American Idol creator gambles on an encore

May 31, 2010

By Rolfe Winkler

Pop impresario Simon Fuller is ready for an encore. He wants his hit TV show American Idol back. This time it’s shaping up to be a duet, as Fuller has another deep pocket to join his own. The empire is bigger too, with image rights to Elvis Presley and Muhammad Ali added to the mix. But Fuller may yet come to regret a return to the same stage.

With a fortune built on the back of the Spice Girls, Fuller sold his TV talent show to CKX in 2005 for $174 million. He’s now ready to fork over $600 million, with one of Britain’s wealthiest bankers, Roger Jenkins, to buy back the whole company, according to the Wall Street Journal. That works out to about $6.50 a share.

It would be a nice premium to Thursday’s closing price of $4.32, but it’s little more than the $6 the shares traded at in late March when the company confirmed sale talks with then-boss Robert F.X. Sillerman, who resigned to launch his own bid. The market seemed skeptical, knocking the shares 30 percent below the $6 he was believed to be offering. It’s still not clear if a bid ever materialized.

Fuller’s offer may appear to shortchange CKX investors. But valuing the company at a modest seven times estimated 2010 EBITDA may not be so bad given the ratings for the American Idol finale sank to 2002 levels and its star, Simon Cowell, just left to launch a competing singing show.

Fuller and Jenkins likely view CKX as a cornerstone for a budding entertainment empire, having put together a $1 billion fund for acquisitions. Still, it seems like they’re paying a full price for the privilege.

The Idol worship follows another entertainment mogul’s return to his roots. Haim Saban just reacquired the Power Rangers kids franchise that started his road to riches. Like Saban, Fuller probably feels he knows his baby best, and is well suited to keep it strong. That may be true. But at the premium Fuller is willing to pay, current CKX investors should be happy to make this a swan song.

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