(BFM Bourse) – While Warner Music Group expressed interest last week in acquiring Believe, Stifel expects the American to propose an offer of 20 euros per share. The financial intermediary also puts forward a scenario in which other behemoths of the music industry would be likely to enter the arena, with an even higher offer.
A stock market battle is looming for the takeover of Believe. Warner Music Group confirmed at the end of last week that it had approached the French digital music group on February 21 to begin discussions with a view to a potential merger.
The American major then estimated to value Believe shares at a minimum price of 17 euros per share, or two euros more than the offer made last month by the investment funds TCV and EQT, associated with Denis Ladegaillerie, the CEO of specialist in digital music.
In a note published this Monday morning, the Stifel bank returned to these latest developments. According to her, Warner Music Group’s interest in Believe would mark the start of a legal battle.
The consortium formed around the founder of Believe declared that it did not wish to modify its offer, asserting an unconditional agreement to buy 72% of the company from the current majority shareholders. However, Warner Music Group indicated last week its intention to contest this transfer of shares, which would be to the detriment of minority shareholders.
For Stifel, the Financial Markets Authority (AMF) could hear the argument of the American group, under the rules applicable to public purchase offers (OPA) which “are intended to ensure the smooth running of these operations and compliance of a certain number of principles, including the free play of offers and bidding wars, equal treatment between companies and shareholders.
The policeman of the Paris Stock Exchange could therefore be very cautious before approving the consortium’s offer on the basis of this legal argument raised by Warner Music Group.
An offer of 20 euros…or even 40 euros?
Still according to the financial intermediary, the board of directors of Believe will be legally forced to open its data room (secure space for sharing confidential documents, Editor’s note) to Warner Music Group. And once the acquisition audit is completed, Stifel expects the American major to make an initial offer of 20 euros per share, which constitutes the financial intermediary’s new price target.
This offer “would symbolically represent a higher price than the IPO price of 19.50 euros. It would be acceptable in terms of valuation and would make a potential outbidding by the consortium difficult,” analyzes Stifel.
Especially since Warner Music Group has every interest in not letting the nugget Believe slip through its fingers. Stifel points out that the French group is growing faster than the music market and is constantly gaining market share on the majors. A takeover of Believe would therefore be a way for the American group to revitalize itself while it has lost ground compared to the other majors in recent years, adds the financial intermediary.
Stifel analysts also imagine an alternative scenario according to which Sony and Universal “could also try to take over the French company”, although they are not aware of any discussions in this direction.
“The two companies (Sony and Universal Music), which each have a turnover of nearly 12 billion euros, could, with Believe’s billion euros in turnover, take a clear lead in the ‘industry’, Stifel also argues. If these two behemoths of the music industry were to enter “the fray”, the bank expects the bidding to rise to 40 euros per share to win the Believe stake.
“Given the strategic importance of Believe, in the event of a stock market battle, Warner, which trades at 3.2x expected sales in 2024, Universal Music, which trades at 4.4x sales in 2024, and Sony could , in our opinion, going up to 40 euros per share to acquire Believe, that is to say paying 3.5x sales in 2024″, predicts Stifel.
This potential offer of 40 euros would therefore mark a notable difference compared to the initial proposal of 15 euros per share formulated by the consortium last February. Stifel recalled in this regard that the consortium’s initial offer did not fairly value Believe.
Sabrina Sadgui – ©2024 BFM Bourse
Are you following this action?
Receive all the information on BELIEVE in real time: