sale and purchase of the Telefonica stake in Endemol, a change of control situation
occurred inrelationtotheLTIRInaccordancewiththetermsoftheLTIRtheSupervisory Board cancelled
theLTIPandthefullgrossvalueofEUR74.0millionwillbepaidoutincashtotheparticipants,leadingto
a combination of a charge in the income statement and a repurchase of an equity instrument under
IFRS 2 which will be accounted for as a deduction from equity in the second quarter of 2007. The
performance optionsand performance shareswillbepaidoutto morethan200participants basedona
price equal to the offer price. For further details of the plan we refer to section 8.11.1 in this offering
memorandum.
AsaresultoftheTelefonicaSharePurchaseAgreement itwasdecidedthattherewillbeanearlyexercise
ofthelasttrancheoftheEN-SOPaftertheTelefonicaClosing Date.ThefullgrossvalueofEUR3.7 million
willbepaidoutincashtotheparticipants,leadingtoachargeintheincomestatementofEUR0.7 million
inthefirsthalfyearof2007.TheEN-SOPwillbepaidouttomorethan700participantsonthebasisofthe
fairmarketvaluerepresentingtheaverageofthesharepriceofTelefonicafrom 18June2007upanduntil
22 June 2007.
16.3
Review report
To: the Supervisory Board and shareholders of Endemol N.V.
REVIEW REPORT
Introduction
We have reviewed the consolidated interim financial information of Endemol N.V, Hilversum and its
subsidiaries (the"Company") forthethree-month periodended31 March 2007asincluded inthis offer
memorandum in Sections 16.1 and 16.2. The Company's management is responsible for the
preparation and fair presentation of the consolidated interim financial information in accordance with
International Financial Reporting Standards asadopted bythe European Union.Our responsibility isto
issue a conclusion on the consolidated interim financial information based on our review.
120
Scope
Weconducted our review inaccordance with Dutch law, including International Standard on Review
Engagements2410,"ReviewofInterimFinancialInformationperformedbytheIndependentAuditorof
the Entity." Areview of interimfinancial information consists of making inquiries, primarily of persons
responsibleforfinancialandaccountingmatters,andapplyinganalyticalandotherreviewprocedures.
A review is substantially less in scope than an audit conducted in accordance with International
StandardsonAuditingandconsequentlydoesnotenableustoobtainassurancethatwewouldbecome
awareofallsignificant mattersthat might beidentified inanaudit.Accordingly,wedo notexpressan
auditopinion.
Conclusion
Basedonourreview,nothinghascometoourattentionthatcausesustobelievethattheaccompanying
consolidated interim financial information for the three month period ended 31 March 2007, is not
prepared, inall material respects, inaccordance with International Financial Reporting Standardsas
adopted by the EuropeanUnion.
Amsterdam,4July 2007
for Ernst &YoungAccountants
Signed by M.vanDam
121
ADVISERS
Advisers to Edam Acquisition
Financial advisers
Goldman Sachs International
Peterborough Court
133 Fleet Street
London, EC4A 2BB
United Kingdom
Legal adviser
Clifford Chance LLP
Droogbak 1A
1013 GE Amsterdam
The Netherlands
Accountant
KPMG LLP
1-2 1-2 Dorset Rise
EC4Y 8EN, London
United Kingdom
Mediobanca—Banca di Credito
Finanziario S.p.A.
Piazzetta E. Cuccia, 1
20121 Milano
Italy
Exchange Agent—ABN AMRO
Bank N.V.
Gustav Mahlerlaan 10
1082 PP Amsterdam
The Netherlands
Information Agent—
Georgeson Sri.
Georgeson Sri.
Via Emilia 88
Rome—00187
Italy
Advisers to Endemol
Financial adviser
N M Rothschild & Sons Limited
St Swithin's Lane
London
EC4P 4DU
United Kingdom
Legal adviser
De Brauw Blackstone
Westbroek N.V.
Tripolis Burgenweeshuispad
301
1076 HR Amsterdam
The Netherlands
122
Accountant
Ernst & Young Accountants
Drentestraat 20
1083 HK Amsterdam
The Netherlands
(This page has been left blank intentionally.)

8 ffi3" «©MEDMSET dated 4 July 2007 KOPIE

Transcription

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