(News Bulletin 247) – Warner Music Group confirms its interest in the music publishing group which is currently the subject of a takeover project by its founder and several investment funds.

New twist in the Believe file. Warner Music Group confirmed this Thursday that it had approached the French digital music group Believe on February 21 to begin discussions with a view to a potential merger.

The American major estimates valuing Believe shares at a minimum price of 17 euros per share (dividend included) based on public information currently available. However, Warner Music Group has requested access to a list of information that it considers essential in order to potentially submit a formal offer for Believe.

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.

A white knight

On March 1, the digital music group Believe indicated that it was the subject of an offer from another player whose proposal “could, however, result in a more attractive offer for the company and its shareholders”.

Recall that the investment funds TCV and EQT, associated with Denis Ladegaillerie, the CEO of the digital music specialist, announced on February 12 their intention to initiate a purchase offer at a price of 15 euros per share on Believe shares still in circulation on the Paris Stock Exchange.

Warner Music Group is also rejecting the proposed takeover bid announced by the consortium, judging that their motivations are “purely financial”. The American group even claims that the consortium’s proposal would not be in the interest of Believe and its other stakeholders (shareholders, employees, artists and labels).

A beneficial offer

The American music industry giant adds in its press release that its offer would be beneficial because it is part of a real development project for Believe. “Warner Music Group would provide Believe with strategic support and financial stability to help the development and growth of the company, in particular by accelerating its expansion into new geographies,” continues the American company.

Warner Music Group is the third largest player in the recording industry behind Universal Music Group and Sony Music Entertainment.

On the Paris Stock Exchange, Believe shares rose 4% to 16.14 euros to get closer to the price mentioned by Warner Music Group. At this price, the American’s offer could this time convince shareholders scalded by the consortium’s proposal. Several market observers believe that the price of 15 euros proposed as part of this offer did not reflect the fair value of Believe.

In a previous note, Stifel indicated that the consortium’s proposal was the result of an unbalanced negotiation. Eric Lewin, editor-in-chief of Agora Publications, explained that he “feels[ir] comfortable” with a price of 18 euros. He then recommended not bringing the securities to the offer for the moment, “in order to push the buyer to revise (the) proposal upwards”. This is finally Warner Music Group which was responsible for raising the stakes…