Mediaset merger unlikely?
August 22, 2019
Italian broadcasting giant Mediaset has been looking to merge with its Spanish arm, Mediaset Espana. The plan was that the merger would be a step forward in its wish to create a European media giant to rival the likes of Netflix. That merger now looks unlikely.
Shareholder investor adviser ISS is telling stock-holders in the Italian business that they should vote against the proposed deal.
The ISS advice, obtained by Bloomberg, says the deal isn’t “particularly attractive from a financial standpoint” and minority shareholders would be worse off in terms of corporate governance. The proposed governance structure has the clear goal of cementing the control of the Berlusconi family apparently to pursue an M&A growth strategy without losing control of the combined company,” ISS advised. “For these reasons, support for the proposed transaction is not warranted.”
However, for balance, another shareholder advisory firm, Glass Lewis, is saying that shareholders should vote for the plan which would see a Netherlands-based subsidiary which would absorb the Mediaset businesses.
Complicating matters is Mediaset’s second-biggest shareholder, Vivendi which is in a highly vocal dispute with the Berlusconi family and Board. However, Vivendi might not be able to vote its 19.19 per cent holding without permission of the Italian courts.
Investment bank Exane/BNPP in its note to clients, says: “Merger now looks unlikely. Bloomberg also report that Vivendi plans to vote against the combination. According to our estimates ISS would now need to receive support from 92 per cent of the votes expressed by minority shareholders at the Milan EGM to win the approval of its merger with Mediaset Espana.
The bank suggests that the following simulations below assume that minority shareholders’ participation rate would be limited to 75 per cent. There are three main conclusions:
1) The non-participation of Vivendi would guarantee EGM approval; unlikely
2) Support from Vivendi would also guarantee the approval; unlikely
3) Vivendi’s rejection would oblige Fininvest / Mediaset to receive support from 92% of the votes expressed by minority shareholders, which is far from certain to happen – especially given the ISS recommendation; likely
However, what cannot be wholly ignored is the fast-growing threat from fresh ‘streamers’ to the European market. Exane/BNPP reminds us that with Apple’s launch of TV+ leading to a crowded D2C platform landscape all looking to spend lots on non-sports content in 2020:
– Netflix ($17 billion spend projected)
– Hulu ($7 billion spend projected)
– Amazon Prime ($6 billion spend projected)
– Disney+: ($4.5 billion spend projected)
– Apple TV+ ($4billion spend projected)