The collapse of a deal to form a French TV giant to challenge US streaming services such as Netflix (NFLX.O) knocked shares in M6 Group (MMTP.PA) and TF1 (TFFP.PA) on Monday.
France’s two biggest private broadcasters gave up their merger plan on Friday citing French antitrust requirements that rendered the deal unworkable.
Like other local broadcasters in Europe, M6 and TF1 are struggling to stay competitive as global video platforms increase their dominance of the industry and a tie-up was seen as an answer to those challenges.
“It is extremely disappointing, it shows the incapacity in France of pushing a unifying project to create a French media champion,” said Mikael Jacoby, head of continental trading at Oddo Securities.
At 1424 GMT, TF1 shares were down 3.3% and shares in M6 were 3% lower.
The breakdown in talks came as Netflix and rival Disney+ prepare to launch an ad-supported subscription offer for their viewers, potentially eroding the advertising market share of TF1 and M6, Kepler Cheuvreux analyst Conor O’Shea noted.
O’Shea added that German media group Bertelsmann (BTGGg.F) needed to find a buyer by early next year for the 48.3% stake it holds in M6 through its RTL unit as the renewal of M6’s broadcasting channel license will lead to a five-year ban on any sale.
“They need to find a buyer which will trigger fewer competition concerns,” a Paris-based competition lawyer said, noting that the timing constraints meant the terms of a new deal would likely be less advantageous for the German group.
On Friday Bertelsmann said the “creation of national media champions to compete with the global platforms” was still part of its strategy to which it remains “firmly committed”. RTL said on Monday it would meet with M6’s leadership team and assess its options.
Shares in Bertelsmann were down 1.3%.
Cross-border versus national consolidation
Investors doubt a new suitor can be found in time and fears about a recession in the euro zone have hit media stocks hard.
“Hedge funds don’t want exposure to the advertising sector, people are very worried about next year,” a merger arbitrage analyst said.
Pressure was also piling on TF1.
“One thing is certain, abandoning this M&A operation is a bad thing for TF1, which would – should M6 be sold to a competitor – face exacerbated competition,” said Stephane Ekolo, global equity strategist at Tradition in London.
The M6-TF1 deal has been facing stiff opposition from French media group Vivendi (VIV.PA) which is now itself being cited, along with Altice, owned by billionaire Patrick Drahi, as a potential buyer, should Bertelsmann pursue its plans to sell its controlling stake in M6.
Italian media conglomerate MediaForEurope , which is calling for cross-border deals rather than national consolidation to tackle the issues of the European TV industry, is also seen as a potential candidate for a deal by market observers.
Formerly known as Mediaset, MFE was in the race when M6 was first put up for sale.
MFE shares were up over 6% on Monday.
MFE, Vivendi and Altice declined to comment.