The Failure of Europe’s Big TV Mergers
BY Georgi R. Chakarov
Two major mergers on the European TV market failed to materialize over the last six months. First, in mid-September 2022, the French TF1 and M6 Groups announced that they have abandoned their proposed merger. Then, in January 2023, the same happened in the Netherlands as RTL and Talpa gave up the effort to unite their assets. At the start of the year, the UK government also decided that it will not privatize Channel 4 after a long process of preparations to sell the broadcaster.

There were just a few “successful” transactions during this period. The first one saw MFE (Mediaset) acquire the shares it did not already own in Mediaset Spain basically merging the Spanish and Italian assets of the company. The other one was the somewhat surprising investment of CEE giant PPF Group, owner of Central European Enterprises (CME), buying 9.1% of the shares of ProSiebenSat.1 Media SE, becoming the second biggest shareholder in the German media holding. However, both deals are rather small in value and an even smaller impact on the respective media markets.

According to statistics, the last sizeable merger in the sector with a value over a billion euros in Europe took place in June 2021 as UPC Polska was sold by Liberty Global to Iliad for the sum of 1.5 billion euros. This deal as well had a small impact on the TV market itself and its high value is mainly related to the infrastructure of the pay TV operator.

Telia’s 2019 acquisition of Bonnier Broadcasting (TV4) for SEK 9.2 billion (again less than a billion euros) was probably the last time Europe saw a major transaction which affected linear television, pay TV, digital and streaming in two markets – Sweden and Finland. Further back, in 2014, in one of the most talked-about deals on the continent Viacom (now Paramount Global) acquired UK’s Channel 5 for £450 million ($760 million).

According to stats from Dialogic, the best year for M&A in the European TV sector was 2018 with a total spend of 48.7 billion (36 transactions), followed by another peak of 35.1 billion euros out of total of 50 transactions in 2020. In 2021 that sum dropped to only 7.4 billion with 37(!) transactions, and after the first quarter of 2022 the money spent on M&A in the European TV sector amounted to only 1.3 billion euros with 11 transactions. By the end of 2022, the only major deal that was finalized on the continent was the merger of Warner Bros. Discovery’s Eurosport UK channels with the BT Sport channels. In South-East Europe, United Group continued to be the most active player (its biggest deal was the merger of the Wind and Nova telcos in Greece), but most likely the annual result was the lowest since 2017 when mergers in the sector in Europe accounted for only 2.1 billion euros.

The failed merger between TF1 and M6 could have become the biggest in Europe in years with a value of 2.2 billion euros but as it became clear there was no support for the transaction from the French Competition Authority’s board (Collège), i.e. in over a year since the announcement of their plans RTL Group and Bouygues were not able to get political support for their business plans.

John de Mol, owner Talpa Network

In a joint statement, the two groups said: “Following the debates with the Authority and despite the additional remedies proposed, it appears that only structural remedies involving at the very least the divestment of the TF1 TV channel or of the M6 TV channel would be sufficient to approve the proposed merger. The parties have therefore concluded that the proposed merger no longer has any strategic rationale. As a result, and in agreement with the other parties, Bouygues has decided to end the review of the transaction by the Competition Authority. The parties regret that the Competition Authority did not take into account the speed and extent of the changes sweeping through the French broadcasting sector. They continue to firmly believe that a merger of the TF1 and M6 groups would have provided an appropriate response to the challenges resulting from the increased competition from the international platforms.”

Interestingly enough, the message sent by RTL and Talpa, announcing that their merger has been put off, contained almost the same wording: “RTL Group and Talpa Network regret that ACM did not take into account the speed and extent of the changes in the Dutch media landscape and the impact of these changes on local media companies. They continue to firmly believe that a merger of RTL Nederland and Talpa Network would have been the right strategic response to the challenges resulting from the increased competition with the international platforms.”

Balancing between politics and regulations could also put an end to MFE’s ambitions to take operational control of ProSiebenSat.1 Media. In December, MFE, which is controlled by former Italian Prime Minister Silvio Berlusconi, submitted a merger report to the Federal Competition Authority (BWB) which means “the acquisition of de facto sole control ProSiebenSat.1 Media”. However, according to Reuters, an industry insider said this was just a technical process, while a hostile takeover of the company by the Italians is currently considered “politically impossible.” Two months later, MFE said officially that it is not planning a merger with P7S1 “for now.”

Clearly, politicians, regulators and even competitors “failed to see” or understand the arguments and business motivation of these European media giants who felt the impact of the failure of the mergers almost immediately while the consequences could continue to be seen in the next two-three years.

In France, the merger was cancelled but both TF1 and M6 were forced to sell channels. Niche nets TFX and 6ter were sold to Altice as the two groups needed to offload at least one of their terrestrial channels in order to get approval for their merger. Days after the deal was called off, French media reported that M6 Group has been put for sale by Bertelsmann and got offers from Xavier Niel (Iliad group) and MFE, Czech billionaire Daniel Kretinsky, who’s already present in several French media and FL Entertainment (Banijay, Betclic) owned by Stéphane Courbit, more notably associated with Rodolphe Saadé, CEO of the shipping giant CMA-CGM. However, a month later the German media giant said it has scrapped plans to sell its stake in M6.

Just days after Bouygues and RTL Group called off the TF1-M6 deal, Bouygues announced a change in the leadership of TF1 Group with Rodolphe Belmer taking over as Chairman and CEO, effective February 2023. Gilles Pélisson then moved to the Bouygues Group as Deputy MD in charge of Media and Development.

Next up were the reports of the failure of French streamer Salto, operated jointly by TF1, M6 and France Télévisions. Once again, the media blamed the strict regulatory framework which impeded the cooperation of the three groups. Eventually, in February this year, they jointly announced that Salto, which counted nearly one million subscribers, would be shut down in March this year. The joint statement clarified: “This decision by Salto’s three founder-shareholders follows the abandonment of the proposed merger between TF1 and M6, which would have paved the way for Salto to be taken over by the merged entity.”

Sven Sauvé, CEO RTL Netherlands

Financially, 2022 was “stable” for the TF1 Group, which filed 15 million euros in expenses over the failed merger. Current operating profit came to 316.2 million, down 27.0 million year-on-year. It increased by 2.5 million euros without taking into account the broadcaster’s tax credit allocated in 2021 for COVID-19, TF1 clarified.

M6 Group’s revenue in 2022 fell by 2.4% to 1.356 billion euros. EBIT for the period was 312.0 million, compared with 390.5 million in 2021. In 2021, EBIT included a revaluation capital gain of 52.4 million following its acquisition of a majority shareholding in Stéphane Plaza Immobilier, M6 noted. According to the annual report, Salto recorded a significant operating loss of 72.3 million in 2022 (i.e. 24.1 million for M6 share). “In the context of the failure of the M6 / TF1 merger project, the three partners of Salto tested possible buyers for the platform, while evaluating the cost of the liquidation of the company which amounts to €66.0 million (i.e. €22.0 million for M6 share),” M6 said.

Streaming was also one of the key arguments for the merger of the assets of RTL and Talpa Network in the Netherlands where Videoland has been successfully competing with the international giants while Talpa really lacks an asset in that segment. This was also the reason why Talpa was billed “the biggest loser” after the failed merger by Dutch analysts. Media entrepreneur Ruud Hendriks called Talpa “a handicapped” media company: “It won’t be very cozy in the corridors there now. John de Mol will have to come up with something else. I don’t think he can go on like this. Talpa’s Achilles heel is the lack of a streaming service.” De Telegraaf’s TV expert Kirsten Jan van Nieuwenhuijzen also noted: “De Mol had negotiated a very favorable deal. Talpa does not own Videoland. They have not made that investment in the future there. That is a real problem in the long run.”

RTL Netherlands CEO Sven Sauvé then commented for the media that they are open for new partnerships, both national and international, in order to be able to compete better with the international giants. The main strategic goal remains the growth of the Videoland streamer and RTL will continue to cooperate with Talpa in terms of content.

Later, former SBS6 chief Fons van Westerloo told Financieele Dagblad that De Mol now has three options: sale or cooperation with another party, pull out the wallet and make acquisitions, or develop a streaming service. However, in his opinion, Talpa’s acquisitions have not been so successful and a streaming service is unsustainable in the current Dutch market, so: “My prediction is that SBS will be put back on the market. There is always a buyer for media. Many parties find media ‘juicy’.”

The failed merger was also felt among the Talpa ranks. In March Erland Galjaard, consultant at Talpa TV, decided to terminate his contract. He said he wants to devote more time and attention to other projects and develop further as an independent entrepreneur and consultant.

In terms of finances, 2022 was excellent for RTL Netherlands with Adjusted EBITA up 50.5% to 161 million euros. The revenue grew 10.6% to 636 million euros. Videoland recorded a subscriber growth of 11.8% to 1.221 million paying subscribers at the end of 2022 (end of 2021: 1.092 million).

Talpa has not filed official financial reports for 2021 and 2022 yet. In 2020 (at the time of the announcement of the planned merger with RTL) it had a turnover of 433 million euros.

For both companies the two potential local partners could be Mediahuis and DPG Media. The first one was supposed to take over the sales for Talpa’s TV channels after the finalization of the mergers, while the second one is now the co-owner of RTL Belgium, and controls the VTM channels, and has voiced ambitions to enter the Dutch TV market as well, where it currently cooperates with RTL and Talpa in content production.

Bert Habets, CEO ProSiebenSat.1 Media

However, now all eyes are turned towards Germany where ProSiebenSat.1 first called off the release of its 2022 results due to “regulatory matters in connection with the business of Jochen Schweizer mydays.” Then, at a media event in March CEO Bert Habets came up with a proposal for a streaming service ‘Made in Germany’ uniting both public broadcasters and commercial players, and later unveiled a new strategic focus where Joyn becomes the center of the company’s Entertainment activities. The main question here is: Who would fund it?

During the annual results presentation in late March, Bertelsmann CEO Thomas Rabe did not sound very optimistic about the prospects of big mergers in Germany and Europe as a whole: “It’s very clear [that in] the next two to three years, it doesn’t make sense to come up with large-scale merger plans in TV, because the position which the authorities took in France and the Netherlands is likely to be the same in other countries,” Rabe told the Financial Times. But he still sees other options in advertising and distribution partnerships: “These will be smaller steps to consolidate and create scale,” he said. “But, frankly, [they are] the only steps which are currently available, given the position of the competition authorities.”
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