Warner Music Group Confirms Its Indication of Interest in Relation to French Digital Music Company Believe SA

Rhea-AI Summary

Warner Music Group (WMG) confirms its approach to Believe SA for a potential combination, valuing Believe at €17/share. WMG aims to provide strategic support and financial stability to accelerate Believe's growth. The Consortium waives conditions after WMG's proposal, raising concerns over French securities regulations. WMG awaits due diligence information to proceed with a formal offer.

Positive

• None.

Negative

• Concerns over the Consortium waiving conditions set by French securities regulations, which could be challenged.

Insights

Financial Analyst

The approach by Warner Music Group (WMG) to potentially combine with Believe SA represents a strategic move that could reshape the competitive landscape of the digital music industry. A combination of this nature typically aims to leverage synergies, enhance market share and improve negotiating power with music distributors and artists. The offer of €17/share indicates a valuation that could impact Believe's stock performance, potentially leading to an increase in share price due to anticipated growth and financial stability. The mention of cash and/or share components in the transaction suggests flexibility in financing the deal, which could appeal to Believe's shareholders.

WMG's proposal, which appears to offer more attractive financial terms than the Consortium's, highlights the competitive nature of the acquisition process. The waiver of conditions precedent by the Consortium raises questions about the fairness and regulatory compliance of their actions, which could lead to legal challenges and affect the transaction timeline. WMG's interest in strategic support rather than a purely financial investment could signal a commitment to long-term growth, which may be favorable to Believe's stakeholders, including employees and artists.

Market Research Analyst

WMG's potential acquisition of Believe SA could signal a consolidation trend within the music industry, driven by the need to adapt to the rapidly changing digital landscape. The strategic support WMG offers could enhance Believe's capabilities to expand into new geographies, a critical factor given the global nature of music consumption. Accelerating expansion not only offers revenue growth opportunities but also diversification of market risk.

Investors and stakeholders should consider the implications of this transaction on the competitive dynamics of the industry. A successful acquisition could give WMG a stronger foothold in Europe, particularly in the French market where Believe is headquartered. This could potentially lead to increased market concentration, which might draw regulatory scrutiny. The outcome of such scrutiny could have significant implications for the deal's completion and the future operational strategy of the combined entity.

Legal Expert

The legal aspects of the potential transaction between WMG and Believe SA are complex, particularly in light of the waiver of conditions precedent by the Consortium. This waiver could be construed as a deviation from standard practices designed to protect shareholders and ensure a fair transaction process. If the waiver is found to violate French securities regulations, it could lead to legal disputes that may delay or even derail the acquisition.

Furthermore, WMG's mention of obtaining authorizations from competition authorities indicates an awareness of potential antitrust concerns. The consolidation of major players in the music industry could lead to a reduction in competition, which is typically a focal point for regulatory bodies. The due diligence process and subsequent formal proposal by WMG will need to address these regulatory concerns comprehensively to avoid legal complications that could affect the transaction's viability.

NEW YORK, March 07, 2024 (GLOBE NEWSWIRE) -- Warner Music Group (“Warner Music Group” or WMG”) confirms that on February 21, 2024 it approached Believe SA, a global digital music company headquartered in France and listed on the regulated market of Euronext Paris (“Believe” or the “Company”) to initiate discussions with respect to a potential combination of Believe with WMG (the “Transaction”) and that it indicated on February 27, 2024 that, at this stage, WMG thought it could value Believe at a price of at least €17/share (coupon attached) based on currently available public information.

WMG hereby confirms the indications contained in the press release of the ad hoc committee of the Board of Directors of Believe published on March 1, 2024, which reiterates, in particular that WMG’s approach was made to the Company on a confidential, exploratory and non-binding basis and that WMG has requested access to a limited list of key due diligence information with a view to possibly submitting a formal offer relating to the Transaction (as the case may be, by applying usual measures to protect such information).

WMG reaffirms its interest in the potential Transaction and considers that such a combination would be beneficial to the Company and all of its other stakeholders (shareholders, employees, artists and labels). As opposed to the purely financial transaction contemplated by the consortium formed by EQT, TCV, and Denis Ladegaillerie (the “Consortium”) announced on February 12, 2024, WMG would provide Believe with strategic support and financial stability to help the development and growth of the Company, including by accelerating its expansion into new geographies. In addition, WMG envisages financial terms that would be more attractive than those announced by the Consortium. Although no decision has been taken at this stage, the Transaction could be for cash only, without WMG excluding the possibility of a share component, and without any financing conditions. If necessary, and depending on the information provided by the Company, the filing of the offer could be subject to obtaining authorizations from relevant competition authorities.

WMG notes that the Consortium, after having been made aware of WMG’s proposal, has decided to waive the conditions precedent relating to the block acquisitions (related to the issuance of a fairness opinion by the independent expert appointed by the ad hoc committee and the issuance by the Company’s board of directors of its recommendation with respect to the offer, following consultation of the Company’s works council) included in the agreements transferring to it c.72% of Believe’s share capital. WMG considers that such a waiver violates a number of rules of French securities regulations which are meant to protect shareholders (including the sellers and their investors) and the Company, and that the validity of such waiver could be challenged.

WMG is currently awaiting access to the due diligence information requested on February 27, 2024, and which it considers key to allow it to submit a formal proposal, as the case may be, with respect to the Transaction and confirm its indicative price of at least €17/share (coupon attached) based on the elements mentioned above.

WMG will keep the market updated on any further material developments relating to the above situation.

DISCLAIMER
This press release has been prepared for information purposes only. It does not constitute an offer to purchase, or the solicitation of an offer to sell any securities of Believe, or an offer to sell, in any jurisdiction, including France. There is no certainty that the Transaction mentioned above will be further pursued or completed. The dissemination, publication or distribution of this press release may be subject to specific regulations or restrictions in certain jurisdictions. Accordingly, persons who come into possession of this press release should inform themselves of and observe these local restrictions. WMG disclaims any responsibility or liability for the violation of any such restrictions by any person.

About Warner Music Group
Warner Music Group (WMG) brings together artists, songwriters, entrepreneurs, and technology that are moving entertainment culture across the globe. Operating in more than 70 countries through a network of affiliates and licensees, WMG’s Recorded Music division includes renowned labels such as 10K Projects, 300 Entertainment, Asylum, Atlantic, Big Beat, Elektra, Erato, First Night, Fueled By Ramen, Nonesuch, Parlophone, Reprise, Rhino, Roadrunner, Sire, Spinnin’, Warner Records, Warner Classics, and Warner Music Nashville. WMG’s music publishing arm, Warner Chappell Music, has a catalog of over one million copyrights spanning every musical genre, from the standards of the Great American Songbook to the biggest hits of the 21st century. Warner Music Group is also home to ADA, which supports the independent community, as well as artist services division WMX. In addition, WMG counts film and television storytelling powerhouse Warner Music Entertainment among its many brands. Follow WMG on Instagram, X, TikTok, LinkedIn, and Facebook.

Contacts:
Image 7 - Paris
Anne-France Malrieu
afmalrieu@image7.fr
+33 6 89 87 61 18

Sergio de la Calle
sdelacalle@image7.fr
+33 6 69 58 42 34

Warner Music Group - London
Alex Jacob
Senior Vice President, Communications
alex.jacob@warnermusic.com

Warner Music Group - New York
James Steven
Chief Communications Officer
james.steven@wmg.com

Kareem Chin
Senior Vice President & Head of Investor Relations
kareem.chin@wmg.com

FAQ

What is the potential price at which Warner Music Group (WMG) could value Believe?

At least €17/share based on currently available public information.

What strategic support does WMG aim to provide Believe in the potential combination?

WMG aims to provide strategic support and financial stability to accelerate Believe's growth, including expansion into new geographies.

Why did the Consortium waive conditions after being made aware of WMG's proposal?

The Consortium decided to waive conditions related to block acquisitions, raising concerns over French securities regulations.

What is WMG waiting for to proceed with a formal offer for Believe?

WMG is awaiting access to due diligence information requested on February 27, 2024, to confirm its indicative price of at least €17/share.

What disclaimer does the press release include regarding the potential Transaction?

The press release states that there is no certainty that the Transaction will be further pursued or completed, and it does not constitute an offer to purchase or sell any securities.

What could be the implications of the Consortium waiving conditions set by French securities regulations?

The validity of the waiver could be challenged, as it raises concerns over shareholder and company protection.

How does WMG plan to keep the market updated on developments related to the potential Transaction?

WMG will keep the market updated on any further material developments relating to the situation.

What restrictions should individuals be aware of regarding the dissemination of the press release?

Persons who come into possession of the press release should inform themselves of and observe any local restrictions regarding dissemination, publication, or distribution.

What is the main focus of WMG in the potential combination with Believe?

WMG aims to provide strategic support and financial stability to help accelerate the growth and development of Believe.

What actions is WMG taking to proceed with a formal proposal for the Transaction?

WMG is currently awaiting access to due diligence information, which it considers key to allow it to submit a formal proposal.

What concerns does WMG raise regarding the waiver of conditions by the Consortium?

WMG considers that the waiver violates French securities regulations meant to protect shareholders and the Company, and the validity of such waiver could be challenged.