Bank analyses MFE’s Mediaset bid
March 17, 2022
MFE-MediaForEurope, the Berlusconi-backed broadcaster, has announced a bid for the 44 per cent of Mediaset Spain that it does not own.
The bid has an implied price per share of €5.60. MFE is offering cash of €1.86 per Mediaset Spain share, plus 4.5 MFE A shares per MSE share held. The implied value, at close of business on March 15th, represents a 12.1 per cent premium to March 11th’s close, a 20.1 per cent premium to the one-month VWAP (volume weighted average price) and a 30.1 per cent premium for the 3-month VWAP.
A note to clients from Berenberg Bank’s equity research department, said: “We note that MSE’s announcement of a share buyback along with its FY 2021 results has been followed by strong performance in its shares, hence the meaningful gap between the March 11th premium and the aforementioned VWAPs.”
The bank says the upside is in the synergies, commenting: “Back in the summer of 2019, Mediaset (as MFE was then called) attempted to combine the Italian and Spanish businesses under a single holding company. The transaction that has now been announced is essentially the same in that the idea is to extract synergies from the combination, particularly in the area of ad technology and platform technology, as well as overheads and central buying. At the time, the estimated synergies were €100 million – 110 million, but with the cost base of both companies having shrunk through the pandemic, we always expected a more modest number. Thus, MFE says that the synergies will be at least €55 million, by 2024, with an NPV of €340 million. Based on the proforma number of shares that would be outstanding if the transaction is successful, this NPV is equivalent to €0.52 per MSE share. Including this upside would take the value of the bid to €6.12/share.”
But this could be just the beginning, says Berenberg. “MFE has made no secret of its desire to be more than just an Italian/Spanish business. Over the past few years, it has steadily increased its shareholding in fellow broadcaster ProSiebenSat.1, and recently breached the 25 percent level. While it is clear to us that the German broadcaster is on MFE’s shopping list, we do not expect a bid any time soon. Rather, we think MFE will want to demonstrate the validity of its plan, and its ability to extract synergies, before approaching the German company, whose management has in any case been generally resistant to the idea of this pan-European combination. A delay would also give ProSiebenSat.1 the opportunity to try and IPO its dating business, which we think MFE would want to distribute to shareholders rather than retain within the group.”