Warner kicks off bidding war for French music group Believe

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A bidding war has emerged for French digital music company Believe after Warner Music Group said it planned to make an offer to buy the company for at least 17 euros a share, more than a recent proposal from its founder and chief executive.

The potential rival offer from US-based Warner, which would value the company at €1.65bn, comes less than a month after Denis Ladegaillerie, alongside private equity groups EQT and TCV, proposed to take the company private at €15 per share. 

The offers come less than three years after Believe first listed in Paris, but shares have traded significantly below the price at its initial public offering for most of that period. They have gained in recent weeks since the potential delisting was announced, closer to its listing price at €16 a share and giving it a market value of €1.56bn.

Shares rose as much as 6 per cent on Thursday after Warner’s potential offer was disclosed.

Warner, the third-largest music group after Universal and Sony, said the approach was preliminary and non-binding, and that it had asked for a limited amount of information to conduct due diligence with a view to submitting a formal offer. Although a decision has yet to be made, Warner said the offer could be in cash. 

“As opposed to the purely financial transaction contemplated by the consortium formed by EQT, TCV, and Denis Ladegaillerie . . . Warner Music would provide Believe with strategic support and financial stability to help the development and growth of the company,” Warner said in a statement, adding that this could include speeding up Believe’s expansion into new markets. 

The consortium of Ladegaillerie and the private equity groups has said that it already has agreements in place to acquire 72 per cent of the French group’s share capital from existing shareholders and that the offer is backed by the board. 

Founded in 2005, Believe has presented itself as a new kind of music label for the streaming era that helps smaller, independent artists earn on digital platforms while boosting their profile internationally.  

When it listed in 2021, Believe thought it would capitalise on investors’ renewed enthusiasm for the music industry as streaming platforms such as Spotify and Apple Music gained traction.

However, the company’s atypical business model and competition from traditional labels have damped enthusiasm. The bulk of Believe’s revenues come from its premium services for established artists. Musicians retain control over the copyright to their music, unlike traditional labels, while paying Believe a share out of their sales. Revenues have increased steadily but it remains unprofitable because of high costs. 

US-listed Warner, which is home to artists including Dua Lipa, Lizzo and Ed Sheeran, is controlled by Access Industries, the holding company for Ukrainian-born billionaire Leonard Blavatnik.

The three international major labels — Universal, Sony and Warner — are all keen to add to their rosters of artists and music rights as the industry continues to enjoy a surge in revenues on the back of streaming services such as Spotify.

However, deals for significantly sized labels such as Believe are relatively rare with most transactions focused on acquiring the rights to song categories that provide a steady income and potential to revive interest in the music via movies and television shows.

Robert Kyncl, chief executive of Warner Music, said at its last results that it had freed up more funds to invest in music and technology. As of December 2023, the company had a cash balance of $754mn and net debt of $3.3bn.


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