ProSiebenSat.1 downgraded to “neutral” as MFE offer risks weigh on outlook

Investing.com -- J.P. Morgan has downgraded ProSiebenSat.1 to “neutral” from “overweight,” citing growing risks that MFE (MediaForEurope) could withdraw its takeover offer for the German media company. 

The brokerage also lowered its price target for ProSieben to €5.70 per share, aligning it with the value of MFE’s current offer and marking a sharp discount to its own longer-term valuation estimates.

Analysts at J.P. Morgan said the downgrade reflects the increasing uncertainty around MFE’s commitment to the bid and the broader macroeconomic risks that could impact both companies in the months ahead.

ProSieben’s shares have remained relatively resilient in recent weeks, largely supported by the all-cash offer from MFE. 

But the analysts warn that should MFE walk away, the stock could face downside pressure. The offer, originally seen as unappealing due to a discount of over 10% at announcement, has become more attractive amid rising economic risks and weakening valuations across the sector. That shift could prompt MFE to purchase more shares than initially expected.

If MFE crosses the 50% ownership threshold, it would be required to consolidate ProSieben’s debt onto its balance sheet. 

J.P. Morgan notes that while ProSieben’s debt is currently considered attractive, MFE would be assuming leverage in a fragile macroeconomic environment—something that has already weighed on MFE’s own share price.

The analysts flag a possible scenario where MFE could cite a material adverse change and withdraw the offer entirely. 

Alternatively, MFE could wait for a decline in ProSieben’s volume-weighted average price and either launch a mandatory bid later or return with a revised voluntary offer in 12 months.

While the downgrade signals growing caution, J.P. Morgan stopped short of assigning an “underweight” rating. 

The analysts pointed to Germany’s potential to deliver a meaningful fiscal stimulus, which could offset the effects of trade tariffs, and to the possibility that negotiations may lead to reduced tariffs in the near term. 

Additionally, they acknowledge that MFE might still see long-term value in acquiring more of ProSieben at current valuations.

Despite the reduced rating, the brokerage maintains a relatively constructive view on the underlying business. 

The note flags ProSieben’s diversified model—stretching beyond traditional broadcasting into digital entertainment, commerce and content distribution—as a key strength. 

J.P. Morgan believes the company could return to mid-single-digit organic growth and that further M&A or share buybacks could drive earnings growth over the medium term.

The brokerage’s €5.70 target is based on the MFE offer price, reflecting near-term uncertainties. However, it continues to see a longer-term valuation closer to €9.30 per share, based on sum-of-the-parts and discounted cash flow models. 

That higher estimate is being discounted to reflect the macro and political risks facing the company.

J.P. Morgan identifies key risks to the rating and target price, including weaker advertising markets and the impact of potential tariffs on the broader economy. 

On the upside, stronger-than-expected stimulus measures or a recovery in ad spending could provide support.