That mystery company interested in buying Believe? It’s Warner Music Group.

Earlier this week, MBW told you that there was a “mystery” company that has begun a conversation with Believe‘s board over a potential bid worth $1.8 billion for the French company.

Today (March 7), said company has revealed itself. It’s Warner Music Group.

In an investor release issued this morning, WMG confirmed that it approached Believe’s board on February 21 to “to initiate discussions with respect to a potential combination of Believe with WMG”.

Last Tuesday (February 27), WMG then told Believe’s board that it thought it could value Believe at €17 per share based on currently available public information.

A €17 per share offer, as MBW explained earlier this week, values Believe at around EUR €1.7263 billion (USD $1.872 billion).

Crucially, it would be approximately 13% higher than a €15-per-share offer that was made for Believe last month by a consortium that brings together Swedish investment firm EQT, plus existing Believe investor TCV, and the music company’s founder and CEO, Denis Ladegaillerie.

In its investor release today, Warner commented: “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.”

To be clear: Warner has not yet made an offer. It’s begun a discussion with members of Believe’s board who aren’t compromised by the Ladegaillerie consortium’s approach (this group of directors is described as Believe’s ‘Ad-hoc Committee’).

Warner has confirmed that it has requested access to a “limited list of key due diligence information” from Believe, “with a view to possibly submitting a formal offer relating to the transaction”.

There is some doubt that, even if Warner did make a formal offer for Believe, the company would be able to nobble the Ladegaillerie consortium’s approach.

That’s partly because two members of the Ladegaillerie consortium – TCV and Ladegaillerie himself – are already substantial shareholders in Believe. i.e. They would in effect be selling shares to themselves via their consortium.

These shares (the ones owned by Ladegaillerie and TCV) are part of a 71.92% chunk of Believe’s stock that the Ladegaillerie consortium already has agreements to acquire (the ‘Block Acquisitions’).

Last month, Believe said that in order for these ‘Block Acquisitions’ to be completed by the Ladegaillerie consortium, the consortium needed to clear two hurdles: (i) Regulatory approval in France; and (ii) the issuance to Believe shareholders of a financial “fairness opinion” from Believe’s board (the ‘Board Condition’), informed by a report from independent experts.

On Friday last week (March 1), Believe announced that the Ladegaillerie consortium had informed it of its decision to waive the ‘Board Condition’ when it came to the ‘Block Acquisitions’ (i.e. the pre-agreed acquisition of that 71.92% chunk of Believe).

Consequently, said Believe, the ‘Block Acquisitions’ now remain subject only to regulatory approval (relating to anti-trust clearances), which Ladegaillerie’s consortium “expects to obtain in a short timeframe”.

Needless to say, Warner does not love Ladegaillerie’s attempt to bypass the “fairness opinion” part of this process.

Said Warner’s investor release today: “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 says it is currently awaiting access to the due diligence information that it requested on February 27, 2024, and which it “considers key to allow it to submit a formal proposal”.Music Business Worldwide