WPP recovers part of the value of its shares in Mediapro thanks to the rescue

The second largest investor Mediapro breathe a little easier after the Chinese tycoon rescued the company founded by Tatxo Benet and Jaume Roures. WPPthe British global advertising and communication giant, has recovered part of all the lost value of its shares in the Spanish media group. After zeroing out the market ‘price’ of those securities, It has reversed about 50 of the almost 300 million of the accounting restructuring that it carried out in 2020 where the financial problems for the holding company accumulated. After an ‘express’ analysis, the National Commission of Markets and Competition (CNMC) has authorized the “exclusive control” of the group by the discreet Chinese tycoon Tang Hao in charge of the recapitalization agreed at the end of last year.

The The year 2020 was a severe headache for Mediapro and its shareholders. During that year, marked by a pandemic that stopped sports competitions and the shooting of movies and other productions, cut revenues by 38% and shot up gross operating losses to 215 million euros. This forced a capital increase and the request for an ICO credit at first and a long negotiation for the refinancing of the group, given the clear risk of default. This was what forced the media group, owner of firms such as Kantar, Ogilvy or BCW, to make a historic deterioration of almost 300 million euros and zero the value based on criteria of financial prudence. That same year he had to assume more than 60 million euros from the red numbers of the Spanish group.

In a negotiation that lasted for months, finally the Chinese businessman Hao put on the table an offer in which he not only acted as the financier of the media group but also as the largest shareholder. The recapitalization was agreed in November: an injection of 150 million euros for short-term working capital needs and an additional capital increase of 470 million euros. This led to a dilution of all partners, with WPP in the lead. The British group went from 22% to 10%, while the two founders placed their position at just over 5%. Now, after this rescue and despite this dilution, there has been a certain revaluation since that hard ‘zero’ marked by fire in the WPP accounts.

As explained to its investors in the interim report for the 2021 financial year, it contemplates a reversal of £42.4 million (just over 50 million euros at current exchange rates) which is mainly related to the valuation adjustment made in 2020. This is a relatively small recovery compared to the lost value. The group’s chief financial officer, John Rogers, referred to this move as a ‘write-back’but did not mention the reasons or his future strategy in the company, during the last conference with analysts in the presentation of the results accounts.

WPP has remained a relevant partner in the company together with Roures and Benet since 2003, even before the merger with Globomedia, which was definitively signed in 2006. It landed by buying a 30% stake in the former Mediapro. After that union it stood at 21%. And from then on there have been no major changes, until the emergence of the Chinese tycoon and the recapitalization, which has cut his position to 10%. In these almost two decades it has also benefited from the distribution of dividends. In 2019, when the sale to the Chinese group Orient Hontai was signed, in which they left Juan Abello (via Torreal) or Televisapreferred to stay claiming that he preferred not to undersell.

WPP speaks of a ‘write-back’ in the shares after the recapitalization and the significant improvement of Mediapro’s numbers in the first months of 2021

Now Mediapro’s financial team is working on the process of refinancing the bank debt that accumulates. During last summer, SearchLight and Invesco acquired half of the more than 900 million euros of liabilities that the audiovisual group accumulated from different funds and banking entities. It is one of the fundamental reasons that the group alleges to delay the formal presentation of the 2020 consolidated annual accounts in the Mercantile Registry, which they have asked for a little more time to avoid a sanction.

Best numbers in 2021

According to the figures provided by the group, in that year the losses amounted to 215 million euros. In the first six months of 2021, it increased its sales by 68% to 669 million and with an Ebitda (gross operating profit) of 115 million. This figure is similar to what was expected for the entire year. They recovered activity in the four lines of business: content, rights, audiovisual services and innovation. The 14 national soccer leagues in which he is responsible for production and VAR have been at full capacity.

The stumbling block that has also been overcome is that of the regulator of the competence in Spain. The body chaired by Cani Fernández received notification of the transaction by which the company Southwind Group Limited, a Singapore-based company owned by Asian businessman Tang Hao, took “exclusive control” of the Spanish media group. Well, last March 2, the Council authorized it in the first phase, as expected. The largest shareholder will be the little-known tycoon specializing in investors in the online gaming sector.