Market Insight

TDC pulls out of MTG deal after accepting takeover offer from investment consortium

March 02, 2018  | Subscribers Only

Martyn Hannant Martyn Hannant Manager – Research and Analysis, Service Providers & Platforms

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Danish telecommunications provider TDC Group has scrapped its plan to acquire the Nordic broadcasting assets of Sweden’s Modern Times Group, after accepting a takeover proposal from Macquarie and a group of Danish pension funds last month. The consortium made an offer to acquire the entire issued share capital of TDC for an all-cash consideration of DKr50.25 ($8.23) a share, valuing the group at DKr 40 billion ($6.5 billion). The price represented a premium of 25.6% on the share price of TDC prior to the announcement of its potential combination with MTG. As a result, TDC has confirmed its Board of Directors will not propose a TDC-MTG combination its its shareholders. 

The deal with MTG, unveiled on 1 February, would have created what the partners called 'a fully-converged provider of media and communications services'. Under the terms of the deal, TDC would have acquired MTG’s Nordic businesses, comprising its Viasat pay TV and Viaplay OTT brands, free-to-air TV channels, the MTG Studios content arm, and radio stations. The deal valued the MTG assets at Skr19.55 billion ($2.49 billion), which TDC was to pay through the issue of 309 million new shares and SKr 3.3 billion ($420 million) in cash. Current TDC shareholders would have held 72% of the new company, with the balance of 28% held by MTG shareholders.

MTG’s own plan was to continue operation as a company fully focused on digital entertainment - a position it has been gradually moving more towards in recent years following its exit from a number of TV markets in Central and Eastern Europe, and its investments in multichannel networks, esports and digital gaming.

Our analysis

An agreed sale to a consortium of investors is something of an anticlimax so soon after TDC and MTG announced their intention to merge at a press conference which was live-streamed online.

At a time when there is a lot of debate in the industry about the value of content to a telco, the addition of the core TV assets of the Nordic broadcaster and pay TV provider resonated as a strong endorsement of video as a growth driver for telcos. This was recently demonstrated in another high profile Nordic merger transaction between Com Hem and Tele2 in Sweden, which itself followed an increasing trend of telcos buying into well-established TV businesses in pursuit of convergence-led expansion strategies.

While it has been reported that TDC dropping its offer for MTG was a condition of the consortium deal, MTG has stated that the merger agreement's termination is pending the completion of TDC's takeover offer. Although TDC's withdrawal suggests an air of finality, it could also be argued that the fundamental rationale for an MTG-TDC tie-up remains. However, in the event of the deal being firmly off, MTG’s recent strategic moves away from broadcasting suggest it may well seek an alternative buyer for its Nordic broadcasting assets. The proposed sale of its free and pay TV assets, as well as its production company division, would have had  MTG continuing operation as a company fully focused on digital entertainment. It has subsequently agreed the sale of its interests in Bulgaria, continuing its exit from a number of TV markets in Central and Eastern Europe, and its investments in multichannel networks, esports and digital gaming. 

Modern Times Group MTG TDC
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