Joint F1 owner struggles

Bendy roads ahead for the owners of 50% of F1

One of the joint owners of Formula One, the world's most watched sport, is in danger of being brought to its knees - and some blame the Muppets.

EM.TV & Merchandising, the German media company, saw its share price plunge over 40% on Monday, after it warned that this year's profits would be less than 10% of previous forecasts.

Some observers say EM.TV's problems began in earnest after it announced it was buying The Jim Henson Company, which makes the Muppets, for $680m in February 2000.

A very awkward frog

EM.TV's share price has fallen nearly 90% since February.

The profit warning has met with derision from analysts.

"It is ridiculous to have a year-end target of half a billion and then reduce it to 50 million," said Jürgen Gries, a trader at Merck Finck & Co in Munich.

"Some investors are really angry about that," he said.

Kirch joins in

But a deal with the veteran media mogul Leo Kirch may provide a lifeline for EM.TV.

Kirch to the rescue

The German media company Kirch Group will pay $550 million for a 49% stake in EM.TV's share of SLEC, the Formula One motor racing holding company.

Earlier this year, EM.TV paid $1.65bn in cash and shares for its 50% share in the Formula One holding company.

If the Kirch deal goes through, it will also get a provisional 16.74% stake in EM.TV and a 25% voting right.

The deal should provide EM.TV with valuable media content.

As part of the deal, EM.TV will take over Kirch's stake in Junior TV, the children's TV catalogue.

Promoter Bernie Ecclestone, who owns the other 50% of SLEC, has an option to sell a 25% stake in SLEC for nearly $1bn to EM.TV by the end of May next year.

The fate of the Haffas

The founder and chief executive, Thomas Haffa, will retain a majority stake in EM.TV, but his brother, Florian, who is deputy chief executive and former chief financial officer, will leave immediately.

The profit warning came just weeks after Florian Haffa had said that EM.TV's full year earnings target was not in danger.

EM.TV recorded an operating loss on ordinary activities of 135.3 million marks for the first nine months of this year.