A Case study on

Major Corporate Governance Failure

KIRCH GROUP
(GERMANY)

Founder Of
Kirch Group

Leo Kirch
1926 - 2011

A Brief Timeline of LEO KIRCH

1926

Born in Volkach, son of a winemaker

195
2

Graduated from the University of Munich.

Studied Marketing, Management and Mathematics

1956

Purchased the German Rights for the classic

Italian movie La strada .

1980
s

Started assembling Television Properties

A Brief Timeline of LEO KIRCH

1990
s
199
6
200
2
200
6
2011

Sets up the subscription television service

Premiere.
Becomes key player in sports broadcasting
rightsa stake in the publisher of Germanys best
Owned
selling tabloid Bild Zeitung.
Owns rights for broadcasting FIFA world cups
Dies in Munich aged 84

KIRCH GROUP
Kirch Gruppe (Kirch Group) was a German media
group founded by Leo Kirch. The group
collapsed in 2002 largely due to the debts
associated with the purchase of sports rights
for its television channels and the launch of
pay-TV services.
The holding company for the group was Taurus
Holding which had three major subsidiaries,
1) Kirch Media
2) Kirch Pay-TV
3) Kirch Beteiligung

KIRCH MEDIA
Kirch Media's main assets were
a.Kirch Sport, which held the TV
rights to the World Cup and other
sports;
b.52.5% of ProSiebenSat.1 Media,
an owner of main satellite
channels;
c.the DSF sports channel;
d.Taurus Produktion, a film and TV
production group; and
e.Taurus Lizenz, owner of fiction
and media medium rights

Kirch Pay-TV
Kirch Pay-TV was majority
owned by Taurus Holding,
however BSkyB held 22% along
with Lehman Brothers (2.4%)
and Saudi Prince Al-Waleed
(3.12%). The company's main
asset was the Premiere pay-TV
network.
Kirch Pay-TV filed for
bankruptcy on 8 May 2002.

Kirch Beteiligung
Kirch Beteiligung's main
assets were its majority
share of Formula One's
commercial rights (through
Speed Investments) and its
40.33% stake in the media
company, Axel Springer AG
Kirch Beteiligung filed for
insolvency on 12 June 2002,
along with the Taurus
Holding parent company of

Reasons For The Collapse Of Kirch Group

Heavy Debt -The group

purchased firm rights at
high costs and misjudged
entry into pay television,
as a result debt burden
mounted to 6.5 billion
euros.

Over Expansion -Leo

 Lack Of Transparency -As the CEO,

Kirch operated his business empire
with a high degree of secrecy and
opacity.
Audit Failure - KMPG, the groups
external auditor did not make proper
assessment of the debts.
Regulators Complicity -The state

 Deutsche Bank AG (DBK)was found

partially liable over the collapse of
Leo Kirchs media group and must pay
damages.
Massive Borrowings - It continued to
borrow despite a growing debt burden
and weak financial position.

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YOU !!!