Prisa capital increase enters uncertain phase as Media Capital sale edges towards Phase II – sources
24 NOV 2017
Window for capital increase this year closing
Phase II could make sense to buy time
AdC could demand unbundling of Plural
Prisa’s [BME:PRS] planned EUR 450m capital increase is entering an uncertain phase due to potential regulatory issues surrounding the sale of Media Capital [ELI:MCP], said two sources and a person familiar with the situation.
Altice [AMS:ATC] – the Dutch and French telecoms company that owns Portugal Telecom (PT) – announced in July that it would buy Prisa’s 95% stake in Media Capital in a deal that values the company at EUR 440m.
Portugal’s antitrust regulator, the Autoridade da Concorrência (AdC) is very close to taking a decision on whether or not the deal will go to a Phase-II enquiry, said a person familiar with the regulator's thinking.
The sale of the Portuguese media company is “looking complicated” right now, said the first source familiar with the situation. Also, the window for a Prisa capital increase this year is closing, as the company needs a clear month, the source said. There are public holidays in Spain on 6 and 8 December.
If the Media Capital deal falls through, Prisa would probably have to be more aggressive on its capital increase, said the second source familiar with the situation.
The base case for the capital increase involves a successful sale of the Portuguese company, a person familiar with Prisa said. Some competitors have complained about the deal, but that is to be expected, the person said. Operators buying content providers can raise political issues, the person added.
Although the deadline for a AdC decision is 30 days, the clock stops every time the regulator asks for more information, the person familiar with the AdC said. The deal was notified with the regulator on 11 August.
AdC is unlikely to ask for too many drastic changes, said a local regulatory source. The latest meetings have gone well, and a Phase-II enquiry could make sense to buy more time, this source added.
One solution could involve unbundling Plural, a content producer, the regulatory source said, adding that it is difficult to nail the details because the content market is evolving so fast. Another solution would be for Altice to sell Media Capital’s terrestrial digital TV channels (TDT), this source said.
As matters stand, a successful conclusion to the deal isn’t a foregone conclusion, said a Lisbon-based lawyer who is studying the issue. AdC could try to force the sale of Plural, agreed this lawyer, adding that Media Capital wants to keep the content business. Another solution would be to create a monitoring committee for Plural to ensure equal access to content for other players, this lawyer added.
Aside from regulatory concerns, Altice's financial position has also raised doubts over the transaction. Altice is currently selling a number of non-core assets elsewhere, although it remains committed to its presence in Portugal, as reported.
Ratings agency S&P this week changed its outlook on Altice's B+ rating to negative from stable due to a downward revision by Altice management of its EBITDA growth expectation for 2017.
Altice this week said it will not pursue any new meaningful M&A opportunities.
Altice, however, is still committed to the acquisition of Media Capital, a spokesperson for Altice said. Discussions with Media Capital are still ongoing and the acquisition is still relevant for the company, the spokesperson said. The company’s strategy remains the same despite recent management changes, the spokesperson added.
If the sale of Media Capital falls through, Prisa could revive plans to sell all or some of Santillana, the second source said.
Selling Santillana remains an option, but the textbook company is also the most valuable part of group, said the first source. Rhone Capital’s latest offer for the business was rumoured to be EUR 1.2bn, well below Prisa’s asking price of EUR 1.5bn, as reported.
However, despite talk of a bumpy regulatory process for Media Capital, Prisa is confident that the sale will go ahead, said the person familiar with the Spanish company.
Prisa and AdC declined to comment.