French TV Stocks Fall after a Merger to Compete with Netflix Fails

France’s two largest private stations abandoned their merger plan on Friday, citing French antitrust requirements.

The collapse of a deal to form a French TV giant to challenge US streaming services like Netflix (NFLX.O) dented shares in M6 Group (MMTP.PA) and TF1 (TFFP. PA) on Monday.

France’s two largest private operators abandoned their merger plan on Friday, citing French antitrust requirements that made the deal unworkable.

Like other local radio stations in Europe, M6 and TF1 are struggling to stay competitive as global video platforms increase their dominance of the industry, and correlation has been seen as a response to those challenges.

“It’s very disappointing, it shows France’s inability to push through a united project to create a French media champion,” said Mikael Jacoby, head of continental trading at Oddo Securities.

As of 1424 GMT, TF1 shares were down 3.3% and M6 shares were down 3%.

The collapse of the talks came as Netflix and rival Disney+ prepare to launch an ad-supported subscription offering for their viewers, which could erode TF1 and M6’s ad market share, said Conor O’Shea, an analyst at Kepler Cheuvreux.

O’Shea added that German media group Bertelsmann (BTGGg.F) needs to find a buyer early next year for the 48.3% stake it holds in M6 through its RTL unit, as the renewal of the M6 broadcast channel license will result in a five-year ban on any sales.

“They need to find a buyer that raises fewer competition concerns,” said a Paris-based lawyer for a competitor, noting that time constraints mean the terms of a new deal are likely to be less beneficial to the German group.

Bertelsmann said Friday that “creating national media champions to compete with global platforms” remains part of his strategy to which he remains “firmly committed.” On Monday, RTL said it would meet with the M6 ​​leadership team and assess its options.

Bertelsmann shares fell 1.3%.

Cross-border unification vs. national

Investors doubt a new suitor will be found in time and fears of a eurozone recession have weighed heavily on media stocks.

“Hedge funds don’t want exposure to the ad space, people are very worried about next year,” said a merger arbitrage analyst.

The pressure was also building in the TF1.

“One thing is for sure, giving up this M&A process is bad for TF1, which, if the M6 ​​is sold to a competitor, will face more competition,” said Stephane Ecolo, global equity strategist at Tradition in London.

The M6-TF1 deal faced fierce opposition from French media group Vivendi (VIV.PA), which is now cited, along with Altice, owned by billionaire Patrick Drahi, as a potential buyer, should Bertelsmann go ahead with its plans. to sell it. majority stake in M6.

Italian media group MediaForEurope, which is calling for cross-border deals rather than national consolidation to address problems in the European TV industry, is also seen as a potential candidate for deals by market watchers.

The MFE, formerly known as Mediaset, was in the running when the M6 ​​first went on sale.

MFE shares rise more than 6% this Monday.

MFE, Vivendi, and Altice declined to comment.

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