Shares of digital music company Believe (BLV) fell 9.45% Monday to EUR 14.94 on the announcement from Warner Music Group (WMG) on Saturday that it will not submit a non-binding offer for the company.
Following the news, analysts at Bernstein downgraded Believe from Outperform to Market-Perform, while reiterating a price target of EUR 19.10 on the stock.
Warner Music Group had in February revealed that it was considering making a $17+/share offer to buy the company. At the time, a consortium that included Believe CEO Denis Ladegaillerie, EQT and other shareholders had already made an offer to buy the company at EUR 15 per share.
Following WMG’s latest announcement over the weekend to not make an offer, Believe issued a statement saying they will “review the situation with all interested parties (including the consortium) to determine next steps in relation to the possible evolution of the company’s control.”
Warner Music Group’s interest in Believe had made sense given the company’s size, growth profile and strategic fit, said analysts.
“We therefore assume at this stage that WMG's withdrawal likely stemmed from its failing to secure the support of key man CEO D. Ladegaillerie and concerns that existing shareholders supportive of the CEO would turn down its offer, thereby preventing WMG from reaching the necessary level of shares for ownership,” said the analysts at Bernstein in their note to clients.
While the latest development opens up various possibilities for the consortium, since there are no alternative bidders, it is unlikely that any offer will top the firm’s EUR 19.10 price target, noted the analysts.