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Investing.com -- J.P. Morgan in a note dated Monday has upgraded ProSiebenSat.1 (ETR:PSMGn) to “overweight” from “neutral” and raised its December 2026 price target to €11 from €7, citing limited downside risk from ongoing buying by Media For Europe (MFE) and potential upside from consolidation and a recovery in Germany’s advertising market.
The price target incorporates a €500 million (11%) enterprise value premium to reflect possible merger benefits.
A nil-premium merger involving MFE, ProSiebenSat.1 and Central European Media Enterprises (CME), owned by PPF Group, could unlock over €1.5 billion in synergies, or 40% of the combined market capitalization.
J.P. Morgan views such a merger as more likely than a premium bid, and one that allows ProSieben minority shareholders to share in cost savings, increased scale, and improved market relevance.
Both MFE and PPF have offers open until August 13. MFE’s partial offer equates to about €5.80 per share, while PPF’s €7 offer aims to raise its stake from 16% to 30%.
Shares currently trade slightly above the PPF offer, reflecting investor anticipation of a revised bid. Each party may raise its offer once; if done within two weeks of the offer closing, it triggers a mandatory 14-day extension for that specific offer.
J.P. Morgan sees a low probability that either bidder raises its offer before the deadline, but expects MFE to continue buying in the market post-close, offering downside support.
Should a merger follow, ProSieben could be delisted, with shareholders either tendering shares or receiving MFE stock.
Unlike a full acquisition, a nil-premium merger avoids a squeeze-out or domination agreement and aligns strategic interests across parties.
Valuation-wise, ProSiebenSat.1 trades at 5x 2026 expected EBITDA and earnings. Stripping out the growing subscription-based distribution, dating and commerce businesses, core TV operations trade at just 5.3x EV/NOPAT.
Assigning a 10x NOPAT multiple to TV would imply €500 million of additional value, or a 30% upside to the current share price.
J.P. Morgan also notes potential tax advantages from Joyn, following shareholder approval of a domination agreement.
Utilization of €500 million in Joyn’s tax losses could add roughly 10% to consensus valuation, though these savings are not currently priced in.
The German advertising market, which has lagged peers due to macroeconomic shocks, could add further upside.
Even a 5% recovery in ad revenues would raise EBITDA by around €80 million and lift the market cap by 30%.
For fiscal 2025, the bank forecasts €3.86 billion in revenue, €521 million in adjusted EBITDA, €239 million in adjusted net income, and earnings per share of €1.04.
Net debt is expected to fall from €1.51 billion in 2024 to €690 million by 2027, with net debt-to-EBITDA dropping from 2.7x to 1.1x.