Warner Music Makes A Play For Believe

Warner Music has formally revealed its interest in acquiring French digital music giant Believe – the company behind brands likes of TuneCore and Sentric Music, plus labels like Play Two and Nuclear Blast – putting forward a surprisingly hefty bid.

As reported by Billboard, Warner put its chips forward yesterday (March 8), announcing as much in a formal notice ahead of the opening for the Euronext Paris stock exchange (on which Believe is listed). Warner’s bid reportedly valuated Believe in the ballpark of €1.7 billion ($2.81 billion AUD), offering the latter company “at least” €17 ($28.12) per share.

It’s likely more than Believe’s higher-ups were expecting, given a February 12 bid from the company’s own founder and CEO, Denis Ladegaillerie – put forward in tandem with investment funds EQT and TCV – valued shares at €15 ($24.79) for a total of €1.523 billion ($2.516 billion).

Warner’s bid came in response to a notion Believe sent out at the start of March, saying its board of directors had greenlit Ladegaillerie’s plan to take the company private. That notion, however, flagged that the company had been approached by an “interested party” over a proposed acquisition, which Billboard notes was “requesting due diligence information ahead of a possible formal bid”.

Warner were not named in that letter, but has reportedly verified itself as that “interested party”, and is standing by for the requested information. The company is said to have argued that it offers a more “attractive” deal than Ladegaillerie and his consortium, with possible benefits including a cash-only buyout.

Ladegaillerie’s bid would reportedly consolidate most of Believe’s shares “through various transactions” before it made a cash offer for any shares remaining. In order to pull it off, the company said it would make an exception to board conditions regarding block acquisitions – but Warner is said to see this as a point of contention, writing in its statement (again per Billboard) that it “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 arguing that “the validity of such waiver could be challenged”.

To that end, Warner reportedly claims it’s better suited to acquire Believe because it can “provide [the company] with strategic support and financial stability to help the development and growth of the company, including by accelerating its expansion into new geographies”.

The news has landed well on European investors, with Believe’s shares leaping to a peak of €16.42 ($27.15) overnight. Shares in Warner Music Group, however, have slumped considerably – they peaked at $35.76 USD ($53.99) on Monday (March 4), but tanked to a low point of $33.72 ($50.91) overnight.