Market Insight

French investment vehicle agrees €270 million deal to acquire Groupe AB

January 30, 2017

Tim Westcott Tim Westcott Director, Research and Analysis, Programming

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Mediawan, the group backed by French entrepreneurs including Xavier Niel, the founder of Free, has signed an agreement to acquire 100% of Groupe AB, the France-based channel operator and producer, for a total consideration of €270 million ($289 million).

Groupe AB is currently owned by its founder Claude Berda (53%), TF1 (33.5%) and management. The company operates 19 TV channels distributed in France, Belgium and Switzerland and owns a catalogue of 12,000 hours of programming including drama, children's programming, documentaries and animation.  

The deal, announced yesterday afternoon, will be funded through €130 million in debt with the remainder provided by the funds raised by Mediawan, a special purpose acquisition vehicle which raised €250 million on the Paris stock market last year. Mediawan's principals are Niel, Matthieu Pigasse, who co-owns French daily newspaper Le Monde with Niel, and Pierre-Antoine Capton, head of production company Troisieme Oeil.

The agreement will be presented to investors next month and is expected to close in the first half of the year. Mediawan said it is planning further acquisitions to further its aim of becoming 'the leading premium content platform in Europe.

Our analysis

The acquisition of AB signals the emergence of a new player in the European media market, although the partners behind Mediawan already have a high profile in France. Xavier Niel founded one of the first ISPs in France and went on to create Free, which shook up the broadband market and was one of the first triple-play services offering telecoms, broadband and TV. Pigasse's background is in investment banking (he is CEO of Lazard France), but he is on the board of Sky and besides co-owning le Monde is the owner of Huffington Post in France and Radio Nova, a Parisian music station. 

In contrast, Groupe AB is a somewhat lower profile media asset, but one with significant scale and potential nevertheless. Founded by Berda and his partner Jean-Luc Azoulay in 1977, AB was originally a production company which more or less monopolised children's television on market-leading TF1 before moving into other genres and launching pay TV channels and its own direct-to-home satellite package.

AB generated two-thirds of its forecast revenues of €158 million last year from its channels, which include general entertainment brands RTL9 and AB1 and theme channels Mangas, Animaux and Toute l'Histoire. Some 20% of revenues were generated outside France - mainly in Europe and Africa.

The company's development plans - and probably the further acquisition deals it is negotiating - are likely to focus more on its production and distribution arm. Mediawan said the 12,000 library itself is valued at €130 million. It includes current prime time French drama series Section de Recherches and Alice Nevers for TF1 and Zone Blanche (Black Spot) for France TV.

Given Niel's background, some sort of move to exploit this catalogue online seems a possibility - especially given the emphasis given to the development of over-the-top and non-linear viewing in the presentation of the deal by Mediawan yesterday. However, AB has already tried and failed to launch its own SVoD platform, Jook Video, which it closed in 2015. Much more likely is that the opportunity Mediawan identifies is that of supplying programming to the OTT players, either by tapping into the commissioning budgets of global players Amazon and Netflix or of selling rights.

French programme production is on a roll, with 20 locally-made dramas featuring in the list of the top 50 most-viewed programmes last year, compared to 15 in 2015 and none in 2012. AB's production labels Auteurs Associes and Ego Productions both featured in the top 10 last year. However, even among French companies Mediawan will face competition for its stated ambition to be the leading premium content platform. TF1, which bought Newen last year, has ambitions to increase its production arm; Banjiay Group, an international producer/distributor was created last year, with Vivendi owning a stake; while Lagardere Active has also stated that it wants to build its network of production companies via mergers and acquisitions.

Separately, Patrick Drahi, founder/owner of Altice (SFR Group), annouced that he will increase his stake in NextRadioTV by buying the 51% he does not already own. The move was expected, but will need to be approved by the broadcasting regulator, the Conseil Superieur de l'Audiovisuel. SFR subscribers (to TV or mobile) have access to a multimedia package of subscription content, including the SFR Sport channels, magazines and newspapers.

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