Testing The Rules Harder Than Finding The Number

Michael Hedges April 12, 2021 Follow on Twitter

Audiovisual rules in most countries have been set in stone for ages. More precisely, regulatory levers meant to keep a thumb on operational, commercial and financial behaviors date from the pre-digital era. Early deregulation efforts, largely, did not provide the desired effect of giving bracing control to broadcasters. The internet arrived. Mobile phones arrived. Netflix arrived. Consumers went with the flow.

At the end of January German business daily Handelsblatt (January 29) reported “insiders” at media house Bertelsmann speculating on an exit from French broadcaster M6 Groupe, which is 48.6% held by Bertelsmann subsidiary RTL Group. Officially, Bertelsmann and RTL spokespersons were dismissive of this “speculation” with the caveat, quite significant it turned out, that chairman/chief executive Thomas Rabe favors “national champions” among European broadcasters and, therefore, more consolidation. The same day Reuters (January 29) placed a price on such a transaction, €3 billion, which later dropped to about €2 billion.

While Bertelsmann accountants and lawyers locked down the €2.2 billion acquisition of publisher Simon & Schuster for its Penguin Random House publishing division, upsetting the Murdoch family in the process, French media watchers mulled the prospect of M6 Groupe television and radio channels being taken over by others. By the middle of March there was tacit confirmation from Bertelsmann/RTL and that bids were being received. By contrast, some Germany media watchers offered the Herr Rabe was trolling for a merger partner.

Bertelsmann and RTL being what they are, the suitors submitted over the next few weeks to extensive conversations. Included were Vivendi, Bouygues, Xavier Niel, Mediaset and Daniel Kretinsky. Media conglomerate Vivendi, principally controlled by Vincent Balloré, owns French pay-TV company Canal+ as well as media buyer Havas, streaming platform Dailymotion and a significant stake in media house Lagardère, also an eventual takeover candidate. Its music publisher Universal Music is expected to float an IPO in 2023. M Balloré seems a bit more interested in the M6 Groupe radio channels RTL, Fun Radio and Virgin Radio.

Telecom investor Xavier Niel, owner of ISP and mobile provider Iliad-Free, is reportedly bidding with a consortium including Daniel Kretinsky. With partners he holds controlling interest in Le Monde Groupe, publisher of the euphonious French daily newspaper. One of those partners - Matthieu Pigasse - exited in favor of M Kretinsky. Through his media holding company Czech Media Invest M Kretinsky acquired a stake in German TV broadcaster ProSiebenSat but reduced it to 5% earlier this year. At about the same time the Spanish subsidiary of Mediaset increased its stake in ProSiebenSat to 24.9%, the limit before German competition rules kick in.

Bouygues is a huge industrial and energy conglomerate with telecom and media subsidiaries. The Media subsidiary (49.3%) is TF1 Group, the largest privately owned French TV broadcaster. It operates five free-to-air and five pay-TV channels plus the Newen production house. Herr Rabe has made no secret of his preference. “A merger with TF1 would fit with our strategy of actively pursuing market consolidation,” he told an earnings call earlier this month, quoted by Bloomberg (April 2). TF1 Group chairman and chief executive Gilles Pelisson has been silent.

With the entry fee well known, the horse-trading begins. And a large part of that involves the political capital required to change or set aside competition and consolidation rules. French Competition Authority (Autorité de la concurrence) president Isabelle de Silva and M de Tavernost representing M6 visited with the culture committee of the French Senate last week. M de Tavernost described, again, the stark choice: sell to another European company like Mediaset and nothing changes or cut a deal with Vivendi or TF1 and face consolidation rules, reported Le Figaro (April 7). As such, he danced around questions about when a deal might be completed. But he was adamant that “the channels and flagship brands of M6 will not disappear.”

Mme de Silva, who had not made a public statement on the proposed transaction, kept to the facts and not speculation. “Depending on the nature of the acquiring company, the effects on the French market would be different. In any case, the Authority will analyze the transaction by defining the relevant markets, the effects of the transaction on these markets and will have to define remedies to be applied.” Media regulator CSA, for its part, has indicated a willingness to review rules on the number of free-to-air TV channels one company can hold. Today that is limited to seven. Obviously, this is going to be complicated.

See also...

• Hot Topics - Media Mergers and Acquisitions

• Hot Topics - Media in France

• Hot Topics - Competition Rules

• Hot Topics - Bertelsman/RTL