TF1, M6 “exclusive” merger talks
May 18, 2021
By Colin Mann
Groupe TF1, Groupe M6, Groupe Bouygues and RTL Group have signed agreements to enter into exclusive negotiations to merge the activities of Groupe TF1 and Groupe M6 and create a major French media group. They say the new group would be well positioned to master the challenges arising from the accelerating competition with global platforms, active on the French advertising market and in the production of quality audiovisual content.
The merger project has been unanimously approved by the Boards of Groupe Bouygues, RTL Group, Groupe TF1 and Groupe M6.
A French media group ready to master the new challenges of the total video market
Groupe TF1 and Groupe M6 are active in a growing total video market where increasingly rich, original and exclusive content is driving long term audience growth.
This market, where linear TV remains a powerful media, is undergoing a structural transformation, with a strong shift towards on-demand consumption.
The combination of these two players, of the know-how of their employees and of their strong brands, would allow the new group to invest more and to step-up innovation. The proposed merger is critical to ensure the long-term independence of French content creation and to continue to offer diversified and premium local content to the benefit of all viewers.
Ambitious industrial project
- The merged group would pursue an ambitious industrial project focused on five key priorities:
Strengthen the supply of French quality content leveraging a portfolio of strong brands and ambitious investment levels.
- Continue to guarantee the independence, reliability and quality of information on television, radio and digital, while respecting pluralism and preserving each channel’s identity.
- Further develop a production hub for local and international content across all media segments, with the ambition to grow international content sales.
- Accelerate the development of a French streaming champion combining a catch-up and live streaming offering (based on MyTF1 & 6play) and an SVoD service.
- Develop cutting-edge technology in streaming (notably leveraging Groupe TF1’s assets and the Bedrock platform, jointly owned with RTL Group) and in addressable TV advertising to meet the needs of viewers and customers.
“The merger between Groupe TF1 and Groupe M6 is a great opportunity to create a French total video champion that will guarantee independence, quality of content, and pluralism – values that have long been shared by our two groups,” declared Gilles Pélisson, Chairman & CEO of Groupe TF1. “It will be an asset in promoting French culture. Groupe TF1 now approaches a new stage in its development, consistent with the strategic vision developed in the past five years.”
“The consolidation of the French television and audiovisual markets is an absolute necessity if the French audience and the industry as a whole are to continue to play a predominant role in the face of exacerbated international competition, which is accelerating rapidly,” added Nicolas de Tavernost, CEO of Groupe M6. “The combination of the two groups’ know-how will allow for an ambitious French response. Furthermore, this proposed merger of Groupe M6 and Groupe TF1 is the only transaction offering value creation for all Groupe M6 shareholders.”
“The audiovisual market benefits from long term growth,” stated Olivier Roussat, CEO of Groupe Bouygues. “In this context, Groupe Bouygues is pleased to contribute to the creation of a major French media group able to compete with the GAFANs. We are pleased with this major development and partnership which confirm Groupe Bouygues’s commitment to the media since 1987. As shareholders with exclusive control over the new group, we will continue to provide it with our full support.”
“The proposed merger of Groupe TF1 and Groupe M6 would be a major step in implementing our strategy to create national media champions across our European footprint,” asserted Thomas Rabe, CEO of RTL Group. “It demonstrates how in-country consolidation creates significant value. As a strategic investor we will be long-term industrial partners of Groupe Bouygues.”
Strong value creation potential for all shareholders
The merged company would have 2020 Pro Forma revenue of €3.4 billion and Current operating profit of €461 million. The shareholders of Groupe M6 and Groupe TF1 would benefit from significant value creation.
The synergies potential (EBITA run-rate impact) is estimated at €250 million to €350 million per year within three years from closing of the transaction.
The financial policy of the combined group would allow attractive shareholder remuneration and significant investments in content and technology. The combined group would aim to distribute 90 per cent of its free cash flow in dividends.
The transaction would be implemented based on an overall economic exchange ratio of 2.10 Groupe TF1 shares for each Groupe M6 share (after distribution of a special dividend of €1.50 per share for Groupe M6 shareholders and distribution of ordinary dividends of €1.00 per Groupe M6 share and €0.45 per Groupe TF1 share in 20223) and based on the following steps:
- Carve-out of the activities of Groupe M6 non-related to the broadcasting authorizations of the M6 channel granted by the CSA within a new entity (M6 Services).
- Activities related to the broadcasting authorisations granted to the M6 channel would remain in the existing Groupe M6 legal entity which would remain listed and be renamed ‘M6 Edition’ and would benefit from service agreements with M6 Services.
- Distribution by Groupe M6 to its shareholders of:
o Shares in M6 Services
o A special dividend of €1.50 per share
- Merger of M6 Services into Groupe TF1 based on a merger parity reflecting the overall economic exchange ratio of 2.10, adjusted for the value of the share received in M6 Edition retained by Groupe M6 shareholders.
Contribution by RTL Group of its 48.3 per cent stake in M6 Edition to the merged entity, the remainder being owned by Groupe M6 current free float in line with French media regulation.
- Acquisition by Groupe Bouygues of 11 per cent of the merged entity from RTL Group for a consideration of €641 million (based on a price per Groupe M6 share of €26.30 after payment of ordinary and special dividends of €1.00 and €1.50 respectively).
Groupe M6 shareholders would hence receive for each of their existing shares:
i. An ordinary dividend of €1.00 per share
ii. A special dividend of €1.50 per share
iii. 1 share in M6 Edition
iv. A number of shares in the merged entity reflecting the overall economic exchange ratio of 2.10 adjusted for the value of the share retained in “M6 Edition”
Following these steps, Groupe Bouygues would own approximately 30 per cent of the merged entity, which it would have exclusive control over, as part of a shareholder agreement with RTL Group, second largest shareholder with approximatively 16 per cent. Free float would own approximately 54 per cent of the new group of which approximately 29 per cent for the existing float of Groupe M6 and approximately 25 per cent for the existing float of Groupe TF1.
Governance and management
The Board of Directors of the merged group would consist of 12 members, including four directors designated by Groupe Bouygues, two directors designated by RTL Group, three independent directors, two directors representing the employees and one director representing the employee shareholders.
At the day the operation is finalised, the management of the combined group would include members of the current management teams of Groupe M6 and Groupe TF1. Nicolas de Tavernost will be proposed as Chairman and CEO of the merged entity. Gilles Pélisson will be nominated as Deputy CEO of Groupe Bouygues in charge of media and development.
A new name reflecting the diversity and the strength of its assets will be given to the merged company. It would remain based in France and listed on Euronext Paris.
A shareholder agreement will be entered into by Groupe Bouygues and RTL Group with customary statements made to the French AMF as appropriate. Double voting rights will also be granted to shareholders of the new group who will register their shares with the merged company, as customary.
The agreement will provide for representation of the parties within governance bodies, an obligation of consultation between the parties and rights to protect minority shareholders for the benefit of RTL Group, ensuring the predominance of Groupe Bouygues.
The pact will also provide for a number of customary restrictions with regards to the transfer of shares as well as a right of first offer for the benefit of Groupe Bouygues on 5 per cent of the capital of the combined entity, exercisable upon the first sale of shares by RTL. Group.
Conditions and timetable
In compliance with French legislation, Groupe TF1 and Groupe M6 will initiate information and consultation procedures with the employee representatives.
The completion of the transaction remains subject to the approval of the extraordinary general meetings of Groupe M6 and Groupe TF1 which would follow the receipt of the transaction appraisal documentation from the Commissaire à la fusion et aux apports to be designated as part of the transaction.
Completion of the transaction is also subject to customary condition precedents in particular the approvals from the antitrust authorities (Autorité de la Concurrence) and media regulator (Conseil Supérieur de l’Audiovisuel). The transaction would also give rise to a request for exemptions from the compulsory filing of a public offer project (in particular on the basis of the provisions of article 234-9, 4 ° of the general regulations – Combination of a contribution or of a merger submitted to the general meeting of shareholders with the conclusion of an agreement constituting a concerted action between the shareholders of the companies concerned) it being specified that article 39 V of the 1986 law on freedom of communication provides that crossing a threshold for a mandatory public offer does not entail the obligation to file a public offer project until the amount of the share capital or voting rights enabling it to reach the limit of 49 per cent of the capital and voting rights.
The transaction is aimed to close by the end of 2022.
Responding to speculation that it was seeking a buyer for its holding in M6, RTL issued a statement on February 1st suggesting that “it has repeatedly said that there is a strong case for consolidation in the European broadcasting sector”.
“RTL Group reviews such options on an ongoing basis with a view to creating value for its shareholders. There can be no certainty that this may lead to any type of agreement or transaction,” it said.