Warner Music Group and Denis Ladegaillerie’s tussle over buying Believe is hotting up – as France’s SEC equivalent gets dragged into the drama.

Believe's board is asking the AMF (Autorité des marchés financiers), France's equivalent to the SEC in the US, to review Denis Ladegaillerie's recent takeover move at Believe
MBW Explains is a series of analytical features in which we explore the context behind major music industry talking points – and suggest what might happen next. Only MBW+ subscribers have unlimited access to these articles. MBW Explains is supported by JKBX, a technology platform that offers consumers access to music royalties as an asset class.

Right. Before we tell you the latest in the fast-unfurling soap opera of Believe, Warner Music Group, and Denis Ladegaillerie‘s consortium, it’s probably helpful to bring you up to speed.

Believe you me, MBW would love to just skip to the latest chapter: Believe’s board* calling in the AMF – France’s equivalent of the USA’s Securities and Exchange Commission (SEC) – to rule on whether one crucial move by Denis Ladegaillerie’s consortium gets the AOK, or the A-Oh-Nay.

But without the requisite context, trust us, this story will probably leave you lost at sea.

So before we get to the good stuff, here’s a quick chronological recap on what’s happened so far, based on a flurry of announcements issued by Believe and its board (and one by WMG) in recent weeks:

  • On February 12, a consortium comprised of two investment companies – TCV and EQT – plus Denis Ladegaillerie, the founder and CEO of Paris-headquartered Believe, announced that they had tabled a EUR €15-per-share bid to acquire Believe and take it private. This bid valued Believe at around USD $1.6 billion;
  • The Ladegaillerie consortium noted that it had already reached private agreements to acquire 71.92% of Believe via ‘Block Acquisitions’. These ‘Block Acquisition’ agreements were privately inked with four current owners of Believe stock: Ventch and Xange, plus TCV and Denis Ladegaillerie. (To reiterate: The Ladegaillerie/TCV/EQT consortium has agreed to acquire shares from Ladegaillerie himself, plus TCV itself, plus two other stockholders.). The consortium’s acquisition of this 71.92%, said Believe, would be subject to two conditions: (i) Regulatory approval in France; and (ii) the issuance to Believe shareholders of the board’s approval of Ladegaillerie’s bid, aka a “fairness opinion” informed by a report from independent experts. Subsequent to these hurdles being cleared – and the 71.92% officially landing in the consortium’s bag – the consortium said it would make a formal €15-per-share offer to the remainder of Believe’s shareholder base;
  • On February 21, Warner Music Group contacted Believe’s board* “to initiate discussions [regarding] a potential combination of Believe with WMG”.
  • On February 27, WMG told Believe’s board* that it might be willing to value Believe at “at least” EUR €17-per-share based on currently available public information. However, WMG said it would only make a formal offer after receiving and reviewing what Believe deems “confidential information” regarding its finances. WMG made a formal request for this “confidential information”.
  • A €17-per-share offer would be around 13% higher than the Ladegaillerie consortium’s offer, and would value Believe at over USD $1.8 billion. Warner told Believe’s board that, if WMG does go ahead with a formal offer for Believe, it would be able to pay the whole amount in cash;
  • On February 28, in what appears to be a reaction to the Warner approach, the Ladegaillerie consortium told Believe’s board that it would now be “waiving” one of the previously-announced conditions for its 71.92% ‘Block Acquisitions’ – the one requiring the Believe board to issue an approval of the bid to shareholders (aka the “fairness opinion”), informed by independent experts. As a result of this “waiver”, Believe would later confirm, the ‘Block Acquisitions’ would face only one condition: regulatory approval in France (relating to anti-trust clearances), which Ladegaillerie’s consortium said it “expects to obtain in a short timeframe”;
  • On March 7, Warner Music Group publicly unmasked itself as being interested in considering a takeover bid for Believe. As part of this announcement, WMG expressed its strong disapproval of the Ladegaillerie consortium’s intention to “waive” the “fairness opinion” condition of its ‘Block Acquisitions’ bid. Warner said: “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.”
  • Ladegaillerie’s consortium publicly bit back at that claim by Warner on Friday (March 8), claiming in a press release that, in its view, its decision to “waive” the condition in question was valid and complied with French regulations;
  • Last really obvious thing: If Ladegaillerie’s consortium successfully acquires 71.92% of Believe, it will be the majority owner of the company. You’d expect this to end any interest that Warner has in acquiring Believe – even if any of the minority shareholders outside of the 71.92% would have rather sold to WMG.

Okay, you’re pretty much up to speed! Now for the latest.

Today (March 11), Believe’s board* has announced three important things:

  1. It’s contacted the financial authority of France, the AMF, to ask whether Ladegaillerie’s consortium was, legally speaking, allowed to “waive” the board-approval/”fairness opinion” condition. The AMF (Autorité des marchés financiers), as mentioned above, is France’s equivalent of the SEC in the United States. Believe’s board particularly wants to know if the “principles of tender offers” apply here – i.e. if a preliminary approach from a potential rival bidder means that the Believe board’s approval of Ladegaillerie’s bid (“fairness opinion”) is in fact required before the ‘Block Acquisitions’ can go ahead;
  2. While it awaits the AMF’s opinion, Believe’s board* has told Warner that it will not be handing over the “confidential information” requested by WMG regarding Believe’s finances. (You can see why this is: If Believe’s board* hands over this confidential information, then Warner subsequently cannot oust the Ladegaillerie consortium’s takeover, Believe will have just let one of its key global rivals ‘under the hood’ of its finances for zero tangible gain.);
  3. Believe’s board* claims that, when it received the “binding proposal” from the Ladegaillerie consortium, the consortium “did not mention that [either of the two agreed] conditions [for the deal] could be waived”.

(* Technically speaking ‘Believe’s board’ as described throughout this article is in fact what’s called an ‘Ad-hoc Committee’, i.e. an exclusive group of those board Directors at Believe who aren’t personally entangled in Ladegaillerie and co’s bid. But we thought readers who’d made it this far down would have parsed quite enough information already – so we decided to only mention this caveat after today’s news was safely snuggled into your brain’s frontal cortex.)

Obviously, if the AMF gives the Ladegaillerie “waiver” the thumbs-up, this story looks over.

But if it doesn’t – and cites the “principles of tender offers” in France in doing so?

This drama will have a while to go just yet.

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