Richard Desmond 'shakes hands' on Five buyout

Gerhard Zeiler and Richard Desmond are understood to have shaken hands on an outline deal in the early hours of this morning which will see the struggling national broadcaster, Channel Five, bought by the head of Northern and Shell for just over £100m.

The deal is still to be ratified by the board of parent company Bertelsmann in Germany later this afternoon but few insiders expect a hitch.

A Five employee said: "There's a real sense of anxiety and nervousness about what Desmond's going to do. We fear the heart of Five could be ripped out."

However, the owner of Express newspapers and OK! magazine has indicated that he will invest in TV content and is keen to expand its entertainment offering, possibly with an interest in Big Brother.

Desmond, who still owns a raft of porn channels, also spent money on OK! magazine which lost money for the first six years of his ownership but is now highly profitable.

It is unclear what chief executive Dawn Airey's position will be although she is rumoured to be able to move to RTL following any departure from Five.

Desmond is expected to face a grilling by MPs on the House of Commons culture committee once the deal has been done. But the deal is unlikely to be blocked by regulators because there are no competition issues. Desmond's combined share of the UK media market will still be relatively small if the purchase goes ahead.

But John Whittingdale, the Tory backbencher who chairs the culture, media and sport committee, will write to the newspaper and magazine proprietor asking him to appear before committee members if his purchase is confirmed. MPs will question him on his future plans for the channel, which was put up for sale by its German parent company, Bertelsmann.

The firm's flagship terrestrial channel has been hit by falling ratings in recent years and some TV industry sources claim Desmond could transform Five into a UK version of E! Entertainment, the American channel that broadcasts a diet of celebrity news and profiles 24 hours a day.

However, under the terms of Five's licence, which runs until 2014, it must screen a set amount of news and current affairs each year. Desmond visited Ofcom, the media regulator, last week to reassure them that he will continue to meet those requirements. MP are nevertheless also likely to seek assurances that Desmond does not intend to fill Five's schedule with "tabloid TV" shows.
Observers have suggested that Desmond might be tempted to follow the example of the Spanish owners of Hello! magazine, the bitter rival to OK!, who are planning to launch a TV channel in their home market.

Owning Five could also give him the chance to develop TV shows by exploiting the commercial relationships he has with leading celebrities who are signed to OK!, including Katie Price and Kerry Katona.

He will be barred from promoting his titles on Five under EU cross-promotion rules, but Desmond will be free to use his publications to market Five's shows. Sources close to Desmond played down suggestions that he might dumb down Five, which already serves up a populist schedule dominated by US crime drama CSI, reality TV and Australian soaps.

In a sign that he is hopeful of sealing the deal today, an email was sent to Daily Express employees from senior editors which read: "Please note that as from now Five should be known as Channel Five."

Desmond is expected to be confirmed as the "named bidder" by Bertelsmann this evening, when an outline agreement is expected to be signed. He will then be granted a period of exclusivity to finalise the deal.

The nearest bidder is offering less than half the £100m Desmond is prepared to spend. "No one else can get close to what Desmond is prepared to pay", said a source close to the bidding process.

"It's traditional business discipline against an oligarch who will pay whatever it takes". Unsuccessful bidders, including Greek broadcaster Antenna, are waiting in the wings in case the deal collapses but they have been told that the sale will be finalised quickly.

The Express owner, who is worth around £950m, is a controversial figure. He amassed a large part of his fortune from pornographic magazines, which he has now sold, and adult pay-TV channels. He bought Express Newspapers, whose titles include the Daily Express, its Sunday sister title and the Daily Star, almost exactly 10 years ago for £125m. Desmond's critics say he has failed to invest in the papers, cutting costs and axing or outsourcing jobs while taking tens of millions of pounds out of the business.

I've read alot of comments from people who think it's a bad idea but to be honest i think it's just want channel five needs, hopefully it will bring new programmes to the channel that may be watchable.

At the moment i never watch Channel Five unless i catch the news on there.