Subject: Fwd:(Makor) SPECIAL SITUATION: MEDIASET (MS: IM) in light of the Vivendi deal di
SPECIAL SITUATION: MEDIASET (MS: IM) in light of the Vivendi deal dispute - risk/reward skewed to the upside
In this note we present four potential scenarios for Mediaset and their valuation implication given the uncertain situation with Vivendi regarding the sale of Mediaset Premium (“Premium”).
On April 2016 Vivendi offered to acquire 100% of Premium but in July pulled back from its original offer and asked to renegotiate. Vivendi proposed a revised offer of which Mediaset rejected and filed for damages in Italian courts. At the same time there have been rumors in the French press that the two parties are trying to reach a new deal/settlement.
In the report attached we draw four potential scenarios for Mediaset, in order to assess valuation implications of a range of potential alternatives and what could be the upside/downside of each. We believe the market is now pricing a low probability of a future deal and has significantly marked down the valuation of Mediaset Premium. We note that any other outcome and especially an announcement of a revised deal (or even just renewed talks between the parties) could unlock upside in Mediaset shares. We see the downside risk mainly if Premium losses are higher than market expectations and at the same time Vivendi completely abandons the idea of the acquisition.
Below we present a summary of the 4 scenarios and the implied weighted average PT:
Given the attractive risk/reward ratio we would start to build a position of Long MS: IM /Short Mediaset Espana TL5: SM (pro rata of the capital structure) + hedge the rest with short Vivendi.
Full report and analysis attached!