(BFM Bourse) – The music publishing group is currently the subject of a takeover project by its founder and several investment funds, with a view to delisting. But the price of 15 euros per share proposed by this consortium is not unanimous.
Believe announced its intention to withdraw from the Stock Exchange on February 12. Its founder Denis Ladegaillerie therefore called on several investment funds with a view to acquiring all of the music publishing house’s titles in circulation at a price of 15 euros per share. The price proposed by this consortium showed a premium of 21% on the last closing stock price before the announcement of the offer, which was 12.40 euros.
A delisting will then be triggered if the initiators of the offer manage to raise more than 90% of the capital. If this project were to succeed, Believe would add to an already well-stocked list of companies that have left the Parisian stock market in recent years. In 2023, 31 companies turned their backs on the Paris Stock Exchange, six more than in 2022, according to the 15th EY public offering barometer.
Founded in 2005, Believe is a major player in digital music and supports (directly or through labels) more than 850,000 artists in 50 countries at each stage of their career. The group founded by Denis Ladegaillerie is the owner of the German heavy metal label Nuclear Blast or the Naïve label founded in Paris in 1998.
The company offers various services to artists and labels, such as distribution on digital platforms, revenue collection tools, music catalog performance analysis, audience development strategies, or support financial.
False note
The company has experienced an unflattering stock market performance since its IPO in June 2021. Before the announcement of the public purchase offer, Believe was therefore trading at 12.40 euros, and had even fallen below 8 euros at the end of October. 2023.
We are a long way from the price of 19.50 euros per share chosen for its IPO. This price was already set at the lower end of the indicative range which went up to 22.50 euros. It was also the first company benefiting from the “French Tech” label to enter the French market.
Its manager deplores that the progress of his company on the stock market does not reflect the operational dynamics of his group. “Since its IPO, Believe has continued an excellent growth dynamic, having enabled it to achieve, two years in advance, the objectives set at the time of listing. However, the solidity of its operational performance has not been reflected in the evolution of the stock price”, Denis Ladegaillerie then explained.
Several market observers believe that the price of 15 euros proposed as part of this offer does not reflect the fair value of Believe. In its note soberly titled “Why not add to the 15 euro offer?”, Stifel believes that the proposal is the result of an unbalanced negotiation. “We believe that this offer is essentially the result of the sale of the 12% and 6.3% stakes in Believe held by Ventech and XAnge (the historic shareholders of Believe, Editor’s note). They were clearly in a hurry to sell and therefore poorly placed to do so”, underlines the financial intermediary.
Especially since operationally, Believe is impeccable. Thanks in particular to “its position in digital”, its portfolio of promising artists “and emerging markets, Believe is growing faster than the music market and is constantly gaining market share on the majors”, recalls Stifel, which also reports that the group has quadrupled its turnover over the last five years.
Multiples too low
According to Stifel, the market should assign a better valuation to the music publishing group, at least 15 times its Ebitda (gross operating surplus) expected for 2025, or 18.5 euros per share.
For his part, Eric Lewin, editor-in-chief of Publications Agora, “feels comfortable” with a price of 18 euros. He recommends not bringing the securities to the offer for the moment, “in order to push the buyer to revise (the) proposal upwards”.
“Indeed, when we look at the other comparables, we realize that a group like Spotify, undoubtedly the most similar company in terms of activity, is still paid on a multiple of 2.6 times turnover. What can also be said about the valuations of Warner Music, 3.5 times turnover, or even Universal Music, 4.4 times…”, develops Eric Lewin.
However, according to Stifel, the takeover bid values Believe at 1.15 times its expected turnover for 2024. Which, confirms the research office, is well below the multiples on which Spotify trades (2.6 times), Warner Music (3.5 times) or Universal Music (4.4 times). This is despite the fact that the French company displays growth higher than that of the sector and its competitors. “This multiple could easily be paid by a major in the event of an acquisition,” says the financial intermediary.
“I always thought that the company was listed on the stock market at a stratospheric valuation, but on the contrary, I consider that given the efforts made over the past three years, the premium offered is a little low,” argues Eric Lewin.
Too high an introductory price?
The problem could therefore go back to the stock market origins of Believe. An avenue which is also raised by Pascal Quiry. In a LinkedIn publication, the author of the financial letter Vernimmen and professor at HEC, judges that “we cannot help but think that there is either a problem with the introductory course in 2021, or with the proposed release price in 2024”.
“Indeed, if Believe is two years ahead of its business plan less than three years after its introduction, logic would dictate that the price of 2024 (15 euros) would be higher than that of 2021 (19.5 euros ), especially since in the meantime the stock market has been good: +20% for the SBF 120 (dividends reinvested)”, asks the specialist.
So how can we explain this anomaly? Either “the price of the introduction was good and in this case the exit price is undervalued, and we will read with interest the report of the independent expert (responsible for ruling on the fairness of a public offer of “purchase, Editor’s note). Either it was not good, and the release price is correct”, he continues.
The first hypothesis “would not be a surprise”, according to Pascal Quiry, arguing that at the end of 2022, of the 139 companies that have listed on the Paris Stock Exchange since 2014 and are still in existence, 77% had a price lower than their price. of introduction.
For Believe, the first stock market steps were already a harbinger of an eventful life. The action had fallen by almost 14% for its first day of trading, compared to an introductory price of 19 euros, which remember was already set at the bottom of the indicative range.
“Seeing the fall in the price at the opening, the first reflex is to think of a valuation pushed to the highest, but which can seem expensive,” Mikaël Jacoby, head of brokerage, commented to AFP at the time. Continental Europe at Oddo Securities.
The Believe case above all raises a recurring question: do newcomers to the stock market tend to be too greedy with the market? Many IPOs of the 2021 vintage were then made at very high valuation levels.
This is what Pascal Quiry thinks, who therefore wonders if “introducing bankers should not ask themselves questions about their practices in terms of advising on the introductory price, where the battle to obtain the mandate can lead them to overbidding valuations and overpromising.”
Sabrina Sadgui – ©2024 BFM Bourse
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