German 1.7-billion-euro broadcaster ProSiebenSat. 1 Media XETR:PSM has found itself at the centre of an unlikely M&A drama. Its two largest shareholders, Italy’s MFE-MediaForEurope MIL:MFEA and Czech investment group PPF, seem to be jostling for control of the company – but so far without launching conventional takeover bids that stand a chance of persuading all minority shareholders to sell. It's starting to reflect a broader debate about the right way to modernise Europe's struggling linear TV sector.
MFE, the vehicle of Italy's Berlusconi family, made a lowball cash and shares offer for the German broadcaster in March. It now owns just over 30% of the company. ProSieben shares have largely traded above the live value of that bid in recent weeks, according to Breakingviews calculations, suggesting that few investors will tender. That may be the point, from the Berlusconis' perspective, since it's more economical to control a company with a large minority stake rather than owning the whole thing and having to consolidate the debt.
PPF, with other European media assets and a 15% holding in ProSieben, is taking a different approach. On Monday it offered 7 euros per share in cash but said it would only end up with a maximum 29.99% stake in the German group, which broadcasts shows including the Teutonic version of "The Masked Singer". That price was 17% higher than ProSieben's Friday closing price and 21% above MFE's live bid value, PPF said, but it's not available to all shareholders by virtue of the bidder's self-imposed ownership cap. The Italian side is now considering raising its offer in response, Reuters reported on Wednesday citing a source close to the matter.
Unless either suitor changes tack and makes a knockout bid for the whole company, the stakes are nuanced for other shareholders. It may end up being a question of which pushy investors' favoured strategy carries the day.
The Berlusconis seem likely to want closer collaboration with MFE's Italian and Spanish TV properties. A person familiar with PPF's plans, meanwhile, told Breakingviews that it would pursue greater investment in local content and support a digital overhaul, with a focus on modernising the company's streaming offering.
The Czech recipe, so far, looks better - not least because there is minimal evidence that MFE's cross-border plan would yield much in the way of cost savings or revenue boosters. PPF's strategy, by contrast, could include the alluring idea of seeking a distribution deal with a U.S. streamer, allowing ProSieben to offer prestigious U.S. shows alongside local fare. France’s Canal+ LSE:CAN, which has an agreement with Warner Bros. Discovery’s NASDAQ:WBD Max, offers a template.
Admittedly, the average investor in the German group might prefer to be cashed out in full at a meaningful premium through a conventional takeover offer. But for now, that's not on the table.
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CONTEXT NEWS
Czech investment group PPF on May 12 offered to buy shares in ProSiebenSat.1 Media to lift its 15% stake in the German broadcaster to almost 30%.
MFE-MediaForEurope, controlled by Italy's Berlusconi family, in March made an offer for all of ProSieben. It currently has slightly more than 30% of the stock.
PPF said its 7-euros-per-share bid represented a premium of more than 17% to the target's closing price on May 9 and a 21% premium to MFE’s cash-and-share offer.
Reuters reported on May 14, citing a source close to the matter, that MFE was considering raising its bid for ProSieben in response to PPF’s move.
The German group's shares were trading at 7.28 euros as of 0848 GMT on May 14.