Exhibit 99.6
ARTICLES OF ASSOCIATION
OF
MFE — MEDIAFOREUROPE N.V.
Allen & Overy LLP
INDEX
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Page
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Chapter 1. DEFINITIONS
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1
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Article 1. Definitions and Construction
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1
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Chapter 2. NAME, OFFICIAL SEAT AND OBJECTS
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2
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Article 2. Name and Official Seat
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2
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Article 3. Objects
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2
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Chapter 3. SHARE CAPITAL AND SHARES
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3
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Article 4. Authorised Capital and Shares
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3
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Article 5. Register of Shareholders
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4
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Article 6. Resolution to Issue Shares; Conditions of Issuance
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4
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Article 7. Pre-emptive Rights
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5
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Article 8. Payment on Shares
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5
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Article 9. Treasury Shares
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5
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Article 10. Reduction of the Issued Capital
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6
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Article 11. Transfer of Shares
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6
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Article 12. Usufruct, Pledge and Depositary Receipts with respect to Shares
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7
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Article 13. Certain Provisions concerning Special Voting Shares
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7
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Chapter 4. THE BOARD
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9
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Article 14. Composition of the Board
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9
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Article 15. Appointment, Suspension and Removal of Directors
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9
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Article 16. Remuneration of Directors
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9
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Article 17. General Duties of the Board
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10
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Article 18. Allocation of Duties within the Board; Company Secretary
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10
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Article 19. Representation
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10
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Article 20. Meetings; Decision-making Process
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11
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Article 21. Conflicts of Interests
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11
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Article 22. Vacancies and Inability to Act
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12
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Article 23. Approval of Board Resolutions
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12
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Article 24. Indemnity and Insurance
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13
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Chapter 5. ANNUAL ACCOUNTS; PROFITS AND DISTRIBUTIONS
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14
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Article 25. Financial Year and Annual Accounts
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14
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Article 26. External Auditor
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14
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Article 27. Adoption of the Annual Accounts and Release from Liability
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15
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Article 28. Reserves, Profits and Distributions
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15
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Article 29. Payment of and Entitlement to Distributions
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16
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Chapter 6. THE GENERAL MEETING
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16
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Article 30. Annual and Extraordinary General Meetings of Shareholders
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16
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Article 31. Notice and Agenda of Meetings
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16
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Article 32. Venue of Meetings
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17
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Article 33. Chairman of the Meeting
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17
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Article 34. Minutes
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17
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Article 35. Rights at Meetings and Admittance
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17
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Article 36. Voting Rights and Adoption of Resolutions
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18
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Article 37. Meetings of Holders of Ordinary Shares and Special Voting Shares
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19
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Article 38. Notices and Announcements
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19
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Chapter 7. MISCELLANEOUS
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19
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Article 39. Dispute Resolution
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19
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Article 40. Amendment of Articles of Association
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20
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Article 41. Dissolution and Liquidation
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20
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Article 42. Shareholder Obligations
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21
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Article 43. Mandatory bid requirement
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21
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TRANSITORY PROVISIONS
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23
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T1
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Issued Share Capital Scenario I
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23
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T2
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Issued Share Capital Scenario II
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23
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T3
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Issued Share Capital Scenario III
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24
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T4
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Issued Share Capital Scenario IV
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24
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T5
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Issued Share Capital Scenario V
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24
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T6
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Issued Share Capital Scenario VI
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25
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T7
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Issued Share Capital Scenario VII
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25
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T8
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Issued Share Capital Scenario VIII
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ARTICLES OF ASSOCIATION:
CHAPTER 1. DEFINITIONS
Article 1. Definitions and Construction.
1.1 In these Articles of Association, the following terms have the following meanings:
Acting In Concert
has the meaning given to it in 1:1 of the Act on Financial Supervision, being understood that similar voting behaviour, holding meetings to coordinate voting and joint public announcements will be considered Acting In Concert.
Act on Financial Supervision
means the Dutch Financial Supervision Act
(Wet op het
financieel toezicht)
and the rules promulgated thereunder.
Authority
means any multinational, foreign, domestic, national, federal, state or local authority or entity, public agency or entity, judiciary or arbitration court, government or tribunal.
Board
means the board
(het bestuur)
of the Company.
Book Entry System
means any book entry system in the country where the Shares are listed from time to time.
Company
means the company the internal organization of which is governed by these Articles of Association.
Deputy-Chairman
means a Director appointed as such by the Board as referred to in Article 18.1.
Director
means a member of the Board and refers to both an Executive Director and a Non-Executive Director.
Dutch Civil Code
means the Dutch Civil Code
(Burgerlijk Wetboek).
Executive Director
means a Director appointed as Executive Director in accordance with Article 15.1.
External Auditor
has the meaning ascribed to that term in Article 26.1.
General Meeting
or
General Meeting of Shareholders
means the body of the Company consisting of those in whom as shareholder or otherwise the voting rights on shares are vested or a meeting of such persons (or their representatives) and other persons entitled to attend the General Meeting of Shareholders.
Non-Executive Director
means a Director appointed as Non-Executive Director in accordance with Article 15.1.
Ordinary Share
means a Share referred to as such in Article 4.2.
Public Takeover Bid Decree
means the Public Takeover Decree
(Besluit openbare biedingen
Wft
).
Senior Non-Executive Director
means a Non-Executive Director appointed as such by the Board as referred to in Article 18.1.
Share
means a share in the capital of the Company. Unless the contrary is apparent, this includes a Share of any class.
Shareholder
means a holder of one or more Shares.
Special Voting Share
means a special voting Share referred to as such in Article 4.2. Unless the contrary is apparent, this includes a special voting Share of any class.
Special Voting Share A
means a special voting Share A referred to as such in Article 4.2.
Special Voting Share B
means a special voting Share B referred to as such in Article 4.2.
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Special Voting Share C
means a special voting Share C referred to as such in Article 4.2.
1.2
In addition, certain terms not used outside the scope of a particular Article are defined in the Article concerned.
1.3
A message
in writing
means a message transmitted by letter, by telecopier, by e-mail or by any other means of electronic communication provided the relevant message or document is legible and reproducible, and the term
written
is to be construed accordingly.
1.4
References in these Articles of Association to the meeting of holders of Shares of a particular class will be understood to mean the body of the Company consisting of the holders of Shares of the relevant class or (as the case may be) a meeting of holders of Shares of the relevant class (or their representatives) and other persons entitled to attend such meetings.
1.5
References to
Articles
refer to articles which are part of these Articles of Association, except where expressly indicated otherwise.
1.6
Unless the context otherwise requires, words and expressions contained and not otherwise defined in these Articles of Association bear the same meaning as in the Dutch Civil Code. Also, unless otherwise indicated, references in these Articles of Association to the law are references to provisions of Dutch law as it reads from time to time.
CHAPTER 2.
NAME, OFFICIAL SEAT AND OBJECTS.
Article 2. Name and Official Seat.
2.1 The Company’s name is:
2.2 MFE - MEDIAFOREUROPE N.V.
2.3 The official seat of the Company is in Amsterdam, the Netherlands.
2.4
The Board can establish and close branches, agencies, representative offices and administrative offices both in the Netherlands and abroad.
Article 3. Objects.
The Company’s purpose is to product and provide for audio-visual contents, directly or through wholly owned subsidiaries or companies invested in, on every possible broadcasting and/or programming platform and by any transmitting and receiving means (on land, via satellite, cable or the Internet, with analogue and digital signals) as well as any other, industrial, business, financial and tertiary activity. In the context of the above purposes, and to attain the same, the Company may carry out the following activities:
(a)
developing, producing, co-producing, executive producing films, features, shorts, TV shows, entertainment programmes and various broadcasts mainly aimed at TV channels and radio stations, short video ads, as well as reversing and duplicating TV shows and feature films;
(b)
developing, producing and broadcasting publishing products, information and/or entertainment services and interactive services for the Internet, landlines, mobile phones and every other means, as well as selling and/or performing brokering and/or ancillary services in relation to the sale of goods and/or services through TV channels, the Internet and any other means;
(c)
purchasing, selling, distributing, renting, curating, marketing films, TV shows, documentaries, film and TV programmes;
(d)
producing and writing the score for films, TV shows and documentaries;
(e)
curating music collections and record releases;
(f)
operating and managing film and theatre production companies;
(g)
organising billboard, magazine, TV and audio-visual ads, advertising intermediation, selling
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advertising space by any means, as well as creative support in providing advertising services in any of the possible formats, through any broadcast or public communication means;
(h)
direct sales to the public in single or multiple form of audio-visual contents (e.g. tickets, pay tv, ppv, svod, etc.);
(i)
developing and managing on behalf of third parties e-commerce websites and supplying ancillary services for e-commerce activities and distance sale agreements;
(j)
information, cultural and recreational activities specifically concerning the production and/or management and/or marketing and/or distribution of press information and communication media outlets, with the exception of daily newspapers, irrespective of their creation, development and dissemination, through the written word, of voice, audio-visual and TV reproduction;
(k)
promotional and PR activities, including organising and managing courses, conferences, conventions, seminars, exhibitions, shows, events and any other activity concerning research and culture, such as publishing studies, monographs, catalogues, books, leaflets and audio-visual products;
(l)
exercising economic utilisation rights for intellectual property by any dissemination means, including the marketing of trademarks, inventions and ornamental drawings, audio-visual products and text contents of any kind, as well as other intellectual property rights, also concerning works of art in film and TV, merchandising, sponsorships;
(m)
managing property and industrial complexes relating to film production and the activities specified under points a) through l) above;
(n)
building, purchasing, selling and exchanging properties;
(o)
installing and operating systems to carry out and manage, with no territorial boundaries, telecommunication services, as well as performing all related activities, including that of planning, creating, managing and marketing products, telecommunication, teleinformatics and electronics services and systems; and
(p)
performing, in its own interest or that of companies and legal persons that are wholly-owned or invested in, any transaction regarding movable or immovable assets, of a financial, business, partnership nature, including taking out loans and facilities and, also in favour of third parties, endorsements, sureties and other guarantees, including in rem, as well as performing all administrative or support activities, or any other ancillary, preliminary or supplementary activity to the above.
CHAPTER 3. SHARE CAPITAL AND SHARES
Article 4. Authorised Capital and Shares.
4.1
The authorised capital of the Company amounts to two hundred and forty million euro (EUR 240,000,000.00).
4.2 The authorised capital is divided into the following classes of shares as follows:
·
one billion five hundred million (1,500,000,000) Ordinary Shares, having a nominal value of one eurocent (EUR 0.01) each;
·
one billion five hundred million (1,500,000,000) Special Voting Shares A, having a nominal value of two eurocent (EUR 0.02) each;
·
one billion five hundred million (1,500,000,000) Special Voting Shares B, having a nominal value of four eurocent (EUR 0.04) each; and
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·
one billion five hundred million (1,500,000,000) Special Voting Shares C, having a nominal value of nine eurocent (EUR 0.09) each.
4.3
Further classes of Shares, including classes of senior or junior preferred shares, may be authorised by the Company from time to time, provided a new class of Shares and the terms thereof are first included in the Articles of Association. An amendment of these Articles of Association authorizing a new class of Shares, and the issuance of Shares of any current or future class, will not require the approval of any particular group or class of Shareholders.
4.4
All Shares will be registered Shares. The Board may determine that for the purpose of trading and transfer of Shares at a foreign stock exchange Shares shall be recorded in the Book Entry System, such in accordance with the requirements of the relevant foreign stock exchange.
Article 5. Register of Shareholders.
5.1
The Company must keep a Register of Shareholders. The register may consist of various parts which may be kept in different places and each may be kept in more than one copy and in more than one place as determined by the Board.
5.2
Holders of Shares are obliged to furnish their names and addresses to the Company in writing if and when so required pursuant to (a) a request of the Board and/or (b) the requirements of law and of regulation applicable to the Company. The names and addresses, and, in so far as applicable, the other particulars as referred to in Section 2:85 of the Dutch Civil Code, will be recorded in the Register of Shareholders. Holders of Ordinary Shares who have requested to become eligible to acquire Special Voting Shares, such in accordance with the SVS Terms (as defined in Article 13.2), will be recorded in a separate part of the Register of Shareholders (the
Loyalty Register)
with their names, addresses, the entry date, the total number of Ordinary Shares in respect of which a request is made and, when issued, the total number and class of Special Voting Shares held. The Board will supply anyone recorded in the register on request and free of charge with an extract from the register relating to his right to Shares.
5.3
The register will be kept up to date. The Board will set rules with respect to the signing of registrations and entries in the Register of Shareholders.
5.4
Section 2:85 of the Dutch Civil Code applies to the register of Shareholders.
Article 6. Resolution to Issue Shares; Conditions of Issuance.
6.1
Shares may be issued pursuant to a resolution of the General Meeting. This competence concerns all non-issued Shares of the Company’s authorised capital, except insofar as the competence to issue Shares is vested in the Board in accordance with Article 6.2 hereof.
6.2
Shares may be issued pursuant to a resolution of the Board, if and insofar as the Board is designated to do so by the General Meeting. Such designation can be made each time for a maximum period of five years and can be extended each time for a maximum period of five years. A designation must determine the number of Shares of each class concerned which may be issued pursuant to a resolution of the Board. A resolution of the General Meeting to designate the Board as a body of the Company authorised to issue Shares can only be withdrawn at the proposal of the Board.
6.3
A resolution of the General Meeting to issue Shares or to designate the Board as the body of the Company authorised to do so can only take place at the proposal of the Board.
6.4
The foregoing provisions of this Article 6 apply by analogy to the granting of rights to subscribe for Shares, but do not apply to the issuance of Shares to a person exercising a right to subscribe for Shares previously granted.
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6.5
The body of the Company resolving to issue Shares must determine the issue price and the other conditions of issuance in the resolution to issue.
Article
7.
Pre-emptive Rights.
7.1
Upon the issuance of Ordinary Shares, each holder of Ordinary Shares will have pre-emptive rights in proportion to the aggregate nominal value of his Ordinary Shares. A Shareholder will not have pre-emptive rights in respect of Ordinary Shares issued against a non-cash contribution. Nor will the Shareholder have pre-emptive rights in respect of Ordinary Shares issued to employees of the Company or of a group company
(groepsmaatschappij).
7.2
Prior to each individual issuance of Ordinary Shares, pre-emptive rights may be restricted or excluded by a resolution of the General Meeting. However, with respect to an issue of Ordinary Shares pursuant to a resolution of the Board, the pre-emptive rights can be restricted or excluded pursuant to a resolution of the Board if and insofar as the Board is designated to do so by the General Meeting. The provisions of Articles 6.1 and 6.2 apply by analogy.
7.3
A resolution of the General Meeting to restrict or exclude the pre-emptive rights or to designate the Board as a body of the Company authorised to do so can only be adopted at the proposal of the Board.
7.4
If a proposal is made to the General Meeting to restrict or exclude pre-emptive rights, the reason for such proposal and the choice of the intended issue price must be set forth in the proposal in writing.
7.5
A resolution of the General Meeting to restrict or exclude pre-emptive rights or to designate the Board as the body of the Company authorised to do so requires a majority of not less than two-thirds of the votes validly cast, if less than one-half of the Company’s issued capital is represented at the meeting.
7.6
When rights are granted to subscribe for Ordinary Shares, the holders of Ordinary Shares will have pre-emptive rights in respect thereof; the foregoing provisions of this Article 7 apply by analogy. Holders of Ordinary Shares will have no pre-emptive rights in respect of Ordinary Shares issued to a person exercising a right to subscribe for Ordinary Shares previously granted.
Article 8. Payment on Shares.
8.1
Upon issuance of an Ordinary Share, the full nominal value thereof must be paid-up, as well as the amount of the share premium if the Share is subscribed for at a higher price, without prejudice to the provisions of section 2:80 subsection 2 of the Dutch Civil Code.
8.2
Payment for a Share must be made in cash insofar as no contribution in any other form has been agreed on.
8.3
If the Board so decides, Ordinary Shares can be issued at the expense of any reserve, except for the Special Capital Reserve referred to in Article 13.4.
8.4
The Board is authorised to enter into legal acts relating to non-cash contributions and the other legal acts referred to in section 2:94 of the Dutch Civil Code without the prior approval of the General Meeting.
8.5
Payments for Shares and non-cash contributions are furthermore subject to the provisions of sections 2:80, 2:80a, 2:80b and 2:94b of the Dutch Civil Code.
Article 9. Treasury Shares.
9.1
When issuing Shares, the Company may not subscribe for its own Shares.
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9.2
The Company is entitled to acquire its own fully paid-up Shares, or depositary receipts for Shares, with due observance of the relevant statutory provisions.
9.3
Acquisition for valuable consideration is permitted only if the General Meeting has authorised the Board to do so. Such authorization will be valid for a period not exceeding eighteen months. The General Meeting must determine in the authorization the number of Shares or depositary receipts for Shares which may be acquired, the manner in which they may be acquired and the limits within which the price must be set.
9.4
The Company may, without authorization by the General Meeting, acquire its own Shares for the purpose of transferring such Shares to employees of the Company or of a group company
(groepsmaatschappij)
under a scheme applicable to such employees, provided such Shares are quoted on the price list of a stock exchange.
9.5
Article 9.3 does not apply to Shares or depositary receipts for Shares which the Company acquires by universal succession in title.
9.6
No voting rights may be exercised with respect to any Share held by the Company or by a subsidiary
(dochtermaatschappij),
or any Share for which the Company or a subsidiary
(dochtermaatschappij)
holds the depositary receipts. No payments will be made on Shares which the Company holds in its own share capital.
9.7
The Company is authorised to alienate Shares held by the Company, or depositary receipts for Shares, pursuant to a resolution of the Board.
9.8
Treasury Shares and depositary receipts for Shares are furthermore subject to the provisions of sections 2:89a, 2:95, 2:98, 2:98a, 2:98b, 2:98c, 2:98d and 2:118 of the Dutch Civil Code.
Article 10. Reduction of the Issued Capital.
10.1
The General Meeting may, but only at the proposal of the Board, resolve to reduce the Company’s issued capital:
(a)
by cancellation of Shares; or
(b)
by reducing the nominal value of Shares by amendment of these Articles of Association. The Shares in respect of which such resolution is passed must be designated therein and provisions for the implementation of such resolution must be made therein.
10.2
A resolution to cancel Shares can only relate to:
(a)
Shares held by the Company itself or of which it holds the depositary receipts; or
(b)
all Shares of a particular class.
A cancellation of all Shares of a particular class shall require the prior approval of the meeting of holders of Shares of the class concerned.
10.3
Reduction of the nominal value of Shares, with or without repayment, must be made in the same amount with respect to all Shares. This requirement may be deviated from as such that a distinction is made between classes of Shares. In that case, a reduction of the nominal value of the Shares of a particular class will require the prior approval of the meeting of holders of Shares of the class concerned.
10.4
A reduction of the issued capital of the Company is furthermore subject to the provisions of sections 2:99 and 2:100 of the Dutch Civil Code.
Article 11. Transfer of Shares.
11.1
The transfer of rights a Shareholder holds with regard to Ordinary Shares included in the Book Entry System must take place in accordance with the provisions of the regulations applicable to the relevant Book Entry System.
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11.2
The transfer of Shares not included in the Book Entry System requires an instrument intended for such purpose and, save when the Company itself is a party to such legal act, the written acknowledgement by the Company of the transfer. The acknowledgement must be made in the instrument or by a dated statement of acknowledgement on the instrument or on a copy or extract thereof and signed as a true copy by a civil law notary or the transferor. Official service of such instrument or such copy or extract on the Company is considered to have the same effect as an acknowledgement.
11.3
A transfer of Ordinary Shares from the Book Entry System is subject to the restrictions of the provisions of the regulations applicable to the relevant Book Entry System and is further subject to approval of the Board.
Article 12. Usufruct, Pledge and Depositary Receipts with respect to Shares.
12.1
The provisions of Articles 11.1 and 11.2 apply by analogy to the creation or transfer of a right of usufruct in Shares. Whether the voting rights attached to the Shares on which a right of usufruct is created, are vested in the Shareholder or the usufructuary, is determined in accordance with section 2:88 of the Dutch Civil Code. Shareholders, with or without voting rights, and the usufructuary with voting rights are entitled to attend the General Meeting of Shareholders. A usufructuary without voting rights is not entitled to attend the General Meeting of Shareholders.
12.2
The provisions of Articles 11.1 and 11.2 also apply by analogy to the pledging of Shares. Shares may also be pledged as an undisclosed pledge: in such case, section 3:239 of the Dutch Civil Code applies by analogy. No voting rights and/or the right to attend the General Meeting of Shareholders accrue to the pledgee of Shares.
12.3
Holders of depositary receipts for Shares are not entitled to attend the General Meeting of Shareholders.
Article 13. Certain Provisions concerning Special Voting Shares.
13.1
Where the provisions concerning Special Voting Shares as contained in this Article 13 conflict with any other provisions of this Chapter 3, this Article 13 will govern. The powers attributed in these Articles of Association to the meeting of holders of Special Voting Shares A, to the meeting of holders of Special Voting Shares B and to the meeting of holders of Special Voting Shares C will be effective only if and as long as one or more Special Voting Shares of a class are in issue and neither owned by the Company or a special purpose entity as referred to in Article 13.6 nor subject to a transfer obligation as referred to in Article 13.7.
13.2
The Board will adopt general terms and conditions applicable to the Special Voting Shares and may amend the same from time to time. These terms and conditions as they will read from time to time are hereafter referred to as the
SVS Terms.
These SVS Terms may be amended pursuant to a resolution by the Board, provided, however, that any material, not merely technical amendment will be subject to the approval of the General Meeting and the approval of the combined meeting of holders of Special Voting Shares, unless such amendment is required to ensure compliance with applicable laws or listing regulations.
13.3
Holders of Special Voting Shares have no pre-emptive rights on the issuance of Shares of any class and with respect to the issuance of Special Voting Shares no pre-emptive rights exist.
13.4
The Company will maintain a separate reserve (the
Special Capital Reserve)
to pay-up Special Voting Shares. The Board is authorised to credit or debit the Special Capital Reserve at the expense or in favour of the Company’s other reserves. If the Board so decides, Special Voting
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Shares can be issued at the expense of the Special Capital Reserve
in lieu of
an actual payment for the Shares concerned.
13.5
However, the holder of a Special Voting Share issued at the expense of the Special Capital Reserve may at any time substitute the charge of the Special Capital Reserve by making an actual payment to the Company in respect of the Share concerned (in accordance with payment instructions provided by the Board on request) in an amount equal to the nominal value of that Share. From the date such actual payment is received by the Company, the amount which in connection with the issuance of the Share was originally charged to the Special Capital Reserve will be retransferred to the Special Capital Reserve. Existing Special Voting Shares which after having been acquired by the Company, are transferred by the Company to a special purpose entity as referred to in Article 13.6 for no consideration will be deemed Special Voting Shares which have not been actually paid for in accordance with this Article 13.5.
13.6
Special Voting Shares can be issued and transferred to persons which have expressly agreed with the Company in writing to be subject to the SVS Terms and which respond to the terms set forth therein. Special Voting Shares can also be transferred to the Company and to a special purpose entity designated by the Board which has expressly agreed with the Company in writing that it will act as a warehouse for Special Voting Shares and that it will not exercise any voting rights pertaining to the Special Voting Shares it may hold. Special Voting Shares cannot be issued or transferred to any other person.
13.7
A person holding Ordinary Shares who (i) applies for deregistration of Ordinary Shares in his name from the Loyalty Register, (ii) transfers Ordinary Shares to any other person, (iii) has become the subject of an event in which control over that person is acquired by another person, (iv) does not meet or no longer meets the Qualified Shareholding Obligation, or (v) does not meet or no longer meets the Contract Obligation, all as set out in more detail in Article 42 and in the SVS Terms, must transfer its Special Voting Shares to the Company or a special purpose entity as referred to in Article 13.6, except if and insofar as provided otherwise in the SVS Terms. If and for as long as a Shareholder is in breach with such obligation, the voting rights and the right to participate in General Meetings relating to the Special Voting Shares to be so offered and transferred will be suspended. The Company will be irrevocably authorised to effectuate the offer and transfer on behalf of the Shareholder concerned.
13.8
Special Voting Shares can also be transferred voluntarily to the Company or a special purpose entity as referred to in Article 13.6. A Shareholder wishing to make such voluntary transfer must address a written transfer request to the Company, for the attention of the Board. It must state the number and class of Special Voting Shares the applicant wishes to transfer. The Board must inform the applicant within three months to whom the applicant may transfer the Special Voting Shares concerned.
13.9
If Article 13.7 or 13.8 applies and the Company and the (prospective) transferor do not reach agreement on the amount of the purchase price, it will be determined by one or more experts designated by the Board. When determining this purchase price, no value will be attributed to the voting rights attached to the Special Voting Shares.
13.10
Special Voting Shares cannot be pledged. No depositary receipts may be issued for Special Voting Shares.
13.11
Each Special Voting Share A can be converted into one Special Voting Share B and each Special Voting Share B can be converted into one Special Voting Share C. Each Special Voting Share A or Special Voting Share B will be automatically converted into one Special Voting Share B or one Special Voting Share C (as the case may be) upon the issuance of a conversion
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statement by the Company. The Company will issue such conversion statement if and when a Shareholder is entitled to Special Voting Shares B or Special Voting Shares C, all as set out in more detail in the SVS Terms. The difference between the par value of the converted Special Voting Shares A or Special Voting Shares B and the newly Special Voting Shares B or Special Voting Shares C will be charged to the Special Capital Reserve.
CHAPTER 4. THE BOARD.
Article 14. Composition of the Board.
14.1
The total number of Directors, as well as the number of Executive Directors and Non-Executive Directors, is determined by the Board, provided that the total number of Directors must be at least seven and at most fifteen.
14.2
Only individuals can be Non-Executive Directors.
Article 15. Appointment, Suspension and Removal of Directors.
15.1
Directors will be appointed by the General Meeting of Shareholders. Directors will be appointed either as an Executive Director or as a Non-Executive Director.
15.2
The Board will nominate a candidate for each vacant seat. A nomination by the Board will be binding. However, the General Meeting of Shareholders may deprive the nomination of its binding character by a resolution passed with a two-third majority of the votes validly cast without a quorum being required. If the binding nomination is not deprived of its binding character, the person nominated will be deemed appointed. If the nomination is deprived of its binding character, the Board will be allowed to make a new binding nomination.
15.3
At a General Meeting of Shareholders, votes in respect of the appointment of a Director can only be cast for candidates named in the agenda of the meeting or explanatory notes thereto.
15.4
A nomination to appoint a Director will state the candidate’s age and the positions he holds or has held, insofar as these are relevant for the performance of the duties of a Director. The nomination must state the reasons on which it is based.
15.5
A nomination will also state the candidate’s term of office. The term of office of Directors may not exceed a maximum period of four years at a time. A Director who ceases office in accordance with the previous provisions is immediately eligible for reappointment.
15.6
Each Director may be suspended or removed by the General Meeting of Shareholders at any time. A resolution of the General Meeting of Shareholders to suspend or remove a Director other than pursuant to a proposal by the Board requires a two-third majority of the votes validly cast without a quorum being required. An Executive Director may also be suspended by the Board. A suspension by the Board may at any time be discontinued by the General Meeting of Shareholders.
15.7
Any suspension may be extended one or more times, but may not last longer than three months in the aggregate. If, at the end of that period, no decision has been taken on termination of the suspension or on removal, the suspension will end.
Article 16. Remuneration of Directors.
16.1
The Company must have a policy with respect to the remuneration of Directors. This policy is determined by the General Meeting with a majority of more than half of the votes validly cast without any quorum being required; the Board will make a proposal to that end. The remuneration policy will include at least the subjects described in sections 2:383c through
9
2:383e of the Dutch Civil Code, to the extent these subjects concern the Board. The Executive Directors may not participate in the discussion and decision-making process of the Board on this.
16.2
The authority to establish remuneration and other terms of service for Directors is vested in the Board, with due observance of the remuneration policy referred to in Article 16.1 and applicable provisions of law. The Executive Directors may not participate in the discussion and decision-making process of the Board with respect to the remuneration of Executive Directors.
16.3
The Board shall submit to the General Meeting of Shareholders for approval plans to issue Ordinary Shares or to grant rights to subscribe for Ordinary Shares to Directors. The plans shall at least indicate the number of Ordinary Shares and the rights to subscribe for Ordinary Shares that may be allotted to Directors and the criteria that shall apply to the allotment or any change thereto.
16.4
The absence of approvals required pursuant to Article 16.3 will not affect the authority of the Board or its members to represent the Company.
16.5
Directors are entitled to an indemnity from the Company and D&O insurance, in accordance with Article 24.
Article 17. General Duties of the Board.
17.1
The Board is entrusted with the management of the Company. In the exercise of their duties, the Directors must be guided by the interests of the Company and the business connected with it.
17.2
Each Director is responsible for the general course of affairs.
Article 18. Allocation of Duties within the Board; Company Secretary.
18.1
The chairman of the Board as referred to by law shall be a Non-Executive Director designated by the Board and shall have the title of “Senior Non-Executive Director”. The Board may appoint one or more other Directors as Deputy-Chairmen of the Board and establish the method of replacing the Senior Non-Executive Director.
18.2
The duty of the Non-Executive Directors is to supervise the performance of duties by the Executive Directors as well as the general course of affairs of the Company and the business connected with it. The Non-Executive Directors are also charged with the duties assigned to them pursuant to the law and these Articles of Association.
18.3
An Executive Director, designated by the Board, will be the Chief Executive Officer. The Board may grant other titles, including the title of Chairman and Honorary Chairman, to Directors.
18.4
The specific duties of the Chief Executive Officer and other Directors, if any, will be laid down by the Board in writing.
18.5
To the extent permitted by law, the Board may assign and delegate such duties and powers to individual Directors and/or committees. This may also include a delegation of resolution-making power, provided this is laid down in writing. A Director to whom and a committee to which powers of the Board are delegated, must comply with the rules set in relation thereto by the Board.
18.6
The Board appoints a company secretary and is authorised to replace him at any time. The company secretary does not have to be a member of the Board. The company secretary holds the duties and powers vested in him pursuant to these Articles of Association or a resolution of the Board. In absence of the company secretary, his duties and powers are exercised by his deputy.
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Article 19. Representation.
19.1
The Board is authorised to represent the Company. The Chief Executive Officer and the Director having the title of Chairman are also solely authorised to represent the Company.
19.2
The Board may appoint officers with general or limited power of representation. Each of these officers may represent the Company subject to the limitations relating to his power. Their titles shall be determined by the Board.
Article 20. Meetings; Decision-making Process.
20.1
The Board meets as often as deemed desirable by the Senior Non-Executive Director or when requested by at least two Directors. The notice will be given by the company secretary. The meeting is chaired by the Senior Non-Executive Director or in his absence by the Director having the title of Chairman or in the absence of the Chairman by a Deputy-Chairman. Minutes of the proceedings at the meeting must be kept.
20.2
Board resolutions are adopted by a majority of more than half of the votes validly cast. Each Director has one vote. If there is a tie in voting, the Director having the title of Chairman has a decisive vote. The Board may designate types of resolutions which are subject to requirements deviating from the foregoing. These types of resolutions and the nature of the deviation must be clearly specified and laid down in writing.
20.3
Decisions taken at a meeting of the Board will only be valid if the majority of the Directors is present or represented at the meeting. The Board may designate types of resolutions which are subject to requirements deviating from the foregoing. These types of resolutions and the nature of the deviation must be clearly specified and laid down in writing.
20.4
Meetings of the Board may be held by means of an assembly of the Directors in person in a formal meeting or by conference call, video conference or by any other means of communication, provided that all Directors participating in such meeting are able to communicate with each other simultaneously. Participation in a meeting held in any of the above ways shall constitute presence at such meeting.
20.5
For adoption of a resolution other than at a meeting, it is required that the proposal is submitted to all Directors, none of them has objected to the relevant manner of adopting resolutions and such majority of the Directors as required pursuant to Article 20.2 has expressly declared to be in favour of the resolutions thus adopted in writing.
20.6
Third parties may rely on a written declaration by the Senior Non-Executive Director, the Chairman, the Chief Executive Officer or the company secretary concerning resolutions adopted by the Board or a committee thereof. Where it concerns a resolution adopted by a committee, third parties may also rely on a written declaration by the chairman of such committee.
20.7
In Board meetings and with respect to the adoption of Board resolutions, a Director may be represented only by another Director, authorized in writing. At each meeting a Director may not act as representative for more than one Director.
20.8
The Board may establish additional rules regarding its working methods and decision-making process.
Article 21. Conflicts of Interests.
21.1
A Director having a conflict of interests as referred to in Article 21.2 or an interest which may have the appearance of such a conflict of interests (both a
(potential) conflict of interests)
must declare the nature and extent of that interest to the other Directors.
21.2
A Director may not participate in deliberating or decision-making within the Board, if with respect to the matter concerned he has a direct or indirect personal interest that conflicts with the
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interests of the Company and the business connected with it. This prohibition does not apply if the conflict of interests exists for all Directors and the Board shall maintain its power.
21.3
A conflict of interests as referred to in Article 21.2 only exists if in the situation at hand the Director must be deemed to be unable to serve the interests of the Company and the business connected with it with the required level of integrity and objectivity. If a transaction is proposed in which apart from the Company also an affiliate of the Company has an interest, then the mere fact that a Director holds any office or other function with the affiliate concerned or another affiliate, whether or not it is remunerated, does not mean that a conflict of interests as referred to in Article 21.2 exists.
21.4
The Director who in connection with a (potential) conflict of interests does not exercise certain duties and powers will insofar be regarded as a Director who is unable to perform his duties
(belet).
21.5
A (potential) conflict of interests does not affect the authority concerning representation of the Company set forth in Article 19.1.
Article 22. Vacancies and Inability to Act.
22.1
For each vacant seat on the Board, the Board can determine that it will be temporarily occupied by a person (a stand-in) designated by the Board. Persons that can be designated as such include former Directors (irrespective of the reason why they are no longer Directors).
22.2
If and as long as one or more seats on the Board are vacant, the management of the Company will be temporarily entrusted to the person or persons who (whether as a stand-in or not) do occupy a seat in the Board.
22.3
If the seats of one or more Executive Directors are vacant, the Board may temporarily entrust duties and powers of an Executive Director to a Non-Executive Director.
22.4
If as a result of resignations the majority of the Directors appointed by the General Meeting of Shareholders is no longer in office, the Directors still in office will be obliged to convene a General Meeting of Shareholders on an urgent basis for the purpose of appointing a new Board. In such case, the term of office of all Directors in office that are not reappointed at the General Meeting of Shareholders will be deemed to have expired at the end of the relevant meeting. In such an event the Board will have no binding nomination right as referred to in Article 15.2.
22.5
When determining to which extent Board members are present or represented, consent to a manner of adopting resolutions, or vote, stand-ins will be counted-in and no account will be taken of vacant seats for which no stand-in has been designated.
22.6
For the purpose of this Article 22, the seat of a Director who is unable to perform his duties
(belet) will
be treated as a vacant seat.
Article 23. Approval of Board Resolutions.
23.1
The Board requires the approval of the General Meeting for resolutions entailing a significant change in the identity or character of the Company or its business, in any case concerning:
(a)
the transfer of (nearly) the entire business of the Company to a third party;
(b)
entering into or terminating a long term cooperation between the Company or a subsidiary
(dochtermaatschappij)
and another legal entity or company or as a fully liable partner in a limited partnership or general partnership, if such cooperation or termination is of fundamental importance for the Company;
(c)
acquiring or disposing of a participation in the capital of a company if the value of such participation is at least one third of the sum of the assets of the Company according to its
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balance sheet and explanatory notes or, if the Company prepares a consolidated balance sheet, its consolidated balance sheet and explanatory notes according to the last adopted annual accounts of the Company, by the Company or a subsidiary
(dochtermaatschappij).
23.2
The absence of approvals required pursuant to Article 23.1 will not affect the authority of the Board or its members to represent the Company.
Article 24. Indemnity and Insurance.
24.1
To the extent permissible by law, the Company will indemnify and hold harmless each Director, both former members and members currently in office (each of them, for the purpose of this Article 24 only, an
Indemnified Person),
against any and all liabilities, claims, judgments, fines and penalties
(Claims)
incurred by the Indemnified Person as a result of any expected, pending or completed action, investigation or other proceeding, whether civil, criminal or administrative (each, a
Legal Action),
of or initiated by any party other than the Company itself or a group company
(groepsmaatschappij)
thereof, in relation to any acts or omissions in or related to his capacity as an Indemnified Person. Claims will include derivative actions of or initiated by the Company or a group company
(groepsmaatschappij)
thereof against the Indemnified Person and (recourse) claims by the Company itself or a group company
(groepsmaatschappij)
thereof for payments of claims by third parties if the Indemnified Person will be held personally liable therefore.
24.2
The Indemnified Person will not be indemnified with respect to Claims in so far as they relate to the gaining in fact of personal profits, advantages or remuneration to which he was not legally entitled, or if the Indemnified Person has been adjudged to be liable for wilful misconduct
(opzet)
or intentional recklessness
(bewuste roekeloosheid).
24.3
The Company will provide for and bear the cost of adequate insurance covering Claims against sitting and former Directors
(D&O insurance),
unless such insurance cannot be obtained at reasonable terms.
24.4
Any expenses (including reasonable attorneys’ fees and litigation costs) (collectively,
Expenses)
incurred by the Indemnified Person in connection with any Legal Action will be settled or reimbursed by the Company, but only upon receipt of a written undertaking by that Indemnified Person that he will repay such Expenses if a competent court in an irrevocable judgment has determined that he is not entitled to be indemnified. Expenses will be deemed to include any tax liability which the Indemnified Person may be subject to as a result of his indemnification.
24.5
Also in case of a Legal Action against the Indemnified Person by the Company itself or its group companies
(groepsmaatschappijen),
the Company will settle or reimburse to the Indemnified Person his reasonable attorneys’ fees and litigation costs, but only upon receipt of a written undertaking by that Indemnified Person that he will repay such fees and costs if a competent court in an irrevocable judgment has resolved the Legal Action in favour of the Company or the relevant group company
(groepsmaatschappij)
rather than the Indemnified Person.
24.6
The Indemnified Person may not admit any personal financial liability vis-à-vis third parties, nor enter into any settlement agreement, without the Company’s prior written authorisation. The Company and the Indemnified Person will use all reasonable endeavours to cooperate with a view to agreeing on the defence of any Claims, but in the event that the Company and the Indemnified Person fail to reach such agreement, the Indemnified Person will comply with all
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directions given by the Company in its sole discretion, in order to be entitled to the indemnity contemplated by this Article 24.
24.7
The indemnity contemplated by this Article 24 does not apply to the extent Claims and Expenses are reimbursed by insurers.
24.8
This Article 24 can be amended without the consent of the Indemnified Persons as such. However, the provisions set forth herein nevertheless continues to apply to Claims and/or Expenses incurred in relation to the acts or omissions by the Indemnified Person during the periods in which this clause was in effect.
CHAPTER 5. ANNUAL ACCOUNTS; PROFITS AND DISTRIBUTIONS.
Article 25. Financial Year and Annual Accounts.
25.1
The Company’s financial year is the calendar year.
25.2
Annually, not later than four months after the end of the financial year, the Board must prepare annual accounts and deposit the same for inspection by the Shareholders and other persons entitled to attend the General Meeting of Shareholders at the Company’s office. Within the same period, the Board must also deposit the board report for inspection by the Shareholders and other persons entitled to attend the General Meeting of Shareholders.
25.3
The annual accounts must be signed by the Directors. If the signature of one or more of them is missing, this will be stated and reasons for this omission will be given.
25.4
The Company must ensure that the annual accounts, the board report, and the information to be added by virtue of the law are kept at its office as of the day on which notice of the annual General Meeting of Shareholders is given. Shareholders and other persons entitled to attend the General Meeting of Shareholders may inspect the documents at that place and obtain a copy free of charge.
25.5
The annual accounts, the board report and the information to be added by virtue of the law are furthermore subject to the provisions of Book 2, Title 9, of the Dutch Civil Code.
25.6
The language of the annual accounts and the board report will be English.
Article 26. External Auditor.
26.1
The General Meeting of Shareholders will commission an organization in which certified public accountants cooperate, as referred to in section 2:393 subsection 1 of the Dutch Civil Code (an
External Auditor)
to examine the annual accounts drawn up by the Board in accordance with the provisions of section 2:393 subsection 3 of the Dutch Civil Code. If the General Meeting of Shareholders fails to commission the External Auditor, the commission will be made by the Board.
26.2
The External Auditor is entitled to inspect all of the Company’s books and documents and is prohibited from divulging anything shown or communicated to it regarding the Company’s affairs except insofar as required to fulfil its mandate. Its fee is chargeable to the Company.
26.3
The External Auditor will present a report on its examination to the Board. In this it will address at a minimum its findings concerning the reliability and continuity of the automated data processing system.
26.4
The External Auditor will report on the results of its examination, in an auditor’s statement, regarding the accuracy of the annual accounts.
26.5
The annual accounts cannot be adopted if the General Meeting has not been able to review the auditor’s statement from the External Auditor, which statement must have been added to the
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annual accounts, unless the information to be added to the annual accounts states a legal reason why the statement has not been provided.
Article 27. Adoption of the Annual Accounts and Release from Liability.
27.1
The annual accounts will be submitted to the General Meeting for adoption.
27.2
At the General Meeting of Shareholders at which it is resolved to adopt the annual accounts, it will be separately proposed that the Directors be released from liability for their respective duties, insofar as the exercise of such duties is reflected in the annual accounts or otherwise disclosed to the General Meeting prior to the adoption of the annual accounts.
Article 28. Reserves, Profits and Distributions.
28.1
The Board may decide that the profits realised during a financial year are fully or partially appropriated to increase and/or form reserves.
28.2
Out of the profits remaining after application of Article 28.1, with respect to the financial year concerned, primarily and insofar as possible, a dividend is paid in the amount of one per cent (1%) of the amount actually paid on the Special Voting Shares in accordance with Article 13.5. These dividend payments will be made only in respect of Special Voting Shares for which such actual payments have been made. Actual payments made during the financial year to which the dividend relates, will not be counted. No further distribution will be made on the Special Voting Shares. If, in a financial year, no profit is made or the profits are insufficient to allow the distribution provided for in the preceding sentences, the deficit will be not paid at the expense of the profits earned in following financial years.
28.3
The profits remaining after application of Articles 28.1 and 28.2 will be put at the disposal of the General Meeting for the benefit of the holders of Ordinary Shares. The Board will make a proposal for that purpose. A proposal to pay a dividend to holders of Ordinary Shares will be dealt with as a separate agenda item at the General Meeting of Shareholders.
28.4
Distributions from the Company’s distributable reserves are made pursuant to a resolution of the Board and will not require a resolution from the General Meeting.
28.5
Provided it appears from an unaudited interim statement of assets signed by the Board that the requirement mentioned in Article 28.10 concerning the position of the Company’s assets has been fulfilled, the Board may make one or more interim (dividend) distributions to the holders of Shares.
28.6
The Board may decide that a distribution on Ordinary Shares will not take place as a cash payment but as a payment in Ordinary Shares, or decide that holders of Ordinary Shares will have the option to receive a distribution as a cash payment and/or as a payment in Ordinary Shares, out of the profit and/or at the expense of reserves, provided that the Board is designated by the General Meeting pursuant to Article 6.2. The Board shall determine the conditions applicable to the aforementioned choices.
28.7
The Company’s policy on reserves and dividends shall be determined and can be amended by the Board. The adoption and thereafter each amendment of the policy on reserves and dividends shall be discussed and accounted for at the General Meeting of Shareholders under a separate agenda item.
28.8
No payments will be made on treasury Shares and treasury Shares shall not be counted when calculating allocation and entitlements to distributions.
28.9
All distributions may be made in another currency than Euro.
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28.10
Distributions may be made only insofar as the Company’s equity exceeds the amount of the issued capital, increased by the reserves which must be kept by virtue of the law or these Articles of Association.
Article 29. Payment of and Entitlement to Distributions.
29.1
Dividends and other distributions will be made payable pursuant to a resolution of the Board within four weeks after adoption, unless the Board sets another date for payment. Different payment release dates may be set for the Ordinary Shares and the Special Voting Shares.
29.2
A claim of a Shareholder for payment of a distribution shall be barred after five years have elapsed after the day of payment.
CHAPTER 6. THE GENERAL MEETING.
Article 30. Annual and Extraordinary General Meetings of Shareholders.
30.1
Each year, though not later than in the month of June, a General Meeting of Shareholders will be held.
30.2
The agenda of such meeting will include the following subjects for discussion or voting:
(a)
discussion of the board report;
(b)
discussion and adoption of the annual accounts;
(c)
dividend proposal (if applicable);
(d)
appointment of Directors (if applicable);
(e)
appointment of an External Auditor (if applicable);
(f)
other subjects presented for discussion or voting by the Board and announced with due observance of the provisions of these Articles of Association, as for instance (i) release of Directors from liability; (ii) discussion of the policy on reserves and dividends; (iii) designation of the Board as authorised to issue Shares; and/or (iv) authorisation of the Board to make the Company acquire own Shares.
30.3
Other General Meetings of Shareholders will be held whenever the Board deems such to be necessary, without prejudice to the provisions of Sections 2:108a, 2:110, 2:111 and 2:112 of the Dutch Civil Code.
Article 31. Notice and Agenda of Meetings.
31.1
Notice of General Meetings of Shareholders will be given by the Board.
31.2
Notice of the meeting must be given with due observance of the statutory notice period of forty-two (42) calendar days.
31.3
The notice of the meeting will state:
(a)
the subjects to be dealt with;
(b)
venue and time of the meeting;
(c)
the requirements for admittance to the meeting as described in Articles 35.2 and 35.3, as well as the information referred to in Article 36.3 (if applicable); and
(d)
the address of the Company’s website, and such other information as may be required by the law.
31.4
Further communications which must be made to the General Meeting pursuant to the law or these Articles of Association can be made by including such communications either in the notice, or in a document which is deposited at the Company’s office for inspection, provided a reference thereto is made in the notice itself.
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31.5
Shareholders and/or other persons entitled to attend the General Meeting of Shareholders, who, alone or jointly, meet the requirements set forth in section 2:114a subsection 2 of the Dutch Civil Code will have the right to request the Board to place items on the agenda of the General Meeting of Shareholders, provided the reasons for the request must be stated therein and the request must be received by the Senior Non-Executive Director or the Chairman or the Chief Executive Officer in writing at least sixty (60) calendar days before the date of the General Meeting of Shareholders.
31.6
The notice will be given in the manner stated in Article 38.
Article 32. Venue of Meetings.
General Meetings of Shareholders can be held in Amsterdam or Haarlemmermeer (including Schiphol Airport), at the choice of those who call the meeting.
Article 33. Chairman of the Meeting.
33.1
The General Meetings of Shareholders will be chaired by the Senior Non-Executive Director or in his absence by the Director having the title of Chairman or in the absence of the Chairman by a Deputy-Chairman. In case of absence of the aforesaid Directors the Board will appoint another Director to chair the meeting. The chairman of the meeting will have all the powers he may deem required to ensure the proper and orderly functioning of the General Meeting of Shareholders.
33.2
If the chairmanship of the meeting is not provided for in accordance with Article 33.1, the meeting will itself elect a chairman, provided that so long as such election has not taken place, the chairmanship will be held by a Board member designated for that purpose by the Directors present at the meeting.
Article 34. Minutes.
34.1
Minutes will be kept of the proceedings at the General Meeting of Shareholders by, or under supervision of, the company secretary, which will be adopted by the chairman of the meeting and the company secretary and will be signed by them as evidence thereof.
34.2
However, the chairman of the meeting may determine that notarial minutes will be prepared of the proceedings of the meeting. In that case the co-signature of the chairman will be sufficient.
Article 35. Rights at Meetings and Admittance.
35.1
Each Shareholder and each other person entitled to attend the General Meeting of Shareholders is authorised to attend, to speak at, and to the extent applicable, to exercise his voting rights in the General Meeting of Shareholders. They may be represented by a proxy holder authorised in writing.
35.2
For each General Meeting of Shareholders a statutory record date will be applied, in order to determine in which persons voting rights are vested and which persons are entitled to attend the General Meeting of Shareholders. The record date is the twenty-eighth day before the relevant General Meeting. The manner in which persons entitled to attend the General Meeting of Shareholders can register and exercise their rights will be set out in the notice convening the meeting.
35.3
A person entitled to attend the General Meeting of Shareholders or his proxy will only be admitted to the meeting if he has notified the Company of his intention to attend the meeting in
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writing at the address and by the date specified in the notice of meeting. The proxy is also required to produce written evidence of his mandate.
35.4
The Board is authorised to determine that the voting rights and the right to attend the General Meeting of Shareholders can be exercised by using an electronic means of communication. If so decided, it will be required that each person entitled to attend the General Meeting of Shareholders, or his proxy holder, can be identified through the electronic means of communication, follow the discussions in the meeting and, to the extent applicable, exercise the voting right. The Board may also determine that the electronic means of communication used must allow each person entitled to attend the General Meeting of Shareholders or his proxy holder to participate in the discussions.
35.5
The Board may determine further conditions to the use of electronic means of communication as referred to in Article 35.4, provided such conditions are reasonable and necessary for the identification of persons entitled to attend the General Meeting of Shareholders and the reliability and safety of the communication. Such further conditions will be set out in the notice of the meeting. The foregoing does, however, not restrict the authority of the chairman of the meeting to take such action as he deems fit in the interest of the meeting being conducted in an orderly fashion. Any non or malfunctioning of the means of electronic communication used is at the risk of the persons entitled to attend the General Meeting of Shareholders using the same.
35.6
The company secretary will arrange for the keeping of an attendance list in respect of each General Meeting of Shareholders. The attendance list will contain in respect of each person with voting rights present or represented: his name, the number of votes that can be exercised by him and, if applicable, the name of his representative. The attendance list will furthermore contain the aforementioned information in respect of persons with voting rights who participate in the meeting in accordance with Article 35.4 or which have cast their votes in the manner referred to in Article 36.3. The chairman of the meeting can decide that also the name and other information about other people present will be recorded in the attendance list. The Company is authorised to apply such verification procedures as it reasonably deems necessary to establish the identity of the persons entitled to attend the General Meeting of Shareholders and, where applicable, the identity and authority of representatives.
35.7
The Directors will have the right to attend the General Meeting of Shareholders in person and to address the meeting. They will have the right to give advice in the meeting. Also, the external auditor of the Company is authorised to attend and address the General Meetings of Shareholders.
35.8
The chairman of the meeting will decide upon the admittance to the meeting of persons other than those aforementioned in this Article 35.
35.9
The official language of the General Meetings of Shareholders will be English.
Article 36. Voting Rights and Adoption of Resolutions.
36.1
Each Ordinary Share confers the right to cast one vote. Each Special Voting Share A confers the right to cast two votes, each Special Voting Share B confers the right to cast four votes and each Special Voting Share C confers the right to cast nine votes.
36.2
At the General Meeting of Shareholders, all resolutions must be adopted by a majority of more than half of the votes validly cast without a quorum being required, except in those cases in which the law or these Articles of Association require a greater majority or the requirement of a quorum. If there is a tie in voting, the proposal will thus be rejected.
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36.3
The Board may determine that votes cast prior to the General Meeting of Shareholders by electronic means of communication or by mail, are equated with votes cast at the time of the General Meeting. Such votes may not be cast before the record date referred to in Article 35.2. Without prejudice to the provisions of Article 35 the notice convening the General Meeting of Shareholders must state how Shareholders may exercise their rights prior to the meeting.
36.4
Blank and invalid votes will be regarded as not having been cast.
36.5
The chairman of the meeting will decide whether and to what extent votes are taken orally, in writing, electronically or by acclamation.
36.6
When determining how many votes are cast by Shareholders, how many Shareholders are present or represented, or what portion of the Company’s issued capital is represented, no account will be taken of Shares for which no votes can be cast pursuant to these Articles of Association or the law.
Article 37. Meetings of Holders of Ordinary Shares and Special Voting Shares.
37.1
Meetings of holders of Ordinary Shares, Special Voting Shares A, Special Voting Shares B or Special Voting Shares C
(Class Meetings)
will be held whenever the Board calls such meetings. The provisions of Articles Article 31 through Article 36 apply by analogy, except as provided otherwise in this Article 37.
37.2
All resolutions of a Class Meeting will be adopted by a majority of more than half of the votes validly cast on Shares of the relevant class, without a quorum being required. If there is a tie in voting, the proposal will thus be rejected.
37.3
With respect to a meeting of holders of Shares of a class which are not listed, the term for convening such meeting is at least fifteen calendar days and no record date applies. Also, if at such Class Meeting all outstanding Shares of the relevant class are represented, valid resolutions can be passed if the provisions of Article 37.1 have not been observed, provided they are passed unanimously.
37.4
If the General Meeting adopts a resolution for the validity or implementation of which the consent of a Class Meeting is required, and if, when that resolution is made in the General Meeting, the majority referred to in Article 37.2 votes for the proposal concerned, the consent of the relevant Class Meeting is thus given.
Article 38. Notices and Announcements.
38.1
Notice of General Meetings of Shareholders will be given in accordance with the requirements of law and the requirements of regulation applicable to the Company pursuant to the listing of its Shares on the relevant stock exchange in a country.
38.2
The Board may determine that Shareholders and other persons entitled to attend the General Meeting of Shareholders will be given notice of meetings exclusively by announcement on the website of the Company and/or through other means of electronic public announcement, to the extent in accordance with Article 38.1.
38.3
The foregoing provisions of this Article 38 apply by analogy to other announcements, notices and notifications to Shareholders and other persons entitled to attend the General Meeting of Shareholders.
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CHAPTER
7.
MISCELLANEOUS.
Article 39. Dispute Resolution.
39.1
To the extent permitted by law, the courts of the Netherlands have jurisdiction in all matters relating to the internal organisation of the Company, including disputes between the Company and its Shareholders and Directors as such.
39.2
The provisions of this Article 39 with respect to Shareholders and Directors also apply with respect to persons which hold or have held rights towards the Company to acquire Shares, former Shareholders, persons which hold or have held the right to attend the General Meeting of Shareholders other than as a Shareholder, former Directors and other persons holding or having held any position pursuant to an appointment or designation made in accordance with these Articles of Association.
Article 40. Amendment of Articles of Association.
40.1
The General Meeting may pass a resolution to amend the Articles of Association but only on a proposal of the Board. Any such proposal must be stated in the notice of the General Meeting of Shareholders. A resolution of the General Meeting to amend the Articles of Association requires a majority of not less than two-thirds of the votes validly cast, if less than one-half of the Company’s issued capital is represented at the meeting.
40.2
In the event of a proposal to the General Meeting of Shareholders to amend the Articles of Association, a copy of such proposal containing the verbatim text of the proposed amendment will be deposited at the Company’s office, for inspection by Shareholders and other persons entitled to attend the General Meeting of Shareholders, until the end of the meeting. Furthermore, a copy of the proposal will be made available free of charge to Shareholders and other persons entitled to attend the General Meeting of Shareholders from the day it was deposited until the day of the meeting.
Article 41. Dissolution and Liquidation.
41.1
The Company may be dissolved pursuant to a resolution to that effect by the General Meeting with a majority of at least two-thirds of the votes validly cast without a quorum being required, but only on a proposal of the Board. When a proposal to dissolve the Company is to be made to the General Meeting, this must be stated in the notice convening the General Meeting.
41.2
In the event of the dissolution of the Company by resolution of the General Meeting, the Directors will be charged with effecting the liquidation of the Company’s affairs without prejudice to the provisions of section 2:23 subsection 2 of the Dutch Civil Code.
41.3
During liquidation, the provisions of these Articles of Association will remain in force to the extent possible.
41.4
From the balance remaining after payment of the debts of the dissolved Company will be paid, insofar as possible:
(a)
firstly, the amounts actually paid-in on Special Voting Shares in accordance with Article 13.5 are transferred to those holders of Special Voting Shares whose Special Voting Shares have so been actually paid for; and
(b)
secondly, the balance remaining is transferred to the holders of Ordinary Shares in proportion to the aggregate number of the Ordinary Shares held by each of them.
41.5
After liquidation, the Company’s books and documents shall remain in the possession of the person designated for this purpose by the liquidators of the Company for the period prescribed by law.
41.6
The liquidation is otherwise subject to the provisions of Title 1, Book 2 of the Dutch Civil Code.
20
Article 42. Shareholder Obligations.
42.1
No Shareholder, nor any person having a derived right
(afgeleid recht)
with respect to the Shares (including but not limited to the right of usufruct and right of pledge), may hold, on its own or together with Affiliates or any other person, directly and/or indirectly — at any time — a participation in the Company representing a percentage of the outstanding share capital and/or voting rights of the Company which
(a)
is in excess of what is permitted to be held by such persons by any provision of law (including rules and regulations aiming at safeguarding media pluralism and antitrust laws) issued by any State or Authority applicable to (i) the Company, and/or (ii) group companies of the Company, and/or (iii) the Company’s shareholders, and/or (iv) the Company’s legal predecessors (i.e. Mediaset S.p.A. and Mediaset España Comunicación S.A.) or would have been applicable to the Company’s legal predecessors (i.e. Mediaset S.p.A. and Mediaset España Comunicación S.A.), and/or (b) is in violation of a decision of any Authority applicable to (i) the Company, and/or (ii) group companies of the Company, and/or (iii) the Company’s shareholders, and/or (iv) the Company’s legal predecessors (i.e. Mediaset S.p.A. and Mediaset España Comunicación S.A.) (the
Qualified Shareholding Obligation).
42.2
A Shareholder and any person having a derived right
(afgeleid recht)
with respect to the Shares (including but not limited to the right of usufruct and right of pledge) and their Affiliates must at all times obey and act in accordance with any contractual arrangements made between the Company and any such person relating to the Shares held by such person (including for the avoidance of doubt any contractual arrangements inherited from its legal predecessors and originally relating to shares issued by such legal predecessors) (the
Contract Obligation).
42.3
If and for as long as any person as referred to in Articles 42.1 and/or 42.2 is acting in violation of the Qualified Shareholding Obligation and/or the Contract Obligation, the voting rights and the right to participate in General Meetings attached to all the Shares held by such persons may be suspended by the Board.
42.4
For the purpose of this Article 42
Affiliate
means with respect to any specified person, any other person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified person. The term
control
means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise; and the terms
controlling
and
controlled
have meanings correlative of the foregoing.
Article 43. Mandatory bid requirement.
43.1
In addition to any provision of law, any person who, either on its own or together with persons Acting In Concert, acquires or acquired after the seventh day of June two thousand and nineteen, either directly or indirectly, predominant control, shall make a public takeover bid for all the outstanding ordinary shares.
43.2
The obligation to make a public takeover bid as referred to in paragraph 1 shall lapse if the obliged person loses predominant control within thirty (30) calendar days after the obligation to make a public takeover bid under this Article 43 has become applicable to such person.
43.3
In this Article 43 predominant control means the right to exercise at least (i) twenty-five per cent (25%), or (ii) thirty per cent (30%) of the voting rights in the General Meeting. For the purpose of this provision Shares for which the voting rights and the right to participate in General
21
Meetings are suspended will nevertheless be taken into account when calculating the percentages of predominant control.
43.4
Unless otherwise appears from this Article 43, the definitions and terms used in this Article that relate to the Act on Financial Supervision will be interpreted in accordance with Section 1:1 of the Act on Financial Supervision.
43.5
The public takeover bid that must be made in respect of this Article 43 must further be made in accordance with the provisions of the Act on Financial Supervision and the Public Takeover Bid Decree that apply to a mandatory public takeover bid as referred to in Section 1, paragraph (e), of the Public Takeover Bid Decree or substitute regulations.
43.6
Any person who incurs the obligation to make a public takeover bid is obliged to notify the Company of this immediately.
43.7
Any person who, either on its own or together with any person Acting in Concert, has the obligation to make a public takeover bid under this Article 43 and (
a
) does not meet or no longer meets the Qualified Shareholding Obligation, and/or (
b
) does not meet or no longer meets the Contract Obligation, must (i) dispose of the excess number of Shares that have led to the acquisition of predominant control after the seventh day of June two thousand and nineteen or (ii) take any other action which will result in him losing predominant control within five (5) business days upon written request from the Company (the
Obligation To Lose Predominant Control).
43.8
The Board is irrevocably authorised to effectuate the disposal of such number of Shares which will result in the relevant Shareholder losing predominant control if the Obligation To Lose Predominant Control has not been satisfied within a period of five (5) business days from the day that the Company has requested this in writing. The disposal of the Ordinary Shares will take place via the public market against a price obtained in good faith, and the Special Voting Shares will be transferred to the Company for no consideration.
22
[
The articles of association of the Company contain the following Transitory Provisions:
]
TRANSITORY PROVISIONS(1)
T1
Issued Share Capital Scenario I
44.1
In deviation of the provisions set out in Articles 4.1 and 4.2 and as long as the issued share capital is less than fourteen million seven hundred and seventy-nine thousand two hundred and fifty-nine euro and ninety-eight eurocent (EUR 14,779,259.98) and the Board has not filed a statement as mentioned in Articles 44.2 or 44.3 or 44.4 or 44.5 or 44.6 or 44.7 or 44.8, Articles 4.1 and 4.2 will read as follows:
“4.1
The authorised capital of the Company amounts to forty-six million three hundred thousand euro (EUR 46,300,000.00).
4.2
The authorised capital is divided into the following classes of shares as follows:
·
one billion five hundred million (1,500,000,000) Ordinary Shares, having a nominal value of one eurocent (EUR 0.01) each;
·
one billion five hundred million (1,500,000,000) Special Voting Shares A, having a nominal value of two eurocent (EUR 0.02) each;
·
ten million (10,000,000) Special Voting Shares B, having a nominal value of four eurocent (EUR 0.04) each; and
·
ten million (10,000,000) Special Voting Shares C, having a nominal value of nine eurocent (EUR 0.09) each.”
T2
Issued Share Capital Scenario II
44.2
In deviation of the provisions set out in Articles 4.1 and 4.2 and in the event the issued share capital equals fourteen million seven hundred and seventy-nine thousand two hundred and fifty-nine euro and ninety-eight eurocent (EUR 14,779,259.98) or more and the Board has filed a statement confirming this new minimum issued share capital with the Dutch Commercial Register and has not filed any statement as mentioned in Article 44.3 or 44.4 or 44.5 or 44.6 or 44.7 or 44.8, Articles 4.1 and 4.2 will read as follows:
“4.1
The authorised capital of the Company amounts to sixty-nine million eight hundred thousand (EUR 69,800,000.00).
4.2
The authorised capital is divided into the following classes of shares as follows:
·
one billion five hundred million (1,500,000,000) Ordinary Shares, having a nominal value of one eurocent (EUR 0.01) each;
·
one billion five hundred million (1,500,000,000) Special Voting Shares A, having a nominal value of two eurocent (EUR 0.02) each;
·
two hundred and sixty million (260,000,000) Special Voting Shares B, having a nominal value of four eurocent (EUR 0.04) each; and
·
one hundred and sixty million (160,000,000) Special Voting Shares C, having a nominal value of nine eurocent (EUR 0.09) each.”
(1) The numbers in the transitory provisions are subject to change. The final numbers will be determined prior to the general meeting of shareholders of Mediaset Investment N.V. in which the Merger will be approved.
23
T3
Issued Share Capital Scenario III
44.3
In deviation of the provisions set out in Articles 4.1 and 4.2 and in the event the issued share capital equals nineteen million euro (EUR 19,000,000.00) or more and the Board has filed a statement confirming this new minimum issued share capital with the Dutch Commercial Register and has not filed any statement as mentioned in Article 44.4 or 44.5 or 44.6 or 44.7 or 44.8, Articles 4.1 and 4.2 will read as follows:
“4.1
The authorised capital of the Company amounts to ninety-five million euro (EUR 95,000,000.00).
4.2
The authorised capital is divided into the following classes of shares as follows:
·
one billion five hundred million (1,500,000,000) Ordinary Shares, having a nominal value of one eurocent (EUR 0.01) each;
·
one billion five hundred million (1,500,000,000) Special Voting Shares A, having a nominal value of two eurocent (EUR 0.02) each;
·
five hundred and seventy-five million (575,000,000) Special Voting Shares B, having a nominal value of four eurocent (EUR 0.04) each; and
·
three hundred million (300,000,000) Special Voting Shares C, having a nominal value of nine eurocent (EUR 0.09) each.”
T4
Issued Share Capital Scenario IV
44.4
In deviation of the provisions set out in Articles 4.1 and 4.2 and in the event the issued share capital equals twenty-five million euro (EUR 25,000,000.00) or more and the Board has filed a statement confirming this new minimum issued share capital with the Dutch Commercial Register and has not filed any statement as mentioned in Article 44.5 or 44.6 or 44.7 or 44.8, Articles 4.1 and 4.2 will read as follows:
“4.1
The authorised capital of the Company amounts to one hundred and twenty-four million six hundred thousand euro (EUR 124,600,000.00).
4.2
The authorised capital is divided into the following classes of shares as follows:
·
one billion five hundred million (1,500,000,000) Ordinary Shares, having a nominal value of one eurocent (EUR 0.01) each;
·
one billion five hundred million (1,500,000,000) Special Voting Shares A, having a nominal value of two eurocent (EUR 0.02) each;
·
one billion (1,000,000,000) Special Voting Shares B, having a nominal value of four eurocent (EUR 0.04) each; and
·
forty hundred and forty million (440,000,000) Special Voting Shares C, having a nominal value of nine eurocent (EUR 0.09) each.”
T5
Issued Share Capital Scenario V
44.5
In deviation of the provisions set out in Articles 4.1 and 4.2 and in the event the issued share capital equals thirty million euro (EUR 30,000,000.00) or more and the Board has filed a statement confirming this new minimum issued share capital with the Dutch Commercial Register and has not filed any statement as mentioned in Article 44.6 or 44.7 or 44.8, Articles 4.1 and 4.2 will read as follows:
“4.1
The authorised capital of the Company amounts to one hundred and forty-seven million euro (EUR 147,000,000.00).
4.2
The authorised capital is divided into the following classes of shares as follows:
24
·
one billion five hundred million (1,500,000,000) Ordinary Shares, having a nominal value of one eurocent (EUR 0.01) each;
·
one billion five hundred million (1,500,000,000) Special Voting Shares A, having a nominal value of two eurocent (EUR 0.02) each;
·
one billion two hundred million (1,200,000,000) Special Voting Shares B, having a nominal value of four eurocent (EUR 0.04) each; and
·
six hundred thousand million (600,000,000) Special Voting Shares C, having a nominal value of nine eurocent (EUR 0.09) each.”
T6
Issued Share Capital Scenario VI
44.6
In deviation of the provisions set out in Articles 4.1 and 4.2 and in the event the issued share capital equals thirty-five million euro (EUR 35,000,000.00) or more and the Board has filed a statement confirming this new minimum issued share capital with the Dutch Commercial Register and has not filed any statement as mentioned in Article 44.7 or 44.8, Articles 4.1 and 4.2 will read as follows:
“4.1
The authorised capital of the Company amounts to one hundred and seventy-three million euro (EUR 173,000,000.00).
4.2
The authorised capital is divided into the following classes of shares as follows:
·
one billion five hundred million (1,500,000,000) Ordinary Shares, having a nominal value of one eurocent (EUR 0.01) each;
·
one billion five hundred million (1,500,000,000) Special Voting Shares A, having a nominal value of two eurocent (EUR 0.02) each;
·
one billion four hundred million (1,400,000,000) Special Voting Shares B, having a nominal value of four eurocent (EUR 0.04) each; and
·
eight hundred million (800,000,000) Special Voting Shares C, having a nominal value of nine eurocent (EUR 0.09) each.”
T7
Issued Share Capital Scenario VII
44.7
In deviation of the provisions set out in Articles 4.1 and 4.2 and in the event the issued share capital equals forty million euro (EUR 40,000,000.00) or more and the Board has filed a statement confirming this new minimum issued share capital with the Dutch Commercial Register and has not filed any statement as mentioned in Article 44.8, Articles 4.1 and 4.2 will read as follows:
“4.1
The authorised capital of the Company amounts to one hundred and ninety-five million euro (EUR 195,000,000.00).
4.2
The authorised capital is divided into the following classes of shares as follows:
·
one billion five hundred million (1,500,000,000) Ordinary Shares, having a nominal value of one eurocent (EUR 0.01) each;
·
one billion five hundred million (1,500,000,000) Special Voting Shares A, having a nominal value of two eurocent (EUR 0.02) each;
·
one billion five hundred million (1,500,000,000) Special Voting Shares B, having a nominal value of four eurocent (EUR 0.04) each; and
·
one billion million (1,000,000,000) Special Voting Shares C, having a nominal value of nine eurocent (EUR 0.09) each.”
25
T8
Issued Share Capital Scenario VIII
44.8
In the event the issued share capital equals forty-seven million two hundred and ninety-three thousand six hundred and thirty-one euro and ninety-four eurocent (EUR 47,293,631.94) or more and the Board has filed a statement confirming this new minimum issued share capital with the Dutch Commercial Register Articles 4.1 and 4.2 are applicable as such.
0
-
0
-
0
26
Exhibit 99.9
MFE - MEDIAFOREUROPE N.V.
TERMS AND CONDITIONS FOR SPECIAL VOTING SHARES
These terms and conditions (the
SVS Terms
) will apply to the allocation, acquisition, conversion, holding, sale, repurchase and transfer of special voting shares in the share capital of MFE-MEDIAFOREUROPE N.V., a public company
(naamloze vennootschap)
under the laws of the Netherlands, having its official seat in Amsterdam (the Netherlands), registered with the Dutch Commercial Register under number 70347379 (the
Company)
.
1.
DEFINITIONS AND INTERPRETATION
In addition to terms defined elsewhere in these SVS Terms, the definitions and other provisions in Schedule 1 apply.
2.
PURPOSE OF SPECIAL VOTING SHARES
The sole purpose of Special Voting Shares is to foster the development and continued involvement of a core base of long-term shareholders in a manner that reinforces the Company’s stability.
3.
ADMINISTRATION
3.1
The Company will effectuate the issuance, allocation, acquisition, conversion, sale, repurchase and transfer of Special Voting Shares.
3.2
In accordance with the Power of Attorney, an agent (the
Agent
) shall accept instructions from Shareholders to act on their behalf in connection with the allocation, acquisition, conversion, sale, repurchase and transfer of Special Voting Shares.
3.3
The Company will delegate its powers and duties hereunder in whole or in part to the Agent. The Agent may represent the Company and effectuate and sign on behalf of the Company all relevant documentation in respect of the Special Voting Shares, including - without limitation - deeds, confirmations, acknowledgements, transfer forms and entries in the Loyalty Register. The Company shall ensure that up-to-date contact details of the Agent will be published on the Company’s corporate website.
3.4
All costs of administration in connection with these SVS Terms and any documentation required for allocation, retransfer and conversion of Special Voting Shares shall be for the account of the Company.
4.
APPLICATION FOR SPECIAL VOTING SHARES — LOYALTY REGISTER
4.1
A Shareholder may at any time opt to become eligible for Special Voting Shares by requesting the Agent, acting on behalf of the Company, to register one or more Ordinary Shares in the Loyalty Register. Such a request (a
Request)
will need to be made by the relevant Shareholder via its Intermediary by submitting a duly completed Election Form, including a confirmation from the relevant Intermediary that such Shareholder holds title to the Ordinary Shares included in the Request.
4.2
By signing the Election Form, the relevant Shareholder also grants the Power of Attorney, irrevocably instructing and authorizing the Agent to act on his/her/its behalf and to represent him/her/it in connection with the issuance, allocation, acquisition, conversion, sale, repurchase and transfer of Special Voting Shares in accordance with and pursuant to these SVS Terms.
4.3
The Company and the Agent may establish an electronic registration system in order to allow for the submission of Requests by email or other electronic means of communication. The Company will publish the procedure and details of any such electronic facility, including registration instructions, on its corporate website.
4.4
Upon receipt of the Election Form (including the Power of Attorney and the Intermediary’s confirmation, as referred to in clause 4.1), the Agent will examine the same and use its reasonable efforts to inform the relevant Shareholder, through his/her/its Intermediary, as to whether the Request is accepted or rejected (and, if rejected, the reasons why) within thirty Business Days of receipt of the above-mentioned documents. The Agent may reject a Request for reasons of incompleteness or incorrectness of the Election Form or the Intermediary confirmation, as referred to in clause 4.1 or in case of serious doubts with respect to the validity or authenticity of such documents. If the Agent requires further information from the relevant Shareholder in order to process the Request, then such Shareholder shall provide all necessary information and assistance required in connection therewith. A Request will be rejected if the Board determines that the relevant Shareholder (i) does not meet the Qualified Shareholding Obligation, and/or (ii) does not meet the Contract Obligation. In case of violation of the Qualified Shareholding Obligation, the refusal will be limited to the number of Ordinary Shares which will be held in violation of the Qualified Shareholding Obligation.
4.5
If the Request is accepted, then the relevant Ordinary Shares will be removed from the Regular Settlement System and will be registered in the Loyalty Register in the name of the requesting Shareholder.
4.6
Without prejudice to clause 4.7 the registration of Ordinary Shares in the Loyalty Register will not affect the nature or value of such shares, nor any of the rights attached thereto. They will continue to be part of the class of ordinary shares in which they were issued, and a listing with Mercato Telematico Azionario of the Borsa Italiana Stock Exchange, Spanish stock exchanges of Barcelona, Bilbao, Madrid and Valencia, or any other stock exchange shall continue to apply to such shares. All Ordinary Shares shall be identical in all respects.
4.7
The Company and the Agent will establish a procedure with Monte Titoli and Iberclear to manage the removal of Ordinary Shares from the Regular Settlement System and their registration into the Loyalty Register, and
vice versa.
5.
ALLOCATION OF SPECIAL VOTING SHARES A
5.1
As per the date on which an Electing Ordinary Share has been registered in the Loyalty Register in the name of one and the same Shareholder or its Loyalty Transferee for an uninterrupted period of three years (the
SVS A Qualification Date)
,
such Electing Ordinary Share will become a Qualifying Ordinary Share A and the holder thereof will be entitled to acquire one Special Voting Share A in the manner set out in clause 5.3 in respect of each of such Qualifying Ordinary Shares A.
5.2
A transfer of Electing Ordinary Shares to a Loyalty Transferee shall not be deemed to interrupt the three years holding period referred to in clause 5.1. An Electing Shareholder will not be entitled to receive Special Voting Shares A upon the occurrence of a Change of Control in respect of that Electing Shareholder.
5.3
On the SVS A Qualification Date, the Agent will, on behalf of both the Company and the relevant Qualifying Shareholder, effectuate the execution of a Deed of Allocation pursuant to which such number of Special Voting Shares A will be issued and allocated to the Qualifying Shareholder and will correspond to the number of new Qualifying Ordinary Shares A. The Board will refuse the issuance of Special Voting Shares A if the relevant Shareholder (i) does not meet the Qualified Shareholding Obligation or will no longer meet the Qualified Shareholding Obligation as a result of the acquisition of Special Voting Shares A, and/or (ii) does not meet the Contract Obligation. In case of violation of the Qualified Shareholding Obligation, the refusal will be limited to the number of Special Voting Shares A which will be held in violation of the Qualified Shareholding Obligation.
5.4
Any allocation of Special Voting Shares A to a Qualifying Shareholder will be effectuated for no consideration
(om niet)
and be subject to these SVS Terms. The par value of newly issued Special Voting Shares A will be charged to the Special Capital Reserve.
6.
ALLOCATION OF SPECIAL VOTING SHARES B
6.1
As per the date on which a Qualifying Ordinary Share A has been registered in the Loyalty Register in the name of one and the same Shareholder or its Loyalty Transferee for an uninterrupted period of two years (the
SVS B Qualification Date)
,
such Qualifying Ordinary Share A will become a Qualifying Ordinary Share B and the holder thereof will be entitled to acquire one Special Voting Share B in the manner set out in clause 6.3 in respect of each of such Qualifying Ordinary Share B.
6.2
A transfer of Qualifying Ordinary Shares A to a Loyalty Transferee shall not be deemed to interrupt the two years holding period referred to in clause 6.1.
6.3
On the SVS B Qualification Date, the Agent will, on behalf of the Company, issue a Conversion Statement pursuant to which the Special Voting Shares A corresponding to the number of Qualifying Ordinary Shares B will automatically convert into an equal number of Special Voting Shares B. The Board will refuse the conversion of Special Voting Shares A into Special Voting Shares B if the relevant Shareholder (i) does not meet the Qualified Shareholding Obligation or will no longer meet the Qualified Shareholding Obligation as a result of the conversion of Special Voting Shares A into Special Voting Shares B, and/or (ii) does not meet the Contract Obligation. In case of violation of the Qualified Shareholding Obligation, the refusal will be limited to the number of Special Voting Shares B which will be held in violation of the Qualified Shareholding Obligation.
6.4
The conversion of Special Voting Shares A into Special Voting Shares B will be effectuated for no consideration
(om niet)
and be subject to these SVS Terms. The difference between the par value of the converted Special Voting Shares A and the Special Voting Shares B will be charged to the Special Capital Reserve.
7.
ALLOCATION OF SPECIAL VOTING SHARES C
7.1
As per the date on which a Qualifying Ordinary Share B has been registered in the Loyalty Register in the name of one and the same Shareholder or its Loyalty Transferee for an uninterrupted period of three years (the
SVS
C Qualification Date)
,
such Qualifying Ordinary Share B will become a Qualifying Ordinary Share C and the holder thereof will be entitled to acquire one Special Voting Share C in the manner set out in clause 7.3 in respect of each of such Qualifying Ordinary Share C.
7.2
A transfer of Qualifying Ordinary Shares B to a Loyalty Transferee shall not be deemed to interrupt the three years holding period referred to in clause 7.1.
7.3
On the SVS C Qualification Date, the Agent will, on behalf of the Company, issue a Conversion Statement pursuant to which the Special Voting Shares B corresponding to the number of Qualifying Ordinary Shares C will automatically convert into an equal number of Special Voting Shares C. The Board will refuse the conversion of Special Voting Shares B into Special Voting Shares C if the relevant Shareholder (i) does not meet the Qualified Shareholding Obligation or will no longer meet the Qualified Shareholding Obligation as a result of the conversion of Special Voting Shares B into Special Voting Shares C, and/or (ii) does not meet the Contract Obligation. In case of violation of the Qualified Shareholding Obligation, the refusal will be limited to the number of Special Voting Shares C which will be held in violation of the Qualified Shareholding Obligation.
7.4
The conversion of Special Voting Shares B into Special Voting Shares C will be effectuated for no consideration
(om niet)
and be subject to these SVS Terms. The difference between the par value of the converted Special Voting Shares B and the Special Voting Shares C will be charged to the Special Capital Reserve.
8.
INITIAL ALLOCATION
8.1
In addition to the allocation of Special Voting Shares A pursuant to clause 5, Special Voting Shares A will be allocated following the completion of the Merger to those shareholders of Mediaset and Mediaset España (who will have become Shareholders upon completion of the Merger), as legal predecessors of the Company (the
Initial Electing Shareholders)
,
who have elected for registration in the Loyalty Register of Ordinary Shares to be acquired as a result of the Merger and have complied with the requirements of the Initial Allocation Procedure, including (but not limited to) the requirement (i) to submit a duly completed Initial Election Form no later than 7 Business Days prior to the date of the Mediaset EGM or the Mediaset España EGM (as the case may be), and (ii) to hold the shares in the capital of Mediaset or Mediaset España (as the case may be) included in the Initial Election Form (as well as their corresponding Ordinary Shares of the Company, as received upon completion of the Merger), from the date of submitting the Initial Election Form up to the thirtieth calendar day after the Merger Effective Date.
8.2
The Ordinary Shares acquired as a result of the Merger and elected for registration in the Loyalty Register by Initial Electing Shareholders with due observance of the terms and conditions set out in the Initial Allocation Procedure will be registered in the Loyalty Register after completion of the Merger
(Initial Electing Ordinary Shares)
.
After an uninterrupted period of thirty days since the Merger Effective Date, such Initial Electing Ordinary Share will become a Qualifying Ordinary Share A and the holder
thereof will be entitled to acquire one Special Voting Shares A in the manner set out in clause 8.4 in respect of each of such Qualifying Ordinary Shares A.
8.3
A transfer of Initial Electing Ordinary Shares to a Loyalty Transferee shall not be deemed to interrupt the thirty-day holding period referred to in clause 8.1. An Initial Electing Shareholder will not be entitled to receive Special Voting Shares A upon the occurrence of a Change of Control in respect of that Initial Electing Shareholder.
8.4
The Agent will, on behalf of both the Company and the Initial Electing Shareholders, effectuate the allocation of the Special Voting Shares A by way of execution of an Initial Deed of Allocation. Notwithstanding the aforementioned, the Board will refuse the registration of one or more Ordinary Shares in the Loyalty Register and/or refuse the allocation of Special Voting Shares A if the relevant Shareholder (i) does not meet the Qualified Shareholding Obligation or will no longer meet the Qualified Shareholding Obligation as a result of the allocation of Special Voting Shares A, and/or (ii) does not meet the Contract Obligation. In case of violation of the Qualified Shareholding Obligation, the refusal will be limited to the number of Ordinary Shares and/or Special Voting Shares A which will be held in violation of the Qualified Shareholding Obligation.
8.5
Any allocation of Special Voting Shares A to an Initial Electing Shareholder will be effectuated for no consideration
(om niet)
and be subject to these SVS Terms. The par value of newly issued Special Voting Shares A will be will be charged to the Special Capital Reserve.
9.
VOLUNTARY DE-REGISTRATION
9.1
A Shareholder who is registered in the Loyalty Register may at any time request the Agent, acting on behalf of the Company, to move back some or all of its Ordinary Shares registered in the Loyalty Register to the Regular Settlement System. Such a request (a
De-Registration Request)
will need to be made by the relevant Shareholder through his/her/its Intermediary, by submitting a duly completed De-Registration Form.
9.2
A De-Registration Request may also be made by a Shareholder directly to the Agent
(i.e.
not through the intermediary services of an Intermediary), provided, however, that the Agent, acting on behalf of the Company, may in such case set additional rules and procedures to validate any such De-Registration Request, including - without limitation - the verification of the identity of the relevant Shareholder and the authenticity of such Shareholder’s submission.
9.3
By means of and as per the moment of a Shareholder submitting the De-Registration Form, such Shareholder will have waived his/her/its rights to cast any votes that accrue to the Special Voting Shares concerned in the De-Registration Form.
9.4
Upon receipt of the duly completed De-Registration Form, the Agent will examine the same and use its reasonable efforts to ensure that the Ordinary Shares as specified in the De-Registration Form will be moved back to the Regular Settlement System, starting from the last one registered, within three (3) Business Days of receipt of the De-Registration Form.
9.5
Upon de-registration from the Loyalty Register, such Ordinary Shares will no longer qualify as Initial Electing Ordinary Shares, or Electing Ordinary Shares or Qualifying
Ordinary Shares.
10.
TRANSFER RESTRICTIONS SPECIAL VOTING SHARES
No Shareholder shall, directly or indirectly:
(a)
sell, dispose of or transfer any Special Voting Share or otherwise grant any right or interest therein, unless the Shareholder is obliged to transfer Special Voting Shares in accordance with clause 12.2.; or
(b)
create or permit to exist any pledge, lien, fixed or floating charge or other encumbrance over any Special Voting Share or any interest in any Special Voting Share.
11.
MANDATORY RETRANSFERS OF SPECIAL VOTING SHARES
11.1 A Shareholder will no longer be entitled to hold Special Voting Shares and must offer and transfer his/her/its Special Voting Shares for no consideration
(om niet)
to either the Company or to a special purpose vehicle as referred to in Article 13.6 of the Articles in any of the following circumstances (each a
Mandatory Retransfer Event):
(a)
upon the de-registration from the Loyalty Register of Ordinary Shares in the name of that Shareholder in accordance with clause 9;
(b)
upon any transfer by that Shareholder of Qualifying Ordinary Shares, except if such transfer is a transfer to a Loyalty Transferee as referred to in clause 12;
(c)
upon the occurrence of a Change of Control in respect of that Shareholder;
(d)
upon violation of the Qualified Shareholding Obligation; and
(e)
upon violation of the Contract Obligation.
11.2
The retransfer obligation set forth in clause 11.1 applies to the Special Voting Shares connected to the Qualifying Ordinary Shares for which a Mandatory Retransfer Event relates.
11.3
Upon the occurrence of a transfer of Ordinary Shares to another party which does not qualify as a Loyalty Transferee the relevant Shareholder must promptly notify the Company thereof, and must make a De-Registration Request as referred to in clause 9.1.
11.4
Upon the occurrence of a Change of Control the relevant Shareholder must promptly notify the Company thereof, by submitting a Change of Control Notification, and must make a De-Registration Request as referred to in clause 9.1.
11.5
The offer and retransfer of Special Voting Shares in the circumstances pursuant to clause 11.1 by the relevant Shareholder to the Company or to a special purpose vehicle as referred to in Article 13.6 of the Articles will be effectuated by execution of a Deed of Retransfer.
11.6
If and for as long as a Shareholder is in breach with the retransfer obligation set forth in clause 11.1, the voting rights and the right to participate in general meeting of
shareholders relating to the Special Voting Shares to be so offered and transferred will be suspended. The Company will be irrevocably authorised to effectuate the offer and transfer on behalf of the Shareholder concerned.
11.7
If the Company determines (in its discretion) that a Shareholder has taken any action to avoid the application of clause 10 or clause 11, the Company may determine that clause 11.1 and 11.2 will be applied by analogy.
12.
PERMITTED TRANSFERS ORDINARY SHARES — LOYALTY REGISTER
12.1
A Shareholder may transfer Initial Electing Ordinary Shares, Electing Ordinary Shares and Qualifying Ordinary Shares to a Loyalty Transferee, without moving these shares to the Regular Settlement System. The Loyalty Transferee and the transferring Shareholder are obliged to deliver the documentation evidencing the transfer.
12.2
Upon a transfer of Qualifying Ordinary Shares to a Loyalty Transferee, the Special Voting Shares connected therewith must be transferred to such Loyalty Transferee as well.
13.
BREACH, COMPENSATION PAYMENT
13.1
In the event of a breach of any of the obligations of a Shareholder, that Shareholder must pay to the Company an amount for each Special Voting Share affected by the relevant breach (the
Compensation Amount),
which amount is the average closing price of an Ordinary Share on the Mercato Telematico Azionario of the Borsa Italiana Stock Exchange calculated on the basis of the period of twenty (20) trading days prior to the day of the breach or, if such day is not a Business Day, the preceding Business Day, such without prejudice to the Company’s right to request specific performance.
13.2
Clause 13.1 constitutes a penalty clause
(boetebeding)
as referred to in section 6:91 of the Dutch Civil Code. The Compensation Amount payment shall be deemed to be in lieu of, and not in addition to, any liability
(schadevergoedingsplicht)
of the relevant Shareholder towards the Company in respect of the relevant breach - so that the provisions of this clause 13 shall be deemed to be a “liquidated damages” clause
(schadevergoedingsbeding)
and not a “punitive damages” clause
(strafbeding).
13.3
To the extent possible, the provisions of section 6:92, subsections 1 and 3 of the Dutch Civil Code shall not apply.
14.
AMENDMENT OF THESE SVS TERMS
14.1
These SVS Terms have been established by the Board on
·
2019 and have been approved by the general meeting of shareholders of the Company on
·
2019.
14.2
These SVS Terms may be amended pursuant to a resolution by the Board, provided, however, that any material, not merely technical amendment will be subject to the approval of the general meeting of shareholders and the approval of the combined meeting of holders of Special Voting Shares of the Company, unless such amendment is required to ensure compliance with applicable laws or listing regulations.
14.3
Any amendment of the SVS Terms shall require a private deed to that effect.
14.4
The Company shall publish any amendment of these SVS Terms on the Company’s corporate website and notify the Shareholders of any such amendment through their Intermediaries.
15.
GOVERNING LAW, DISPUTES
15.1
These SVS Terms are governed by and construed in accordance with the laws of the Netherlands.
15.2
Any dispute in connection with these SVS Terms and/or the Special Voting Shares will be brought before the courts of Amsterdam, the Netherlands.
SCHEDULE 1
DEFINITIONS AND INTERPRETATION
1.1
In these SVS Terms the following words and expressions shall have the following meanings, except if the context requires otherwise:
Affiliate
means with respect to any specified person, any other person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified person. The term
control
means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise; and the terms
controlling
and
controlled
have meanings correlative of the foregoing.
Articles
means the Articles of Association of the Company as in effect from time to time.
Board
means the board of directors of the Company.
Business Day
means a calendar day which is not a Saturday or a Sunday or a public holiday in the Netherlands.
Change of Control
means in respect of any Shareholder that is not an individual
(natuurlijk persoon):
any direct or indirect transfer in one or a series of transactions of (1) the ownership or control in respect of fifty per cent (50%) or more of the voting rights of such Shareholder, (2) the de facto ability to direct the casting of fifty per cent (50%) or more of the votes exercisable at general meetings of such Shareholder; and/or (3) the ability to appoint or remove half or more of the directors, executive directors or board members or executive officers of such Shareholder or to direct the casting of fifty per cent (50%) or more of the voting rights at meetings of the board, governing body or executive committee of such Shareholder; provided that no Change of Control shall be deemed to have occurred if (i) the transfer of ownership and/or control is an intragroup transfer under the same parent company; (ii) the transfer of ownership and/or control is the result of the succession or the liquidation of assets between spouses or the inheritance, inter vivo donation or other transfer to a spouse or a relative up to and including the fourth degree; or (iii) the fair market value of the Ordinary Shares held by such Shareholder represent less than twenty per cent (20%) of the total assets of the Transferred Group at the time of the transfer and the Ordinary Shares, in the sole judgment of the Company, are not otherwise material to the Transferred Group or the Change of Control transaction.
Change of Control Notification
means the notification to be made by a Qualifying Shareholder, an Electing Shareholders or an Initial Electing Shareholders in respect of whom a Change of Control has occurred, substantially in the form as annexed hereto as Exhibit G.
Contract Obligation
means the obligation of each Shareholder as referred to in Article 42.2 of the Articles.
Conversion Statement
means the conversion statement as referred to in Article 13.11 of the Articles from the Company pursuant to which one or more Special Voting Shares A are converted into one or more Special Voting Shares B or one or more Special Voting Shares B are
converted into one or more Special Voting Shares C, substantially in the form as annexed hereto as Exhibit El and Exhibit E2, as amended from time to time.
Deed of Allocation
means the private deed of allocation
(onderhandse akte van uitgifte of levering)
of Special Voting Shares A between a Qualifying Shareholder and (i) the Company or (ii) a special purpose entity as referred to in Article 13.6 of the Articles (as the case may be), substantially in the form as annexed hereto as Exhibit D.
Deed of Retransfer
means a private deed of repurchase and transfer
(onderhandse akte van inkoop c.q. terugkoop en levering)
of Special Voting Shares, substantially in the form as annexed hereto as Exhibit H.
De-Registration Form
means the form to be completed by a Shareholder requesting to de-register some or all of his/her/its Initial Electing Ordinary Shares, Electing Ordinary Shares or Qualifying Ordinary Shares from the Loyalty Register and to move such shares back to the Regular Settlement System, substantially in the form as annexed hereto as Exhibit F1 and Exhibit F2.
Electing Ordinary Shares
means Ordinary Shares, not being Qualifying Ordinary Shares, for which a Shareholder has issued a Request for registration in the Loyalty Register.
Election Form
means the form to be completed by a Shareholder requesting to register one or more Ordinary Shares in the Loyalty Register, substantially in the form as annexed hereto as Exhibit Cl and Exhibit C2, as amended from time to time.
Electing Shareholders
means the holder of one or more Electing Ordinary Shares.
Iberclear
means Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A. Unipersonal, being the Spanish Central Securities Depositary.
Initial Allocation Procedure
means the formal procedure pursuant to which shareholders of Mediaset and Mediaset España can elect for registration of Ordinary Shares in the Loyalty Register following completion of the Merger as described in more detail in the relevant merger documentation.
Initial Deed of Allocation
means a private deed of allocation
(onderhandse akte van toekenning)
of Special Voting Shares A, substantially in the form as annexed hereto as Exhibit B.
Initial Election Form
means the form completed by a shareholder of Mediaset or Mediaset España (as the case may be) requesting to register one or more Ordinary Shares to be acquired by such person pursuant to the Merger in the Loyalty Register and applying for allocation of a corresponding number of Special Voting Shares A, substantially in the form as annexed hereto as Exhibit Al and Exhibit A2, as amended from time to time.
Initial Electing Shareholders
has the meaning ascribed to that term in clause 8.1.
Initial Electing Ordinary Shares
has the meaning ascribed to that term in clause 8.2.
Intermediary
means the financial institution at which a shareholder of the Company or Mediaset or Mediaset España (as the case may be) has opened a securities account where the relevant shares are registered.
Loyalty Register
means that part of the Company’s shareholder register reserved for the registration of Special Voting Shares, Qualifying Ordinary Shares, Electing Ordinary Shares and Initial Electing Ordinary Shares.
Loyalty Transferee
means (i) with respect to any Shareholder that is not a natural person, (A) any Affiliate of such Shareholder (including any successor of such Shareholder) that is directly or indirectly beneficially owned in substantially the same manner (including percentage) as the beneficial ownership of the transferring Shareholder or (B) the beneficiary company as part of a proportional demerger of such Shareholder, and (ii) with respect to any Shareholder that is a natural person, (A) in case of transfers
inter vivos,
any transferee of Ordinary Shares following succession or the division of community property between spouses or
inter vivos
donation to a spouse or relative up to and including the fourth degree and (B) in case of transfers
mortis causa,
inheritance by a spouse or by a relative up to and including the fourth degree. For the avoidance of doubt any transfer to a Loyalty Transferee cannot qualify as a Change of Control.
Mediaset
means Mediaset S.p.A.
Mediaset EGM
means the extraordinary general meeting of shareholders of Mediaset at which the Merger is put to a vote.
Mediaset España
means Mediaset España Comunicación S.A.
Mediaset España GSM
means the general meeting of shareholders of Mediaset España at which the Merger is put to a vote.
Merger
means the cross-border statutory merger pursuant to which Mediaset and Mediaset España (as disappearing entities) merge into the Company (as acquiring entity).
Merger Effective Date
means the date on which the Merger is legally effected.
Monte Titoli
means Monte Titoli S.p.A., being the Italian Central Securities Depositary.
Ordinary Shares
means ordinary shares in the share capital of the Company (including Initial Electing Ordinary Shares, Electing Ordinary Shares and Qualifying Ordinary Shares).
Power of Attorney
means a power of attorney pursuant to which a Shareholder irrevocably authorizes and instructs the Agent to represent such Shareholder and act on his/her/its behalf in connection with any allocation, acquisition, conversion, sale, repurchase and transfer of any Special Voting Shares in accordance with and pursuant to these SVS Terms.
Qualified Shareholding Obligation
means the obligation of each Shareholder as referred to in Article 42.1 of the Articles.
Qualifying Ordinary Shares
means Qualifying Ordinary Shares A and/or Qualifying Ordinary Shares B and/or Qualifying Ordinary Shares C.
Qualifying Ordinary Shares A
means (i) Initial Electing Ordinary Shares that have been registered in the Loyalty Register in the name of one and the same Shareholder or its Loyalty Transferee from the Merger Effective Date up to the thirtieth calendar day after the Merger Effective Date and as such give entitlement to Special Voting Shares A and (ii) Electing Ordinary Shares that have for an uninterrupted period of at least three years been registered in
the Loyalty Register in the name of one and the same Shareholder or its Loyalty Transferee and as such give entitlement to Special Voting Shares A.
Qualifying Ordinary Shares B
means Qualifying Ordinary Shares A that have for an uninterrupted period of at least two years been registered in the Loyalty Register in the name of one and the same Shareholder or its Loyalty Transferee and as such give entitlement to Special Voting Shares B.
Qualifying Ordinary Shares C
means Qualifying Ordinary Shares B that have for an uninterrupted period of at least three years been registered in the Loyalty Register in the name of one and the same Shareholder or its Loyalty Transferee and as such give entitlement to Special Voting Shares C.
Qualifying Shareholder
means the holder of one or more Qualifying Ordinary Shares.
Regular Settlement System
means the process managed by Monte Titoli, Iberclear and their participants in which regular shares can be freely moved from an account to another account in name of a different person, free of payment or versus payment.
Shareholder
means a holder of one or more Ordinary Shares.
Special Capital Reserve
means a separate reserve maintained in the books of the Company to pay-up Special Voting Shares.
Special Voting Shares
means special voting shares in the capital of the Company. Unless the contrary is apparent, this includes Special Voting Shares A, Special Voting Shares B and Special Voting Shares C.
Special Voting Shares A
means the special voting shares A in the share capital of the Company.
Special Voting Shares B
means the special voting shares B in the share capital of the Company.
Special Voting Shares C
means the special voting shares C in the share capital of the Company.
Transferred Group
shall mean the relevant Shareholder together with its Affiliates, if any, over which control was transferred as part of the same change of control transaction within the meaning of this definition of Change of Control.
1.2
In these SVS Terms, unless the context requires otherwise:
(a)
references to a
person
shall be construed so as to include any individual, firm, legal entity (wherever formed or incorporated), governmental entity, joint venture, association or partnership;
(b)
references to
transfer
shall mean any kind of transaction whereby the ownership of a Initial Electing Ordinary Share, and/or of an Electing Ordinary Share and/or of a Qualifying Ordinary Share is changed, which will include (without limitation) a change of ownership by way of a sale, exchange, donation, contribution, merger or demerger.
(c)
the headings are inserted for convenience only and shall not affect the construction of this agreement;
(d)
the singular shall include the plural and vice versa;
(e)
references to one gender include all genders; and
(f)
references to times of the day are to local time in the Netherlands.
EXHIBIT A1
INITIAL ELECTION FORM FOR MEDIASET SHAREHOLDERS
INITIAL ELECTION FORM FOR MEDIASET SHAREHOLDERS
FOR THE ALLOCATION OF SPECIAL VOTING SHARES A OF MFE — MEDIAFOREUROPE N.V.
AFTER THE MERGER OF MEDIASET S.P.A. AND MEDIASET ESPAÑA COMUNICACIÓN, S.A. WITH AND INTO MEDIASET INVESTMENT N.V.
To:
Mediaset S.p.A. c/o Computershare S.p.A.
, through the
depositary intermediary
, by certified e-mail to mediaset@pecserviziotitoli.it.
Disclaimer
The holder of Mediaset S.p.A. (
Mediaset
) shares (the
Initial Electing Shareholder
) must fill in and sign this Initial Election Form (the
Form
) pursuant to the instructions here below in order to receive the
Special Voting Shares A
issued as a result of the completion of the merger of Mediaset and Mediaset España Comunicaciòn, S.A. (
Mediaset España
) with and into Mediaset Investment N.V. (the
Merger
), company which will — upon effectiveness of the Merger — be renamed MFE — MEDIAFOREUROPE N.V. (the
Company
).
A Special Voting Share A can only be validly acquired after thirty calendar days following the effectiveness of the Merger (the
Initial Allocation Date A
) by a holder of an ordinary share of the Company, subject to such ordinary share being an
Initial Electing Ordinary Share
in accordance with, and subject to the satisfaction of the conditions set out in, the “
Terms and Conditions for Special Voting Shares
” and the “
Terms and Conditions for the initial allocation of special voting shares A
” available on the corporate website of Mediaset. A holder of Initial Electing Ordinary Shares can only validly acquire 1 Special Voting Share A for each Initial Electing Ordinary Share held.
This Form shall be read jointly with the “Terms and Conditions for Special Voting Shares” and the “Terms and Conditions for the initial allocation of special voting shares A”.
This Form, duly filled in and signed by the Initial Electing Shareholder, must be sent by certified e-mail to the address indicated above and must be received by Mediaset
on or before 26 August 2019
(the
Final Term
) through the relevant depositary intermediary with its confirmation that such Initial Electing Shareholder holds title to the Mediaset shares included in this Form. Any Form received after the Final Term shall not be valid for the purpose of issuing and assigning Special Voting Shares A upon the Initial Allocation Date A.
In this Form, the defined English words shall have the same meaning ascribed to them in the “Terms and Conditions for Special Voting Shares”, unless otherwise defined herein.
1.
Data of the Initial Electing Shareholder
|
Name and surname or Corporate name
|
|
|
|
Tax Code:
|
Date of birth / /
|
Place of birth
|
|
|
|
|
|
Address or registered seat
|
|
|
|
Telephone number
|
E-mail address
|
|
|
|
|
(if the signing party acts on behalf of the Initial Electing Shareholder, please fill in the following table including data relating to the signing party)
|
|
|
|
Name and surname
|
In the quality of
|
|
|
|
|
Tax Code:
|
Date of birth / /
|
Place of birth
|
|
|
|
Telephone number
|
E-mail address
|
|
|
|
|
|
|
2.
Number of Mediaset shares held in relation to which Initial Allocation of Special Voting Shares A is requested
|
No. of Shares
|
o
ISIN IT0001063210
|
o
ISIN ITXXV0001089
|
|
|
|
|
|
Depositary Intermediary
|
|
MT account
|
|
|
|
|
|
3.
Acknowledgments, agreements and authorizations
The
Initial Electing Shareholder
, through the transmission of this Form, duly completed, irrevocably and unconditionally:
a)
acknowledges
that he/she/it shall continuously own the Mediaset shares (as well as the corresponding Initial Electing Ordinary Shares, upon effectiveness of the Merger) in relation to which he/she/it elects to receive Special Voting Shares A starting from the date hereof up to the Initial Allocation Date A and that therefore — without prejudice to the permitted transfers as set out in the “Terms and Conditions for the initial allocation of special voting shares A” — he/she/it shall lose the right to receive Special Voting Shares A in case of transfer of such Mediaset shares (or the corresponding Initial Electing Ordinary Shares) before the Initial Allocation Date A;
b)
acknowledges
that he/she/it shall forfeit the right to receive the Special Voting Shares A upon the Initial Allocation Date A if Mediaset does not
receive this Form duly filled in and signed by the Final Term, but without prejudice to the right to request the Special Voting Shares A after the effectiveness of the Merger in accordance with the “Terms and Conditions for Special Voting Shares”;
c)
accepts
and agrees to be bound by the “Terms and Conditions for Special Voting Shares” and by the “Terms and Conditions for the initial allocation of special voting shares A”, available on the corporate website of Mediaset;
d)
authorizes
and irrevocably instructs
Computershare S.p.A.
to represent the Initial Electing Shareholder and act on his/her/its behalf in connection with (i) the registration in the Loyalty Register in his/her/its name of the Ordinary Shares in accordance with and pursuant to the “Terms and Conditions for Special Voting Shares”; (ii) any issuance, allocation, acquisition, transfer, conversion and/or repurchase of any Special Voting Share A in accordance with and pursuant to the “Terms and Conditions for Special Voting Shares”; (iii) any retransfer to the Company and/or repurchase of any Special Voting Share A, in accordance with and pursuant to the “Terms and Conditions for Special Voting Shares”.
4.
Governing law and disputes
This Form, with the exception of the power of attorney required under paragraph 3), letter d) above, will be governed by Italian law. The court of Milan will be the competent court in connection with any dispute might arise in relation with this Form.
Nevertheless, the Initial Electing Shareholder acknowledges and accepts that, in the light of the fact that the Company will be organized under Dutch law, the power of attorney required under paragraph (3), letter (d) above, the “Terms and Conditions for Special Voting Shares”, as well as the allocation procedure of Special Voting Shares will be governed by Dutch law and the court of Amsterdam will be competent for any dispute in connection therewith in accordance with the “Terms and Conditions for the Special Voting Shares”.
|
The Initial Electing Shareholder
|
(signature)
|
|
(if the signing party signs this Form on behalf of the Initial Electing Shareholder, reference shall be made to the table under point No. 1 above)
5.
The depositary intermediary
a)
confirms
the number of Mediaset shares owned by the Initial Electing Shareholder at the date of this Form;
b)
undertakes
to cause this Form to be received by Mediaset on behalf of the Initial Electing Shareholder within and no later than the Final Term, advanced by certified e-mail to Computershare;
c)
provides
to change the regular ISIN of Mediaset shares (or the temporary ISIN code assigned to Mediaset shares upon request for registration for the multiple voting mechanism provided for by the articles of association of Mediaset, as the case may be) in the Special Code XXMTC0000265 reporting to Computershare every subsequent transfer of such shares.
Date
|
The Intermediary
|
(Stamp and signature)
|
|
|
EXHIBIT A2
INITIAL ELECTION FORM FOR MEDIASET ESPAÑA SHAREHOLDERS
INITIAL ELECTION FORM FOR MEDIASET ESPAÑA SHAREHOLDERS
FOR THE ALLOCATION OF SPECIAL VOTING SHARES A OF MFE — MEDIAFOREUROPE N.V.
AFTER THE MERGER OF MEDIASET S.P.A. AND MEDIASET ESPAÑA COMUNICACIÓN, S.A. WITH AND INTO MEDIASET INVESTMENT N.V.
To:
Mediaset España Comunicaciõn S.A. c/o Computershare Investor Service plc, Sucursal en España,
through the
depositary intermediary,
by e-mail to telecinco@computershare.es.
Disclaimer
The holder of Mediaset España Comunicaciõn S.A.
(Mediaset España)
shares (the
Initial Electing Shareholder)
must fill in and sign this Initial Election Form (the
Form
)
pursuant to the instructions here below in order to receive the
Special Voting Shares A
issued as a result of the completion of the merger of Mediaset S.p.A.
(Mediaset)
and Mediaset España with and into Mediaset Investment N.V. (the
Merger
),
company which will — upon effectiveness of the Merger — be renamed MFE — MEDIAFOREUROPE N.V. (the
Company
).
A Special Voting Share A can only be validly acquired after thirty calendar days following the effectiveness of the Merger (the
Initial Allocation Date A)
by a holder of an ordinary share of the Company, subject to such ordinary share being an
Initial Electing Ordinary Share
in accordance with, and subject to the satisfaction of, the conditions set out in the
“Terms and Conditions for Special Voting Shares”
and the
“Terms and Conditions for the initial allocation of special voting shares A”
available on the corporate website of Mediaset España. A holder of Initial Electing Ordinary Shares can only validly acquire 1 Special Voting Share A for each Initial Electing Ordinary Share held.
This Form shall be read jointly with the “Terms and Conditions for Special Voting Shares” and the “Terms and Conditions for the initial allocation of special voting shares A”.
This Form, duly filled in and signed by the Initial Electing Shareholder, must be sent by e-mail to the address indicated above and must be received by or on behalf of Mediaset España
on or before 26 August 2019
(the
Final Term
)
through the relevant depositary intermediary with its confirmation that such Initial Electing Shareholder holds title to the Mediaset España shares included in this Form. Any Initial Election Form received after the Final Term shall not be valid for the purpose of issuing and assigning Special Voting Shares A upon the Initial Allocation Date A.
In this Form, the defined English words shall have the same meaning ascribed to them in the “Terms and Conditions for Special Voting Shares”, unless otherwise defined herein.
1.
Data of the Initial Electing Shareholder
|
Name and surname or Corporate name
|
|
|
|
Tax Code:
|
Date of birth / /
|
Place of birth
|
|
|
|
|
|
Address or registered seat
|
|
|
|
Telephone number
|
E-mail address
|
|
|
|
|
(if the signing party acts on behalf of the Initial Electing Shareholder, please fill in the following table including data relating to the signing party)
|
|
|
|
Name and surname
|
In the quality of
|
|
|
|
|
Tax Code:
|
Date of birth / /
|
Place of birth
|
|
|
|
Telephone number
|
E-mail address
|
|
|
|
|
|
|
2.
Number of Mediaset España shares held in relation to which Initial Allocation of Special Voting Shares A is requested
|
No. of Shares
|
Security Account no.
|
|
|
|
|
|
|
Depositary Intermediary
|
|
|
|
|
|
|
|
3.
Acknowledgments, agreements and authorizations
The
Initial Electing Shareholder,
through the transmission of this Form, duly completed, irrevocably and unconditionally:
a)
acknowledges
that he/she/it shall continuously own the Mediaset España shares (as well as the corresponding Initial Electing Ordinary Shares, upon effectiveness of the Merger) in relation to which he/she/it elects to receive Special Voting Shares A starting from the date hereof up to the Initial Allocation Date A and that therefore he/she/it shall lose the right to receive Special Voting Shares A in case of transfer of
Mediaset España shares (or the corresponding Initial Electing Ordinary Shares) before the Initial Allocation Date A;
b)
acknowledges
that he/she/it shall forfeit the right to receive the Special Voting Shares A upon the Initial Allocation Date A if Mediaset España does not receive this Form duly filled in and signed by the Final Term, but without prejudice to the right to request the Special Voting Shares A after the effectiveness of the Merger in accordance with the “Terms and Conditions for Special Voting Shares”;
c)
accepts
and agrees to be bound by the “Terms and Conditions for Special Voting Shares” and by the “Terms and Conditions for the initial allocation of special voting shares A”, available on the corporate website of Mediaset España;
d)
authorizes
and irrevocably instructs Computershare Investor Service plc, Sucursal en España to represent the Initial Electing Shareholder and act on his/her/its behalf in connection with (i) the registration in the Loyalty Register in his/her/its name of the Ordinary Shares in accordance with and pursuant to the “Terms and Conditions for Special Voting Shares”; (ii) any issuance, allocation, acquisition, transfer, conversion and/or repurchase of any Special Voting Share A in accordance with and pursuant to the “Terms and Conditions for Special Voting Shares”; (iii) any retransfer to the Company and/or repurchase of any Special Voting Share A, in accordance with and pursuant to the “Terms and Conditions for Special Voting Shares”;
e)
accepts
that the Mediaset España shares, in relation to which the Initial Electing Shareholder requests the allocation of Special Voting Shares A, will be blocked by the depositary intermediary;
f)
Personal data.
Personal data provided by the Initial Electing Shareholder in the Form or generated as a consequence of its acquisition of Special Voting Shares A shall be initially processed by Mediaset España, and upon completion of the Merger, shall be processed by the Company on the basis of and for the purposes of (i) managing the corporate relationship with the Initial Electing Shareholder, (ii) complying with the “Terms and Conditions for Special Voting Shares” and (iii) complying with applicable laws. The data shall be retained by the Company while the Initial Electing Shareholder remains as a shareholder of the Company and, thereafter, while legal liabilities and duties exist. The data may be shared with agents and other intermediaries. Access, erasure and other rights can be exercised by contacting at privacidad@conecta5.es. Data protection authorities may be contacted for queries or complaints.
4.
Governing law and disputes
This Form, with the exception of the power of attorney required under paragraph (3), letter (d) above, will be governed by Spanish law. The courts of the city of Madrid will be the competent courts in connection with any dispute that might arise in relation with this Form.
Nevertheless, the Initial Electing Shareholder acknowledges and accepts that, in the light of the fact that the Company will be organized under Dutch law, the power of attorney required under paragraph (3), letter (d) above, the “Terms and Conditions for Special Voting Shares”, as well as the allocation of Special Voting Shares will be governed by Dutch law and the court of Amsterdam will be competent for any dispute in connection therewith in accordance with the “Terms and Conditions for the Special Voting Shares”.
|
The Initial Electing Shareholder
|
(signature)
|
|
(if the signing party signs this Form on behalf of the Initial Electing Shareholder, reference shall be made to the table under point No. 1 above)
5.
The depositary intermediary
a)
confirms
the number of Mediaset España shares owned by the Initial Electing Shareholder at the date of this Form;
b)
undertakes
to cause this Form to be received by or on behalf of Mediaset España on behalf of the Initial Electing Shareholder within and no later than the Final Term, advanced by e-mail to Computershare Investor Service plc, Sucursal en España;
c)
agrees
to block the above Mediaset España shares and
undertakes
to communicate to Computershare Investor Service plc, Sucursal en España any movement of such shares.
Date
|
The Intermediary
|
(Stamp and signature)
|
|
|
EXHIBIT B
INITIAL DEED OF ALLOCATION
DATE:
INITIAL PRIVATE DEED OF ALLOCATION
relating to the allocation of special voting shares A in the capital
of MFE — MEDIAFOREUROPE N.V.
DATE:
PARTIES
(1)
MFE — MEDIAFOREUROPE N.V.,
a public company
(naamloze vennootschap)
under the laws of the Netherlands, having its official seat in Amsterdam (the Netherlands), registered with the Dutch Commercial Register under number 70347379 (the
Company)
;
and
(2)
[
name entity
]
,
a company under the laws of [
corporate jurisdiction
]
,
having its registered office at [
·
], registered in the [
name of commercial register
]
under number [
·
] (the
Shareholder
).
OR
[
name individual
]
,
born in [
·
] on [
·
], residing at [
·
] (the
Shareholder
).
The parties to this Agreement are collectively referred to as the
Parties
and individually as a
Party.
RECITALS:
(A)
The Company has a special voting scheme pursuant to which shareholders can be rewarded with multiple voting rights for long-term ownership of Ordinary Shares. The terms and conditions with respect to special voting shares are accessible via the Company’s website (www.mfemediaforeurope.com) (the
SVS Terms
).
Capitalized terms used in this deed but not defined in this deed will have the meaning as set out in the SVS Terms.
(B)
The Shareholder is the owner of [
·
] [(
·
)] Initial Electing Ordinary Shares that have been registered in the Loyalty Register in accordance with the procedure as set out in clause 8 of the SVS Terms. Pursuant to clause 8.2 of the SVS Terms aforesaid Initial Electing Ordinary Shares have become Qualifying Ordinary Shares A and the holder thereof is entitled to acquire [
·
] [(•)] Special Voting Shares A.
(C)
In view of the foregoing, the Company wishes to issue [
·
] [(
·
)] Special Voting Shares A, with a nominal value of two eurocent (EUR 0.02) each, numbered SVSA-[
·
] through SVSA
-[
·
],
to the Shareholder (the
New
SVS A),
such in accordance with clause 8.4 of the SVS Terms.
(D)
The issuance of the New SVS A has been approved by the Board on [
·
] (the
Board Resolution
).
(E)
The Company and the Shareholder shall hereby effect the issuance and the acceptance of the New SVS A on the terms stated below.
THE PARTIES AGREE
as follows:
1.
ISSUANCE
1.1
The Company hereby issues the New SVS A to the Shareholder and the Shareholder hereby accepts the same from the Company, all on the terms set out in the SVS Terms, the Board Resolution and in this deed.
1.2
The New SVS A shall be registered and no share certificates shall be issued for the New SVS A.
1.3
The Company shall register the issuance of the New SVS A in its register of shareholders.
2.
ISSUE PRICE
The New SVS A are issued at par, and therefore at an issue price of two eurocent (EUR 0.02) per share, amounting to [
·
] euro (EUR [
·
]) in the aggregate and are paid up in full at the expense of the Special Capital Reserve.
3.
LEGAL RELATIONSHIP
The legal relationship between the Company and the Shareholder will be governed by the SVS Terms, the Articles and Dutch law.
The Shareholder accepts the SVS Terms and the Articles as they now read or as they shall read at any time in the future.
4.
GENERAL
4.1
Dissolution
(ontbinding)
.
The Parties waive the right to dissolve or to demand dissolution of this Agreement.
4.2
Counterparts
. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement and any Party may enter into this Agreement by executing a counterpart.
4.3
Governing Law
. This Agreement is governed by and shall be construed in accordance with Dutch law.
SIGNATORIES
|
SIGNED by
|
)
|
|
for and on behalf of:
|
)
|
|
MFE — MEDIAFOREUROPE N.V.
|
)
|
|
|
|
|
SIGNED by
|
)
|
|
for and on behalf of:
|
)
|
|
[
·
]
|
)
|
EXHIBIT C1
ELECTION FORM (MONTE TITOLI)
ELECTION FORM (MONTE TITOLI SYTEM)
FOR THE REGISTRATION OF ORDINARY SHARES OF MFE — MEDIAFOREUROPE N.V. IN THE LOYALTY REGISTER
To:
Computershare S.p.A
, as Agent for
MFE — MEDIAFOREUROPE N.V.
through the
depositary intermediary
by certified e-mail to mediaforeurope@pecserviziotitoli.it.
Disclaimer
This Election Form (the
Form
) shall be completed and signed by the
Electing Shareholder
, in accordance with the instructions contained herein, to elect to receive special voting shares A (the
Special Voting Shares A
) in the share capital of MFE — MEDIAFOREUROPE N.V. (the
Company
) and shall be sent by certified e-mail to the address indicated above, through the relevant depository intermediary, with its confirmation that the Electing Shareholder holds title to the Ordinary Shares included in this Form.
This Form should be read in conjunction with the “
Terms and Conditions for Special Voting Shares
”, available on the corporate website of the Company (www.mfemediaforeurope.com). Defined terms in this Form will have the meaning ascribed to them in the “Terms and Conditions for Special Voting Shares”, unless otherwise defined herein. By submitting this Form, duly completed and signed, to the Agent, you — as Electing Shareholder — are hereby electing to obtain Special Voting Shares A and in this respect the Ordinary Shares for which you elect registration (the
Electing Ordinary Shares
) will be registered in the Loyalty Register of the Company.
1.
Data of the Electing Shareholder
|
Name and surname or Corporate name
|
|
|
|
Tax Code:
|
Date of birth / /
|
Place of birth
|
|
|
|
|
|
Address or registered seat
|
|
|
|
Telephone number
|
E-mail address
|
|
|
|
|
(if the signing party acts on behalf of the Electing Shareholder, please fill in the following table including data relating to the signing party)
|
|
|
|
Name and surname
|
In the quality of
|
|
|
|
|
Tax Code:
|
Date of birth / /
|
Place of birth
|
|
|
|
Telephone number
|
E-mail address
|
|
|
|
|
|
|
2.
Number of Ordinary Shares in relation to which the registration in the Loyalty Register is requested in order to receive Special Voting Shares A
|
No. of Shares
|
Security Account no.
|
|
|
|
|
|
|
Depositary Intermediary
|
|
MT Account
|
|
|
|
|
|
3.
Declarations and power of attorney
The
Electing Shareholder
, through the transmission of this Form, duly completed, irrevocably and unconditionally:
a)
accepts
and agrees to be bound by the “Terms and Conditions for Special Voting Shares”, available on the corporate website of the Company (www.mfemediaforeurope.com);
b)
authorizes
and irrevocably instructs
Computershare S.p.A
., as Agent — who also acts on behalf of the Company — to represent the Electing Shareholder and act on his/her/its behalf in connection with the registration, in the name of the Electing Shareholder, of the Ordinary Shares in the Loyalty Register, as well as with any issuance,
allocation, acquisition, transfer, conversion and/or repurchase of any Special Voting Share A, in accordance with and pursuant to the “Terms and Conditions for Special Voting Shares”;
c)
accepts
that the Special Voting Shares A will be uncertificated and registered in the Loyalty Register of the Company.
4.
Governing law and disputes
This Form is governed by and construed in accordance with the laws of the Netherlands. Any dispute in connection with this Form will be brought before the courts of Amsterdam (the Netherlands) as provided by the “Terms and Conditions for Special Voting Shares”.
|
The Electing Shareholder
|
(signature)
|
|
(if the signing party signs this Form on behalf of the Electing Shareholder, reference shall be made to the table under point No. 1 above)
5.
The depositary intermediary
a)
confirms
the number of Ordinary Shares owned by the Electing Shareholder at the date of this Form;
b)
provides
to change the regular ISIN of Ordinary Shares in the Special Code (
·
) reporting to Computershare S.p.A. every subsequent transfer of such shares.
Date
|
The Intermediary
|
(Stamp and signature)
|
|
|
EXHIBIT C2
ELECTION FORM (IBERCLEAR)
ELECTION FORM (IBERCLEAR SYTEM)
FOR THE REGISTRATION OF ORDINARY SHARES OF MFE — MEDIAFOREUROPE N.V. IN THE LOYALTY REGISTER
To:
Computershare Investor Service plc, Sucursal en España
, as Agent for
MFE — MEDIAFOREUROPE N.V.
through the
depositary intermediary
by e-mail to telecinco@computershare.es.
Disclaimer
This
Election Form
shall be completed and signed, in accordance with the instructions contained herein, to elect to receive special voting shares A (the
Special Voting Shares A
) in the share capital of MFE - MEDIAFOREUROPE N.V. (the
Company
) and shall be sent by e-mail to the address indicated above, through the relevant depository intermediary, with its confirmation that the
Electing Shareholder
holds title to the Ordinary Shares included in this Election Form.
This Election Form should be read in conjunction with the “
Terms and Conditions for Special Voting Shares
”, available on the corporate website of the Company (www.mfemediaforeurope.com). Defined terms in this Election Form will have the meaning ascribed to them in the “Terms and Conditions for Special Voting Shares”, unless otherwise defined herein.
By submitting this Election Form, duly completed and signed, to the Agent, you — as Electing Shareholder — are hereby electing to obtain Special Voting Shares A and in this respect the Ordinary Shares for which you elect registration (the
Electing Ordinary Shares
) will be registered in the Loyalty Register of the Company.
1.
Data of the Electing Shareholder
|
Name and surname or Corporate name
|
|
|
|
Date of birth / /
|
Place of birth
|
Tax Code:
|
|
|
|
|
|
Address or registered seat
|
|
|
|
Tel. n.
|
E-mail address
|
|
|
|
|
(if the signing party acts on behalf of the Electing Shareholder, please fill in the following table including data relating to the signing party)
|
|
|
|
Name and surname
|
In the quality of
|
|
|
|
|
Date of birth / /
|
Place of birth
|
Tax Code:
|
|
|
|
Tel. n.
|
E-mail address
|
|
|
|
|
|
|
2.
Number of Ordinary Shares in relation to which the registration in the Loyalty Register is requested in order to receive Special Voting Shares A
|
No. of Shares
|
|
|
|
|
|
|
|
Depositary Intermediary
|
|
|
|
|
|
|
|
Security Account no. (with Iberclear participant)
|
|
|
|
|
|
|
3.
Declaration and Power of Attorney
The
Electing Shareholder
, through the transmission of this Election Form, duly completed, irrevocably and unconditionally:
a)
accepts
and agrees to be bound by the “Terms and Conditions for Special Voting Shares”, available on the corporate website of the Company (www.mfemediaforeurope.com);
b)
authorizes
and irrevocably instructs Computershare Investor Service plc, Sucursal en España, as Agent — who also acts on behalf of the Company — to represent the Electing Shareholder and act on his/her/its behalf in connection with the registration, in the name of the Electing Shareholder, of the Ordinary Shares in the Loyalty Register, as well as with any issuance, allocation, acquisition, transfer, conversion and/or repurchase of any Special Voting Share A, in accordance with and pursuant to the “Terms and Conditions for Special Voting Shares”;
c)
accepts
that the Special Voting Shares will be uncertificated and registered in the Loyalty Register of the Company.
4.
Governing law and disputes
This Election Form is governed by and construed in accordance with the laws of the Netherlands. Any dispute in connection with this Election Form will be brought before the courts of Amsterdam (the Netherlands) as provided by the “Terms and Conditions for Special Voting Shares”.
|
The Electing Shareholder
|
(signature)
|
|
(if the signing party signs this Form on behalf of the Electing Shareholder, reference shall be made to the table under point No. 1 above)
5.
Depositary intermediary
The
Depositary Intermediary
a)
confirms
the number of Ordinary Shares owned by the Electing Shareholder at the date of this Election Form;
b)
provides
the transfer of the above Ordinary Shares to the Company in its Monte Titoli account n. in favour of the Electing Shareholder.
Date
|
The Intermediary
|
(Stamp and signature)
|
|
|
EXHIBIT D
DEED OF ALLOCATION
DATE:
PRIVATE DEED OF ALLOCATION
relating to the allocation of special voting shares A in the capital
of MFE — MEDIAFOREUROPE N.V.
DATE:
PARTIES
(1)
MFE — MEDIAFOREUROPE N.V.,
a public company
(naamloze vennootschap)
under the laws of the Netherlands, having its official seat in Amsterdam (the Netherlands), registered with the Dutch Commercial Register under number 70347379 (the
Company
);
and
(2)
[name entity],
a company under the laws of
[corporate jurisdiction],
having its registered office at [
·
], registered in the
[name of commercial register]
under number [
·
] (the
Shareholder
).
OR
[name individual],
born in [
·
] on [
·
], residing at [
·
] (the
Shareholder
).
The parties to this Agreement are collectively referred to as the
Parties
and individually as a
Party.
RECITALS:
(A)
The Company has a special voting scheme pursuant to which shareholders can be rewarded with multiple voting rights for long-term ownership of Ordinary Shares. The terms and conditions with respect to special voting shares are accessible via the Company’s website (www.mfemediaforeurope.com) (the
SVS Terms
).
Capitalized terms used in this deed but not defined in this deed will have the meaning as set out in the SVS Terms.
(B)
The Shareholder is the owner of [
·
] [(
·
)] Electing Ordinary Shares that have been registered in the Loyalty Register for an uninterrupted period of three (3) years. Pursuant to clause 5 of the SVS Terms aforesaid Electing Ordinary Shares have become Qualifying Ordinary Shares A and the holder thereof is entitled to acquire [
·
] [(
·
)] Special Voting Shares A.
(C)
In view of the foregoing, the Company wishes to issue [
·
] [(
·
)] Special Voting Shares A, with a nominal value of two eurocent (EUR 0.02) each, numbered SVSA-[
·
] through SVSA
-[
·
],
to the Shareholder (the
New
SVS A),
such in accordance with clause 5.3 of the SVS Terms.
(D)
The issuance of the New SVS A has been approved by the Board on [
·
] (the
Board Resolution
).
(E)
The Company and the Shareholder shall hereby effect the issuance and the acceptance of the New SVS A on the terms stated below.
THE PARTIES AGREE
as follows:
1.
ISSUANCE
1.1
The Company hereby issues the New SVS A to the Shareholder and the Shareholder hereby accepts the same from the Company, all on the terms set out in the SVS Terms, the Board Resolution and in this deed.
1.2
The New SVS A shall be registered and no share certificates shall be issued for the New SVS A.
1.3
The Company shall register the issuance of the New SVS A in its register of shareholders.
2.
ISSUE PRICE
The New SVS A are issued at par, and therefore at an issue price of two eurocent (EUR 0.02) per share, amounting to [
·
] euro (EUR [
·
]) in the aggregate and are paid up in full at the expense of the Special Capital Reserve.
3.
LEGAL RELATIONSHIP
The legal relationship between the Company and the Shareholder will be governed by the SVS Terms, the Articles and Dutch law.
The Shareholder accepts the SVS Terms and the Articles as they now read or as they shall read at any time in the future.
4.
GENERAL
4.1
Dissolution
(ontbinding)
.
The Parties waive the right to dissolve or to demand dissolution of this Agreement.
4.2
Counterparts
. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement and any Party may enter into this Agreement by executing a counterpart.
4.3
Governing Law
. This Agreement is governed by and shall be construed in accordance with Dutch law.
SIGNATORIES
|
SIGNED by
|
)
|
|
for and on behalf of:
|
)
|
|
MFE — MEDIAFOREUROPE N.V.
|
)
|
|
|
|
|
SIGNED by
|
)
|
|
for and on behalf of:
|
)
|
|
[
·
]
|
)
|
EXHIBIT E1
CONVERSION STATEMENT
(CONVERSION OF SPECIAL VOTING SHARES A INTO SPECIAL VOTING
SHARES B)
CONVERSION STATEMENT
relating to the conversion of special voting shares A in the capital
of MFE — MEDIAFOREUROPE N.V.
Date: [
·
]
Introduction
MFE — MEDIAFOREUROPE N.V. (the
Company)
has a special voting scheme pursuant to which shareholders can be rewarded with multiple voting rights for long-term ownership of Ordinary Shares. The terms and conditions with respect to special voting shares are accessible via the Company’s website (www.mfemediaforeurope.com) (the
SVS Terms
).
Capitalized terms used in this statement but not defined in this conversion statement will have the meaning as set out in the SVS Terms.
[
·
] holds [
·
] Special Voting Shares A, with a nominal value of two eurocent (EUR 0.02) each (the
Existing SVS A
),
whereby the Ordinary Shares corresponding to the Existing SVS A have become Qualifying Ordinary Shares B as from [
·
], and thus giving entitlement to Special Voting Shares B, such in accordance with clause 6 of the SVS Terms.
Conversion
In view of the foregoing, the Company hereby issues this conversion statement pursuant to which the Existing SVS A are converted into an equal number of Special Voting Shares B, with a nominal value of four eurocent (EUR 0.04) each (the
New SVS
B
),
such in accordance with article 13.11 of the Company’s articles of association and clause 6.3 of the SVS Terms.
This conversion takes immediate effect. The New SVS B shall be registered and no share certificates shall be issued for the New SVS B. The Company shall register the issuance of the New SVS B in its register of shareholders.
The difference between the nominal value of the Existing SVS A and of the New SVS B, amounting to [
·
] euro (EUR [
·
]) in the aggregate, are paid in full at the expense of the Special Capital Reserve.
The issuance of the New SVS B has been approved by the Board on [
·
].
Signed in on
[
·
].
|
MFE — MEDIAFOREUROPE N.V.:
|
|
|
|
|
|
By :
|
|
|
|
Its :
|
[Agent]
|
|
EXHIBIT E2
CONVERSION STATEMENT
(CONVERSION OF SPECIAL VOTING SHARES B INTO SPECIAL VOTING
SHARES C)
CONVERSION STATEMENT
relating to the conversion of special voting shares B in the capital
of MFE — MEDIAFOREUROPE N.V.
Date: [
·
]
Introduction
MFE — MEDIAFOREUROPE N.V. (the
Company)
has a special voting scheme pursuant to which shareholders can be rewarded with multiple voting rights for long-term ownership of Ordinary Shares. The terms and conditions with respect to special voting shares are accessible via the Company’s website (www.mfemediaforeurope.com) (the
SVS Terms)
.
Capitalized terms used in this statement but not defined in this conversion statement will have the meaning as set out in the SVS Terms.
[
·
] holds [
·
] Special Voting Shares B, with a nominal value of four eurocent (EUR 0.04) each (the
Existing SVS B)
,
whereby the Ordinary Shares corresponding to the Existing SVS B have become Qualifying Ordinary Shares C as from [
·
], and thus giving entitlement to Special Voting Shares C, such in accordance with clause 7 of the SVS Terms.
Conversion
In view of the foregoing, the Company hereby issues this conversion statement pursuant to which the Existing SVS B are converted into an equal number of Special Voting Shares C, with a nominal value of nine eurocent (EUR 0.09) each (the
New SVS C)
,
such in accordance with article 13.11 of the Company’s articles of association and clause 7.3 of the SVS Terms.
This conversion takes immediate effect. The New SVS C shall be registered and no share certificates shall be issued for the New SVS C. The Company shall register the issuance of the New SVS C in its register of shareholders.
The difference between the nominal value of the Existing SVS B and of the New SVS C, amounting to [
·
] euro (EUR [
·
]) in the aggregate, are paid in full at the expense of the Special Capital Reserve.
The issuance of the New SVS C has been approved by the Board on [
·
].
|
MFE — MEDIAFOREUROPE N.V.:
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
Its:
|
[Agent]
|
|
EXHIBIT F1
DE-REGISTRATION FORM (MONTE TITOLI)
DE-REGISTRATION FORM (MONTE TITOLI SYSTEM)
FOR DE-REGISTRATION OF ORDINARY SHARES OF MFE — MEDIAFOREUROPE N.V.
FROM THE LOYALTY REGISTER
To: Computershare S.p.A., as Agent for MFE — MEDIAFOREUROPE N.V., to be advanced by certified email to mediaforeurope@pecserviziotitoli.it.
Disclaimer
This De-Registration Form
(Form)
shall be completed and signed in accordance with the instructions contained herein, to request de-registration of Ordinary Shares registered in the Loyalty Register of MFE — MEDIAFOREUROPE N.V. (the
Company).
This De-Registration Form should be read in conjunction with the “Terms and Conditions for Special Voting Shares”, which documentation is available on the corporate website of the Company (www.mfemediaforeurope.com). Defined terms in this Form will have the meaning as set out in the “Terms and Conditions for Special Voting Shares”, unless otherwise defined herein.
The shareholder must send this Form duly completed and signed to the Agent above through the intermediary and/or a Monte Titoli participant in order to get the Ordinary Shares on your account with such depositary Intermediary.
1.
Data of Shareholder registered in the Loyalty Register
|
Name and surname or Corporate name
|
|
|
|
Date of birth / /
|
Place of birth
|
Tax code
|
|
|
|
Address or registered seat
|
|
|
|
Tel.
|
E-mail
|
|
|
|
(if the signing party acts on behalf of the Registered Shareholder, please fill in the following table including data relating to the signing party)
|
|
|
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Name and surname
|
In the quality of
|
|
|
|
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Date of birth / /
|
Place of birth
|
Tax code
|
|
|
|
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Tel.
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E-mail
|
|
|
|
|
|
|
2.
Number of Ordinary Shares, starting from the last one registered, in relation to which the De-Registration from the Loyalty Register is requested
|
No. of Ordinary Shares
|
Average book value (for Italian residents tax purpose)
|
|
|
|
Depositary intermediary to whom crediting the shares
|
|
|
|
Shareholder Security Account
|
MT Account
|
|
|
|
|
3.
Acknowledgment, representations and undertakings
The
Shareholder,
through the submission of this Form duly completed, irrevocably and unconditionally instructs and authorizes the Agent, who acts also on behalf of the Company, to credit the above indicated intermediary with the Ordinary Shares to be de-registered and, pursuant to the “Terms and Conditions for Special Voting Shares”, acknowledges:
a)
as from the date hereof, the Ordinary Shares included in this Form will no longer be registered in the Loyalty Register;
b)
to be no longer entitled to hold or acquire the Special Voting Shares in respect of the Ordinary Shares included in this Form;
c)
that the Agent, who acts also on behalf of the Company, shall transfer to the Company, or a designated special purpose entity, such number of Special Voting Shares corresponding to the Ordinary Shares included in this De-Registration Form for no consideration; and
d)
as from the date hereof the Shareholder, to the extent he holds Special Voting Shares, he is considered to have waived the voting rights attached to these Special Voting Shares, effected by this Form.
4.
Governing law and disputes
This Form is governed by and construed in accordance with the laws of the Netherlands. Any dispute in connection with this Form will be brought before the courts of Amsterdam, the Netherlands, as provided by the “Terms and Conditions for Special Voting Shares”.
|
The Shareholder
|
(signature)
|
|
5.
Intermediary
The Depositary Intermediary and/or the Monte Titoli participant, if different from the depositary, undertakes to change the Special Code, attributed to the Ordinary Shares registered in the Loyalty Register, into the regular ISIN code.
|
Date
|
(Stamp and signature)
|
|
|
The Intermediary
|
|
|
Tel.
|
e-mail
|
|
The Monte Titoli Participant
|
(Stamp and signature)
|
|
|
|
|
|
|
EXHIBIT F2
DE-REGISTRATION FORM (IBERCLEAR)
DE-REGISTRATION FORM (IBERCLEAR SYSTEM)
FOR DE-REGISTRATION OF ORDINARY SHARES OF MFE —MEDIAFOREUROPE N.V.
FROM THE LOYALTY REGISTER
To: Computershare Investor Service plc, Sucursal en España, as Agent for MFE — MEDIAFOREUROPE N.V., to be advanced by e-mail to telecinco@computershare.es.
Disclaimer
This
De-Registration Form
shall be completed and signed in accordance with the instructions contained herein, to request de-registration of Ordinary Shares registered in the Loyalty Register of MFE — MEDIAFOREUROPE N.V. (the
Company).
This De-Registration Form should be read in conjunction with the “Terms and Conditions for Special Voting Shares”, which documentation is available on the corporate website of the Company (www.mfemediaforeurope.com). Defined terms in this De-Registration Form will have the meaning as set out in the “Terms and Conditions for Special Voting Shares”, unless otherwise defined herein.
You must send this De-Registration Form duly completed and signed to the Agent above through the Intermediary and/or an Iberclear participant in order to get the Ordinary Shares on your account with such depositary Intermediary.
1.
Data of Shareholder registered in the Loyalty Register
|
Name and surname or Corporate name
|
|
|
|
|
|
Date of birth / /
|
Place of birth
|
Tax code
|
|
|
|
|
Address or registered seat
|
|
|
|
|
|
Tel.
|
E-mail
|
|
|
|
(if the signing party acts on behalf of the Registered Shareholder, please fill in the following table including data relating to the signing party)
|
|
|
|
Name and surname
|
In the quality of
|
|
|
|
|
Date of birth / /
|
Place of birth
|
Tax code
|
|
|
|
|
Tel.
|
E-mail
|
|
|
|
|
|
|
|
|
|
|
2.
Number of Ordinary Shares, starting from the last one registered, in relation to which the De-Registration from the Loyalty Register is requested
No. of Ordinary Shares
Depositary intermediary to whom crediting the shares
Shareholder Security Account no. (with Iberclear participant)
3.
Acknowledgment, representations and undertakings
The Shareholder, through the submission of this De-Registration Form duly completed, irrevocably and unconditionally instructs and authorizes the Agent, who acts also on behalf of the Company, to credit the above indicated Intermediary with the Ordinary Shares to be de-registered and, pursuant the Terms and Conditions for Special Voting Shares, acknowledges:
a)
as from the date hereof, the Ordinary Shares included in this De-Registration Form will no longer be registered in the Loyalty Register;
b)
to be no longer entitled to hold or acquire the Special Voting Shares in respect of the Ordinary Shares included in this De-Registration Form;
c)
that the Agent, who acts also on behalf of the Company, shall transfer to the Company or a designated special purpose entity such number of Special Voting Shares corresponding to the Ordinary Shares included in this De-Registration Form for no consideration; and
d)
as from the date hereof the Shareholder, to the extent he holds Special Voting Shares, he is considered to have waived the voting rights attached to these Special Voting Shares, effected by this De-Registration Form.
4.
Governing law and disputes
This De-Registration Form is governed by and construed in accordance with the laws of the Netherlands. Any dispute in connection with this De-Registration Form will be brought before the courts of Amsterdam, the Netherlands as provided by Terms and Conditions for Special Voting Shares.
|
The Shareholder
|
(signature)
|
|
5.
Intermediary
The Depositary Intermediary and/or the Iberclear participant, if different from the depositary, accepts to receive on behalf of the Shareholder the above Ordinary Shares to be credited to his securities account above indicated
|
Date,
|
(Stamp and signature)
|
|
|
|
The Intermediary
|
|
|
|
Tel.
|
e
-
mail
|
|
|
|
|
|
|
|
The Iberclear Participant
|
(Stamp and signature)
|
|
|
EXHIBIT G
CHANGE OF CONTROL NOTIFICATION
CHANGE OF CONTROL NOTIFICATION
TO NOTIFY MFE — MEDIAFOREUROPE N.V. OF THE OCCURRENCE OF A
CHANGE OF CONTROL RELATING TO THE HOLDER OF ORDINARY
SHARES REGISTERED IN THE LOYALTY REGISTER
Please read, complete and sign this Change of Control Notification in accordance with the instructions contained herein.
This Change of Control Notification should be read in conjunction with the terms and conditions with respect to special voting shares (the
SVS Terms),
which are available on the corporate website (www.mfemediaforeurope.com) of MFE — MEDIAFOREUROPE N.V. (the
Company).
Capitalized terms used but not defined in this notification will have the same meaning as set out in the SVS Terms.
Please send the duly completed Change of Control Notification together with a duly completed De-Registration Form, which is available on the corporate website (www.mfemediaforeurope.com) of the Company, to Computershare S.p.A.
1.
DECLARATION OF CHANGE OF CONTROL
I hereby declare that a Change of Control has occurred in relation to the undersigned, as holder of Ordinary Shares registered in the Loyalty Register of the Company. This Change of Control Notification is accompanied by the attached duly completed De-Registration Form in relation to all Ordinary Shares as stated under Paragraph 4 of this Change of Control Notification.
2.
DATE AND CAUSE OF CHANGE OF CONTROL
|
Date on which the Change of Control occurred:
|
|
|
|
|
|
Cause of Change of Control:
|
|
3.
PERSONAL DETAILS OF HOLDER
|
Name(s) of Holder(s):
|
|
|
Address:
|
|
|
City:
|
Zip Code:
|
|
Country:
|
|
|
Capacity, if applicable (full title):
|
|
|
Phone Number:
|
|
|
E-mail address:
|
|
(This Change of Control Notification must be signed by the registered holder(s) exactly as such name(s) appear(s) in the Loyalty Register of the Company).
If the signature is placed by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the necessary information above, including full title.
4.
NUMBER OF ORDINARY SHARES REGISTERED IN THE LOYALTY REGISTER
Aggregate number of Ordinary Shares registered in the Loyalty Register of the Company in your name:
Number:
5.
GOVERNING LAW, DISPUTES
This Change of Control Notification is governed by and construed in accordance with the laws of the Netherlands. Any dispute in connection with this Change of Control Notification will be brought before the courts of Amsterdam, the Netherlands.
SIGNATURE
|
|
|
|
Shareholder’s signature
|
|
|
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|
|
|
Name of shareholder
|
|
|
|
|
|
|
Date
|
|
|
EXHIBIT H
DEED OF RETRANSFER
DATE:
PRIVATE DEED OF RETRANSFER
of special voting shares in the capital
of MFE — MEDIAFOREUROPE N.V.
DATE:
PARTIES
(1)
[
name entity
]
,
a company under the laws of [
corporate jurisdiction
]
,
having its registered office at [
·
], registered in the [
name of commercial register
]
under number [
·
] (the
Shareholder);
and
OR
[
name individual
]
,
born in [
·
] on [
·
], residing at [
·
] (the
Shareholder);
and
(2)
MFE — MEDIAFOREUROPE N.V.
a public company (
naamloze vennootschap
)
under the laws of the Netherlands, having its official seat in Amsterdam (the Netherlands), registered with the Dutch Commercial Register under number 70347379 (the
Company).(1)
The parties to this Agreement are collectively referred to as the
Parties
and individually as a
Party.
RECITALS:
(A)
The Company has a special voting scheme pursuant to which shareholders can be rewarded with multiple voting rights for their long-term ownership of shares in the capital of the Company. The terms and conditions with respect to special voting shares are accessible via the Company’s website (www.mfemediaforeurope.com) (the
SVS Terms).
Capitalized terms used in this deed but not defined in this deed will have the meaning as set out in the SVS Terms.
(B)
[The Shareholder is the owner of fully paid up [
·
] [(
·
)] Special Voting Shares A, with a nominal value of two eurocent (EUR 0.02) each, numbered
SVSA-[
·
]
through
SVSA-[
·
]
acquired on [
·
] by way of an issuance (the
Offered SVS).]
OR
[The Shareholder is the owner of fully paid up [
·
] [(
·
)] Special Voting Shares B, with a nominal value of four eurocent (EUR 0.04) each, numbered
SVSB-[
·
]
through
SVSB-[
·
]
acquired on [
·
] by way of a conversion (the
Offered SVS).]
OR
[The Shareholder is the owner of fully paid up [
·
] [(
·
)] Special Voting Shares C, with a nominal value of nine eurocent (EUR 0.09) each, numbered SVSC-[
·
] through SVSC-[
·
] acquired on [
·
] by way of a conversion (the
Offered SVS).]
(1) The Company may also designate a special purpose entity as referred to in Article 13.6 of the Company’s articles to acquire the Special Voting Shares. If this is the case, definition the “Company” to be changed into the “Special Purpose Entity” and where required the deed will be modified accordingly.
OR
[The Shareholder is the owner of (i) fully paid up [
·
] [(
·
)] Special Voting Shares A, with a nominal value of two eurocent (EUR 0.02) each, numbered SVSA-[
·
] through SVSA-[
·
] acquired on [
·
] by way of an issuance and (ii) fully paid up [
·
] [(
·
)] Special Voting Shares B, with a nominal value of four eurocent (EUR 0.04) each, numbered SVSB-[
·
] through SVSB-[
·
] acquired on [
·
] by way of a conversion (collectively the
Offered SVS
).]
OR
[The Shareholder is the owner of (i) fully paid up [
·
] [(
·
)] Special Voting Shares A, with a nominal value of two eurocent (EUR 0.02) each, numbered SVSA-[
·
] through SVSA-[
·
] acquired on [
·
] by way of an issuance and (ii) fully paid up [
·
] [(
·
)] Special Voting Shares C, with a nominal value of nine eurocent (EUR 0.09) each, numbered SVSC-[
·
] through SVSC-[
·
] acquired on [
·
] by way of a conversion (collectively the
Offered SVS
).]
OR
[The Shareholder is the owner of (i) fully paid up [
·
] [(
·
)] Special Voting Shares B, with a nominal value of four eurocent (EUR 0.04) each, numbered SVSB-[
·
] through SVSB-[
·
] acquired on [
·
] by way of a conversion and (ii) fully paid up [
·
] [(
·
)] Special Voting Shares C, with a nominal value of nine eurocent (EUR 0.09) each, numbered SVSC-[
·
] through SVSC-[
·
] acquired on [
·
] by way of a conversion (collectively the
Offered SVS
).]
OR
[The Shareholder is the owner of (i) fully paid up [
·
] [(
·
)] Special Voting Shares A, with a nominal value of two eurocent (EUR 0.02) each, numbered SVSA-[
·
] through SVSA-[
·
] acquired on [
·
] by way of an issuance, (ii) fully paid up [
·
] [(
·
)] Special Voting Shares B, with a nominal value of four eurocent (EUR 0.04) each, numbered SVSB-[
·
] through SVSB-[
·
] acquired on [
·
] by way of a conversion and (iii) fully paid up [
·
] [(
·
)] Special Voting Shares C, with a nominal value of nine eurocent (EUR 0.09) each, numbered SVSC-[
·
] through SVSC-[
·
] acquired on [
·
] by way of a conversion (collectively the
Offered SVS
).]
(C)
On [
·
], Computershare S.p.A., acting on behalf of the Company, received a duly completed De-Registration Form with respect to [
·
] Qualifying Ordinary Shares of the Shareholder, registered in the Loyalty Register.
(D)
In view of the foregoing, the Shareholder wishes to offer and transfer to the Company the corresponding Special Voting Shares, being the Offered SVS, for no valuable consideration
(om niet),
such in accordance with clause 11.5 of the SVS Terms.
(E)
The Company and the Shareholder shall hereby effect the repurchase and transfer of the Offered SVS in accordance with Section 2:98 and Section 2:86c of the Dutch Civil Code and the terms set out below.
THE PARTIES AGREE
as follows:
1.
REPURCHASE
1.1
The Shareholder hereby offers and transfers the Offered SVS for no valuable consideration
(om niet)
to the Company and the Company hereby accepts the same from the Shareholder.
1.2
The Offered SVS are registered and no share certificates have been issued for the Offered SVS.
2.
WARRANTIES
The Shareholder warrants to the Company that he has full and unencumbered title to the Offered SVS.
3.
ACKNOWLEDGMENT
The Company shall record the transfer of the Offered SVS effected by this deed in its register of shareholders.
4.
GENERAL
4.1
Dissolution
(ontbinding)
.
The Parties waive the right to dissolve or to demand dissolution of this Agreement.
4.2
Counterparts
. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement and any Party may enter into this Agreement by executing a counterpart.
4.3
Governing Law
. This Agreement is governed by and shall be construed in accordance with Dutch law.
SIGNATORIES
|
SIGNED by
|
)
|
|
|
for and on behalf of:
|
)
|
|
|
[
·
]
|
)
|
|
|
|
|
|
|
|
|
|
|
SIGNED by
|
)
|
|
|
for and on behalf of:
|
)
|
|
|
MFE — MEDIAFOREUROPE N.V.
|
)
|
|
|
|
|
|
|
(as approved by the Board on
|
)
|
|
Exhibit 99.10
EXTRAORDINARY SHAREHOLDERS’
MEETING
Explanatory report on the item on the agenda of the extraordinary general
meeting of shareholders
1
IMPORTANT INFORMATION FOR INVESTORS AND SHAREHOLDERS
This document is for informational purposes only and is not intended to and does not constitute an offer or invitation to exchange or sell or solicitation of an offer to subscribe for or buy, or an invitation to exchange, purchase or subscribe for, any securities, any part of the business or assets described herein, or any other interests or the solicitation of any vote or approval in any jurisdiction in connection with the proposed transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made. This document is not a prospectus, product disclosure statement or other offering document for the purposes of Directive 2003/71/EC of the European Parliament and the Council of 4 November 2003, as amended, in particular, by Directive 2010/73/EC of the European Parliament and the Council of 24 November 2010, as amended and as implemented in each member State of the European Economic Area and under Italian, Spanish and Dutch law.
This document does not represent an offer to the public in Italy, pursuant to Section 1, letter (t) of Legislative Decree no. 58 of February 24, 1998, as amended and supplemented, nor in Spain, pursuant to article 35.1 of the restated text of the Securities Market Act approved by Royal Legislative Decree 4/2015, dated 23 October. The release, publication or distribution of this document in certain jurisdictions may be restricted by law, and therefore persons in such jurisdictions into which this document is released, published or distributed should inform themselves about and observe such restrictions.
Nothing in this document constitutes an offer of securities for sale in the United States within the meaning of the Securities Act or in any other jurisdiction where it is unlawful to do so, or a solicitation of votes for the general meeting of shareholders described herein. The securities referred to in this document have not been, and will not be, registered under the Securities Act or the securities laws of any state in the United States, and any representation to the contrary is a violation of law. The securities referred to in this document may not be offered or sold within the United States or to, or for the account or benefit of, U.S. Persons, both as defined in Regulation S under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state or local securities laws.
* * *
US investors disclaimer
This Transaction is made for the securities of a foreign company. The Transaction is subject to disclosure requirements of a foreign country that are different from those of the United States. Financial statements included in the documents, if any, have been prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of United States companies.
It may be difficult for you to enforce your rights and any claim you may have arising under the federal securities laws since the issuer is located in a foreign country, and some or all of its officers and directors may be residents of a foreign country. You may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court’s judgment.
You should be aware that the issuer may purchase securities otherwise than in the Transaction, such as in open market or privately negotiated purchases.
* * *
Forward Looking Statements
This document contains certain forward-looking statements relating to Mediaset, Mediaset España and the proposed business combination between them. All statements included in this document concerning activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and involve known and unknown risks, uncertainties and other factors, including, but not limited to, the following: volatility and deterioration of capital and financial markets, changes in general economic conditions, economic growth and other changes in business conditions, changes in government regulation, uncertainties as to whether the proposed business combination will be consummated, uncertainties as to the timing of the proposed business combination, uncertainties as to how many shareholders will participate in the proposed business combination, the risk that the announcement of the proposed business combination may make it more difficult for Mediaset or Mediaset España to establish or maintain relationships with its employees, suppliers and other business partners, the risk that the businesses of Mediaset or Mediaset España will be adversely impacted during the pendency of the proposed business combination; the risk that the operations of Mediaset or Mediaset España will not be integrated successfully, and other economic, business and competitive factors affecting the businesses of Mediaset and Mediaset España generally, including those set forth in the annual reports for the year ended 31 December 2018 of Mediaset and Mediaset España.
Therefore, Mediaset and Mediaset España and their affiliates, directors, advisors, employees and representatives, expressly disclaim any liability whatsoever for such forward-looking statements.
These forward-looking statements speak only as of the date of this document and neither Mediaset nor Mediaset España undertake obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise, except as required by law.
2
REPORT OF THE BOARD OF DIRECTORS OF MEDIASET S.P.A. ON THE TRIPARTITE COMMON CROSS-BORDER MERGER PLAN RELATING TO THE MERGER BY INCORPORATION OF MEDIASET S.P.A. AND MEDIASET ESPAÑA COMUNICACIÓN S.A. WITH AND INTO THE MEDIASET’S WHOLLY-OWNED DUTCH COMPANY MEDIASET INVESTMENT N.V.
This report has been prepared pursuant to Article 2501 -
quinquies
of the Italian civil code, Article 8 of the Legislative Decree No. 108 of 30 May 2008 and Article 70, paragraph 2, of the Consob Resolution No. 11971/1999.
Dear Shareholders,
we hereby submit to your approval the tripartite common cross-border merger plan relating to the merger of Mediaset S.p.A. (
Mediaset
) and Mediaset España Comunicacion S.A. (
Mediaset España
) with and into Mediaset’s wholly-owned Dutch subsidiary Mediaset Investment N.V. (
DutchCo
).
This report (the
Report
) has been prepared pursuant to Article 2501 -
quinquies
of the Italian civil code, Article 8 of the Legislative Decree No. 108 of 30 May 2008 (
Legislative Decree 108
) and, since Mediaset shares are listed on the Mercato Telematico Azionario organized and managed by Borsa Italiana S.p.A. (
Mercato Telematico Azionario
), Article 70, paragraph 2, of the Consob Resolution No. 11971/1999 (the
Issuers’ Regulation
) and in compliance with the Scheme No. 1 of Annex 3A of the Issuers’ Regulation. Two other separate reports have been prepared, respectively, by the board of directors of Mediaset España (the
Board of Directors of Mediaset España
) and by the board of directors of DutchCo (the
Board of Directors of DutchCo
).
The proposed resolution to be submitted to your approval is attached to the present Report.
The remaining documentation relating to the Merger (including the Common Cross-Border Merger Plan, as defined below) will be made available as provided by law.
Prior to the extraordinary general meeting of shareholders of Mediaset (the
Mediaset Extraordinary Meeting
), called for the purposes of approving the Merger (as defined below), Mediaset will make available on its corporate website
(
www.mediaset.it
)
the “Questions and Answers” relating to the Merger and prepared by Mediaset in accordance with Article 127-
ter
, paragraph 2, of the Italian Legislative Decree No. 58 of 1998 (
TUF
).
1.
DESCRIPTION AND RATIONALE OF THE TRANSACTION
1.1.
The Transaction
Preamble
This Report has been prepared by the board of directors of Mediaset (the
Board of Directors of Mediaset
and, together with the Board of Directors of Mediaset España and the Board of Directors of DutchCo, the
Boards of Directors
) in order to describe the tripartite cross-border merger of Mediaset and Mediaset España with and into DutchCo (the
Merger
). Upon effectiveness of the Merger, DutchCo will be renamed “MFE — MEDIAFOREUROPE N.V.” (
MFE — MEDIAFOREUROPE
or
MFE
).
DutchCo, Mediaset and Mediaset España (jointly referred to as the
Merging Companies
) are part of the Mediaset group (the
Group
). In particular, (i) DutchCo is a wholly-owned direct subsidiary of Mediaset and (ii) Mediaset España is a direct subsidiary of Mediaset, which currently owns shares representing approximately 51.63% of Mediaset España’s share capital (and 53.98% of the voting rights, taking into account the treasury shares currently held by Mediaset España).
Subject to the completion of the pre-merger formalities and the satisfaction (or the waiver, as the case may be) of the conditions precedent, as described under Paragraph 1.2, the Merger shall be executed in accordance with Section 2:318 of the Dutch civil code (the
Dutch Civil Code
) and, as such, will become effective at 00:00 am CET (
Central European Time
) on the day following the day on which the deed of merger (the
Merger Deed
) is executed before a civil law notary officiating in the Netherlands (the
Merger Effective Date
).
The Dutch Commercial Register will subsequently inform the Companies’ Register of Milan and the Commercial Register of Madrid about the Merger Effective Date.
The Merger is a cross-border merger within the meaning of the provisions of European Directive 2017/1132 of the European Parliament and Council of 14 June 2017 on certain aspects of company law (the
Directive
), whereby the regulations on cross-border mergers of limited liability companies are in force for Dutch law purposes under Title 2.7 of the Dutch Civil Code, for Italian law purposes under Legislative
3
Decree 108 and, for Spanish law purposes under Chapter II of Title II of Law 3/2009 of 3 April on structural modifications to business companies (the
LME
).
The Merger is part of a single and broader transaction (the
Transaction
) which also envisages the following reorganizations, aimed at maintaining the operations and business activities of Mediaset and Mediaset España, respectively, in Italy and Spain, to be completed prior to the effectiveness of the Merger:
(i)
the incorporation of an Italian wholly-owned direct subsidiary of Mediaset (
NewCo Italia
);
(ii)
the transfer by Mediaset to NewCo Italia, by means of a contribution in-kind regulated by the Italian civil code, of substantially all of its business and certain shareholdings (the
Mediaset Reorganization
); and
(iii)
the segregation (
segregación
) by Mediaset España, in accordance with Title III of the LME, of all its assets and liabilities, including its shareholdings in other companies, to Grupo Audiovisual Mediaset España Comunicación, S.A. (
GA Mediaset
) — a Spanish wholly-owned direct subsidiary of Mediaset España — in exchange for the allotment to Mediaset España of all the new shares in GA Mediaset that will be issued on the occasion of its share capital increase triggered by the segregation (the
Mediaset España Segregation
and, together with the Mediaset Reorganization, the
Preliminary Reorganizations
).
Therefore, before completion of the Merger, Mediaset and Mediaset España will not have any activities of their own (save for certain financial activities that will remain in Mediaset and will be transferred to MFE upon effectiveness of the Merger). Upon effectiveness of the Merger, MFE
— as surviving company and new parent company of the Group — will be a holding company.
The Preliminary Reorganizations
— the completion of which is a condition precedent to the Merger, as described under Paragraph 1.2 — will not have any impact on the Exchange Ratios (as defined and described below).
The Preliminary Reorganizations will be completed prior to the execution of the Merger Deed and will, thus, not be conditional upon completion of the Merger.
In light of the structure of the envisaged Transaction, this Report has been prepared by the Board of Directors of Mediaset having examined the Transaction, taking into consideration the overall impact on Mediaset.
The current structure of the Group is represented below.
The structure of the Group after completion of the Preliminary Reorganizations, but prior to the completion of the Merger, is represented below.
By virtue of the Merger, Mediaset and Mediaset España will cease to exist as standalone entities and, DutchCo will acquire all assets and assume all liabilities and other legal relationships of Mediaset and Mediaset España.
The structure of the Group after completion of the Merger is represented below.
4
Today the Board of Directors of Mediaset approved the common cross-border merger plan, which has been jointly prepared by the Boards of Directors (the
Common Cross-Border Merger Plan
).
The Merger will be submitted for approval to Mediaset shareholders, to Mediaset España shareholders and to DutchCo’s sole shareholder (
i.e.
Mediaset) respectively at the Mediaset Extraordinary Meeting, at the Mediaset España general shareholders’ meeting (the
Mediaset España General Meeting
) and at the general meeting of shareholders of DutchCo.
The Mediaset shares are currently listed on the Mercato Telematico Azionario and the Mediaset España shares are currently listed on the Spanish stock exchanges of Barcelona, Bilbao, Madrid and Valencia, which are organized and managed by their respective managing companies of the stock exchanges (
sociedades rectoras de las bolsas de valores
) (the
Spanish Stock Exchanges
) and are traded through the automated quotation system of the Spanish Stock Exchanges (S
istema de Interconexión Bursátil Español
— the
SIBE
), organized and managed by
Sociedad de Bolsas
,
S.A.U.
Completion of the Merger is subject to,
inter alia
, admission to listing of the ordinary shares of DutchCo (the
DutchCo Ordinary Shares
) on the Mercato Telematico Azionario (for further information on the conditions precedent, please refer to Paragraph 1.2). Additionally, DutchCo will request admission to listing of the DutchCo Ordinary Shares on the Spanish Stock Exchanges for trading through the SIBE.
Listing and trading of the DutchCo Ordinary Shares on the Mercato Telematico Azionario and the Spanish Stock Exchanges (through the SIBE) is envisaged to occur on or about the Merger Effective Date.
In order for DutchCo Ordinary Shares to be admitted to listing and trading on the Mercato Telematico Azionario, DutchCo shall submit to Borsa Italiana S.p.A. the relevant applications for admission to listing and for admission to trading.
In order for DutchCo Ordinary Shares to be admitted to listing on the Spanish Stock Exchanges for trading on the SIBE, DutchCo shall submit the relevant applications for admission to listing and trading to the managing companies of the Spanish Stock Exchanges and to the Spanish national securities market commission (
Comisión Nacional del Mercado de Valores
— the
CNMV
), respectively.
DutchCo shall also prepare a listing prospectus to be submitted to the Dutch supervisory authority (
Autoriteit Financiële Markten
— the
AFM
), which listing prospectus will be passported into Italy and Spain, after approval by the AFM, in accordance with applicable laws and regulations.
Therefore, following completion of the Transaction, all existing business activities, shareholdings and any other assets, as well as liabilities pertaining to the business of Mediaset and Mediaset España, will be consolidated into (or controlled by, as the case may be) one single legal entity (MFE), the ordinary shares of which will be admitted to listing and trading on the Mercato Telematico Azionario and will be admitted to listing on the Spanish Stock Exchanges for their trading through the SIBE.
Public documents
In light of the Merger and pursuant to Article 2501 -
septies
of the Italian civil code and Article 70, paragraph 1, of the Issuers’ Regulation, in addition to this Report and to the reports prepared by the Board of Directors of Mediaset España and by the Board of Directors of DutchCo, the following documents will be made available for inspection, pursuant to the applicable laws and regulations, on the Mediaset corporate website
(
www.mediaset.it
)
and at the registered office of Mediaset, in Milan, via Paleocapa 3, as well as at the registered office addresses of DutchCo and on the corporate website of Mediaset España
(
www.telecinco.es
):
(i)
the Common Cross-Border Merger Plan, as approved by the Boards of Directors;
5
(ii)
the expert reports on the fairness of the Exchange Ratios (as defined below) prepared by (i) PricewaterhouseCoopers S.p.A. (
PwC
) in the interest of Mediaset, pursuant to Article 2501-
sexies
of the Italian civil code and Article 9 of the Legislative Decree 108; (ii) Grant Thornton, S.L.P. (
Grant Thornton
) in the interest of Mediaset España, pursuant to Article 34 of the LME; and (iii) Deloitte Accountants B.V. (
Deloitte
) in the interest of DutchCo, pursuant to Section 2:328, paragraph 1 (in conjunction with Section 2:333g) and 2, of the Dutch Civil Code;
(iii)
the financial statements of Mediaset, Mediaset España and DutchCo as at 31 December 2018, pursuant to, respectively, Article 2501 -
quater
of the Italian civil code, Article 36 of the LME and Section 2:314 of the Dutch Civil Code;
(iv)
2017 and 2016 full year financial statements of Mediaset and Mediaset España, together with the relevant board reports attached thereto; with reference to DutchCo, which was incorporated on 20 December 2017, the financial statements and board report for the first financial year ended at 31 December 2017 will be made available.
Purpose of the Transaction
From a strategic, operational and industrial perspective, the transaction is aimed at creating a pan- European media and entertainment group, with a leading position in its local markets and greater scale to compete and potential to expand further in specific countries across Europe. Combined sustainable capital structure and strong cash flow generation profile provide MFE with the required firepower to play a pivotal role in the context of a possible future consolidation scenario in the European video media industry.
The incorporation of a new holding company in the Netherlands represents the perfect and neutral ground for such an ambitious project (as proven by other companies that have adopted the same structure) and constitutes an important step in the development of a fully integrated media powerhouse, which would become a leader in linear and non-linear entertainment, leveraging tech and data to compete on an equal footing in the evolving media space.
On 29 May 2019, Mediaset announced the acquisition of a 9.6% stake in the German broadcaster ProSiebenSat.1 Media, corresponding to up to 9.9% of the voting rights, excluding treasury shares. Mediaset and Mediaset España have been developing a strong relationship with ProSiebenSat.1 in the European Media Alliance (EMA) in the last five years. The goal of this alliance is to develop economies of scale which are crucial for the future of European TV.
In the context of the current constantly developing competitive landscape, internationalization, economies of scale and ability to offer tech enabled products and quality content are becoming the key critical factors in the profitable execution of modern media company strategies.
In particular, the Mediaset and Mediaset España boards of directors believe that this first step enables the following strategic and operational benefits, which can only be unlocked efficiently through a combined entity that is run by a single management team with a clear definition of its strategic priorities and value levers:
·
Scale to compete.
Integrated and diversified media company with access to a combined audience of 107mm viewers to better compete with global players. Economies of scale will be generated in key crucial areas such as: (i) audience/reach, (ii) content creation and distribution, (iii) audience data, (iv) AdTech platforms, (v) OTT (AVOD) platforms, and (vi) talent acquisition and attraction;
·
New business opportunities.
Scale and international footprint will create opportunities that cannot be seized today due to the local focus and dimension and ample resources to invest in core business areas, such as creation of a production content house, data collection, Addressable TV, Digital audio, DOOH, Mobile proximity;
·
Stronger proprietary channel and content portfolio.
MFE will have the best content and viewing experience across all platforms (linear and non-linear). It will offer engaging content for viewers thanks to stronger in-house production resources and increased ability to supply content to 3rd parties;
·
Leaner
and more efficient organization.
Pan-European consolidation requires a re-engineering of the operational and organization model that will allow cost efficiencies and savings, mainly driven by technological developments. Agile decision making with a leaner organization to adapt to a changing business environment and capture combined growth opportunities;
·
“
Driving the change”.
Scale coupled with a pan-European footprint will benefit all stakeholders by increasing bargaining power with suppliers and establishing a first-mover advantage in a consolidating media landscape.
6
Mediaset and Mediaset España have gone through a very detailed exercise aimed at identifying specific levers out of 6 buckets (content, broadcasting & digital, IT/tech, procurement, G&A expenses, sales house), where a different size and operational model can generate significant cost efficiencies, savings and opportunities. In this respect, the boards of directors of both companies believe that the Transaction would create cost efficiencies and savings of about Euro 100-110 million (before taxes) in the next 4 years (from 2020 to 2023), representing around Euro 800 million on a net present value basis.
Exchange ratios
At the Merger Effective Date:
(i)
each Mediaset shareholder, including the depositary bank under the Mediaset American Depositary Receipts (
ADRs
) program, shall be granted 1 (one) DutchCo Ordinary Share (with a nominal value of Euro 0.01) for each share held in Mediaset (with a nominal value of Euro 0.52) (the
Exchange Ratio I
);
(ii)
each holder of ADRs representing Mediaset shares shall be granted such number of DutchCo ADRs representing DutchCo Ordinary Shares as results from the Exchange Ratio I; and
(iii)
each Mediaset España shareholder (other than Mediaset, as the shares held by Mediaset in Mediaset España will be cancelled by operation of law pursuant to Section 2:325(4) of the Dutch Civil Code) shall be granted 2.33 (two/thirtythree) DutchCo Ordinary Shares for each share held in Mediaset España (having a nominal value of Euro 0.50) (the
Exchange Ratio II
and, together with the Exchange Ratio I, the
Exchange Ratios
).
No fractional DutchCo Ordinary Shares shall be allotted to any holders of shares of Mediaset España. Those shareholders who hold a number of Mediaset España shares such as to enable them to receive, in accordance with the Exchange Ratio II, a non-whole number of DutchCo Ordinary Shares, shall receive such whole number of DutchCo Ordinary Shares which is immediately below said non-whole number. Mediaset España shares (or any fractions thereof) in excess of those required, pursuant to the Exchange Ratio II, to receive a whole number of DutchCo Ordinary Shares (i.e., Mediaset España shares or any fractions thereof representing fractional entitlements to DutchCo Ordinary Shares) shall be transferred on behalf of the Mediaset España shareholders, through their depositaries, to an agent appointed for these purposes by Mediaset España (the
Fractions Agent
).
The Fractions Agent, acting at its own risk and for its own account, shall pay in cash to these shareholders, in consideration for each of the Mediaset España shares (or any fractions thereof) so transferred, their market value. The Fractions Agent will, in turn, exchange the Mediaset España shares (and any fractions thereof) arising from the aggregation of such fractions so purchased and exchange them, in its own name and on its own behalf, for the relevant whole number of DutchCo Ordinary Shares resulting from the Exchange Ratio II, with any remainder fractional entitlements to DutchCo Ordinary Shares corresponding to the Mediaset España shares (or fractions thereof) held by the Fractions Agent being disregarded.
The treasury shares held by Mediaset and Mediaset España as at the Merger Effective Date, if any, will not be exchanged and will be cancelled pursuant to Article 2504-
ter
of the Italian civil code and Article 26 of the LME, respectively, as well as pursuant to Section 2:325(4) of the Dutch Civil Code.
Likewise, any shares in either of the absorbed companies (i.e., Mediaset and Mediaset España) held by the other absorbed company will not be exchanged, but will be cancelled on the Merger Effective Date pursuant to Article 2504-
ter
of the Italian civil code and Article 26 of the LME, respectively, as well as pursuant to Section 2:325(4) of the Dutch Civil Code.
For clarification purposes, Mediaset España neither holds any Mediaset shares on the date hereof nor is expected to hold any Mediaset shares at any time before the Merger Effective Date, so that the paragraph above will predictably apply only with regard to the Mediaset España shares which are held by Mediaset on the date on which the Merger Deed is executed.
No consideration in addition to the DutchCo Ordinary Shares delivered in application of the Exchange Ratios, either in cash or otherwise, will be paid by DutchCo, Mediaset and Mediaset España to the Mediaset and Mediaset España shareholders in connection with the Merger, without prejudice to the withdrawal rights as described in Paragraph 11.
1.2. Conditions precedent
The completion of the Merger by way of the execution of the Merger Deed is subject to the satisfaction of the following conditions precedent, without prejudice to the fact that Mediaset and Mediaset España may jointly waive the condition set out under (iv) and (v) below:
7
(i)
the Preliminary Reorganizations shall have been consummated, for which purposes, among others, the Spanish State Secretariat for the Digital Advance, part of the Ministry of Economy and Business Affairs (
Secretaría de Estado para el Avance Digital del Ministerio de Economía y Empresa
— the
SEAD
) shall have authorized the transfer of the audiovisual media licenses currently held by Mediaset España to GA Mediaset;
(ii)
the DutchCo Ordinary Shares, which are to be issued and allotted to Mediaset and Mediaset España shareholders upon effectiveness of the Merger, shall have been admitted to listing on the Mercato Telematico Azionario and the decision to admit to trading shall have been released. The admission will be conditional upon the obtaining of the necessary authorizations by the AFM and/or other competent authorities;
(iii)
no governmental entity of a competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any order which prohibits the consummation of the Transaction or makes it void or extremely burdensome;
(iv)
the amount of cash, if any, to be paid by Mediaset and Mediaset España to (a) Mediaset and Mediaset España shareholders exercising their withdrawal right in relation to the Merger under Article 2437-
quater
of the Italian civil code and under Article 62 of the LME and other applicable Spanish regulations, respectively, and/or to (b) creditors of Mediaset and of Mediaset España exercising their right of opposition to the Merger according to applicable law (or alternatively, to financial entities for purposes of sufficiently guaranteeing the credits of such creditors of Mediaset and of Mediaset España) (
Amount of Withdrawal Rights and Oppositions
), shall not exceed in the aggregate the amount of Euro 180 million, provided, however, that, for clarity, the Amount of Withdrawal Rights and Oppositions will be calculated net of the amount of cash payable by Mediaset shareholders or third parties for the purchase of Mediaset shares pursuant to Article 2437-
quater
of the Italian civil code, and of the amount of cash payable (or paid) by third parties pursuant to any purchase or commitments to purchase the withdrawn Mediaset and/or Mediaset España shares; and
(v)
there shall not have been nor occurred at any time before the date of execution of the Merger Deed, at a national or international level, (a) any extraordinary event or circumstance involving changes in the legal, political, economic, financial, currency exchange or in the capital markets conditions or any escalation or worsening of any of the same or (b) any events or circumstances that, individually or taken together, have had, or are reasonably likely to have, a material adverse effect on the legal situation, on the business, results of operations or on the asset, economic or financial conditions (whether actual or prospective) of Mediaset and/or of Mediaset España and/or the market value of the Mediaset and/or Mediaset España shares and/or that could otherwise materially and negatively affect the Transaction (
MAC Clause
).
Mediaset, Mediaset España and DutchCo will communicate to the market the satisfaction of (or the waiver of, where applicable) or the failure to satisfy the above conditions.
In addition to the satisfaction of the above conditions precedent, prior to the Merger Effective Date:
(i)
Deloitte shall have delivered to DutchCo, in accordance with the applicable laws, the report with respect to the fairness of the Exchange Ratios (a copy of which shall have been provided to Mediaset and Mediaset España as soon as practicable upon delivery thereof to DutchCo);
(ii)
PwC shall have delivered to Mediaset, in accordance with the applicable laws, the report with respect to the fairness of the Exchange Ratios (a copy of which shall have been provided to DutchCo and Mediaset España as soon as practicable upon delivery thereof to Mediaset);
(iii)
Grant Thornton shall have delivered to Mediaset España, in accordance with the applicable laws, the report with respect to the fairness of the Exchange Ratio II (a copy of which shall have been provided to DutchCo and Mediaset as soon as practicable upon delivery thereof to Mediaset España);
(iv)
a declaration shall have been issued by the local district Court in Amsterdam (the Netherlands) (and received by DutchCo) stating that no creditor has opposed to the Merger pursuant to Section 2:316 of the Dutch Civil Code or, in case of the opposition pursuant to Section 2:316 of the Dutch Civil Code, such declaration shall have been received within one month after the withdrawal or the discharge of the opposition has become enforceable;
(v)
the 60-day period following the date on which the resolution of the Mediaset Extraordinary Meeting has been registered with the Companies’ Register of Milan shall have expired and no creditor of Mediaset whose claims precede the registration of the Common Cross-Border Merger Plan shall have opposed the Merger pursuant to Article 2503 of the Italian civil code or, should the Merger be opposed, (i) such opposition shall have been waived, settled or rejected, and/or (ii)
8
Mediaset shall have deposited the necessary amounts to satisfy its opposing creditors with a bank, and/or (iii) the competent Court — provided that the risk of prejudice to creditors is deemed ungrounded or that adequate guarantees have been given by Mediaset in order to satisfy its creditors — shall have nonetheless authorized the Merger despite the opposition, pursuant to Article 2503 of the Italian civil code in conjunction with Article 2445 of the Italian civil code;
(vi)
the one-month period following the publication of the resolution of the Mediaset España General Meeting approving the Merger shall have expired and no creditor of Mediaset España — whose non-secured credits have arisen before the publication of the Common Cross-Border Merger Plan on the Mediaset España website and are not due and payable before such date — shall have opposed the Merger in accordance with Article 44 of the LME or, should the Merger be opposed (i) such opposition shall have been waived, settled or rejected, and/or (ii) Mediaset España shall have (directly or through a credit institution) sufficiently secured such credits; and
(vii)
all the pre-merger formalities shall have been completed, including the delivery (i) by the Italian public notary selected by Mediaset and (ii) by the Commercial Register of Madrid to the Dutch civil law notary of the respective certificates conclusively attesting to the proper completion of the pre-merger acts and formalities within the meaning of Article 127 of the Directive.
1.3. Merging Companies
1.3.1.
DutchCo (surviving company)
|
Name:
|
|
Mediaset Investment N.V.
|
|
|
|
|
|
Legal form:
|
|
Public company (
naamloze venootschap
) incorporated under the laws of the Netherlands
|
|
|
|
|
|
Official seat:
|
|
Amsterdam (the Netherlands)
|
|
|
|
|
|
Tax domicile:
|
|
Cologno Monzese, Milan (Italy)
|
|
|
|
|
|
Principal office:
|
|
Viale Europa 46, 20093 Cologno Monzese, Milan (Italy)
|
|
|
|
|
|
Share capital:
|
|
Issued share capital of Euro 90,000.00, fully paid-in, divided into 90,000 shares, having each a nominal value of Euro 1 (one), and in respect of which no depository receipts have been issued with the cooperation of DutchCo Authorized share capital of Euro 180,000.00
|
|
|
|
|
|
Register:
|
|
Company registered with the Dutch Commercial Register (
Kamer van Koophandel
) under number 70347379
|
|
|
|
|
|
Tax code:
|
|
10367000964
|
|
|
|
|
|
Pledge:
|
|
No shares of DutchCo have been pledged or encumbered with a right of usufruct.
|
Upon effectiveness of the Merger, DutchCo will be renamed “MFE - MEDIAFOREUROPE N.V.”. MFE — as surviving company — will maintain its current legal form and official seat and will therefore continue to be subject to the laws of the Netherlands, maintaining its tax residence in Italy.
The articles of association of DutchCo were originally established by deed of incorporation of DutchCo executed before C.A. Voogt, civil law notary, officiating in Amsterdam (the Netherlands), on 20 December 2017. The current articles of association of DutchCo have been established by deed of amendment executed before P.C. Cramer-de Jong, civil law notary, officiating in Amsterdam (the Netherlands), on 4 October 2018. A copy of the current articles of association of DutchCo is attached to the Common Cross- Border Merger Plan as
Schedule 1.
In order for MFE to have available sufficient reserves, according to DutchCo’s latest financial statements, to carry out a buy-back program after the Merger Effective Date (as further described in Paragraph 5.1), the current articles of association of DutchCo will be amended before 30 June 2019 to provide for DutchCo’s current financial year to end on 30 June 2019, with the provision that, before 30 September 2019, the articles of association of DutchCo will be amended again to provide for DutchCo’s financial year to coincide with the calendar year and, thus, end on 31 December 2019.
Moreover, the articles of association of DutchCo will be further amended and restated at the Merger Effective Date in accordance with the proposed version of the articles of association attached to the Common Cross-Border Merger Plan as
Schedule 2.
It is expected that, prior to the Merger Effective Date, the Board of Directors of DutchCo will be authorised by the shareholders’ meeting to make share capital increases, on one or more occasions, with the
9
exclusion or the limitation of pre-emptive right, and also to issue convertible bonds. These operations can be carried out for any purpose, including that of promoting the development of a more liquid market for the DutchCo Ordinary Shares on the Mercato Telematico Azionario and on the Spanish Stock Exchanges immediately after the Merger.
1.3.2.
Mediaset S.p.A. (disappearing company)
|
Name:
|
|
Mediaset S.p.A.
|
|
|
|
|
|
Legal form:
|
|
Public joint stock company (
società per azioni
) incorporated under the laws of the Republic of Italy
|
|
|
|
|
|
Official seat:
|
|
Via Paleocapa 3, 20121 Milan (Italy)
|
|
|
|
|
|
Share capital:
|
|
Issued share capital of Euro 614,238,333.28, fully paid-in, divided into 1,181,227,564 ordinary shares, having each a nominal value of Euro 0.52 and listed on the Mercato Telematico Azionario
|
|
|
|
|
|
Register:
|
|
Company registered with the Companies Register of Milan (
Registro delle Imprese di Milano
) under number 09032310154
|
|
|
|
|
|
Tax code:
|
|
09032310154 (also for VAT purposes)
|
In accordance with the regulation containing provisions relating to transactions with related parties, as approved by Consob with Resolution no. 17221 dated 12 March 2010, as amended and supplemented (the
Regulation
), Mediaset, Mediaset España, DutchCo and NewCo Italia are related parties because Mediaset España, DutchCo and NewCo Italia are (or will be, in case of NewCo Italia) subsidiaries of Mediaset, which is the controlling shareholder pursuant to Article 93 TUF.
The Merger, as well as the Mediaset Reorganization, benefits from the exemption set forth in Article 14, paragraph 2, of the Regulation and Article 7, let. d) of the “
Procedures for transactions with related parties
” adopted by Mediaset and published on the corporate website of Mediaset
(
www.mediaset.it
).
Consequently, Mediaset will not publish the relevant information document (
documento informativo
) pursuant to Article 5 of the Regulation.
1.3.3.
Mediaset España Comunicacion S.A. (disappearing company)
|
Name:
|
|
Mediaset España Comunicación, S.A.
|
|
|
|
|
|
Legal form:
|
|
Public joint stock company (
sociedad anónima
) incorporated under the laws of the Kingdom of Spain
|
|
|
|
|
|
Official seat:
|
|
Carretera de Fuencarral a Alcobendas 4, 28049 Madrid (Spain)
|
|
|
|
|
|
Share capital:
|
|
Share capital of Euro 163,717,608.00, fully paid-in, divided into 327,435,216 shares, having each a nominal value of Euro 0.50 and listed on the Spanish Stock Exchanges, for trading through the SIBE
|
|
|
|
|
|
Register:
|
|
Company registered with the Commercial Register of Madrid (
Registro Mercantil de Madrid
) in volume 33.442, sheet 122, section 8, page M-93.306
|
|
|
|
|
|
Tax code:
|
|
A-79.075.438
|
Mediaset España and DutchCo are related parties because DutchCo is a wholly-owned subsidiary of Mediaset España ‘s parent company, Mediaset, and will become the parent company of the successor of Mediaset España pursuant to Mediaset España Segregation following completion of the Merger.
The Board of Directors of Mediaset España entrusted the analysis of the envisaged Transaction, the corresponding decision-making process and the preparation of the Common Cross-Border Merger Plan to a merger committee composed by four members: three independent directors and one “other external” member of the Board of Directors of Mediaset España (the
Merger Committee
).
Along the same lines, and following the best corporate governance practices pursuant to Articles 228 and 229 of the of the restated text of the Spanish Companies Law approved by Royal Legislative Decree 1/2010, of 2 July (the
LSC
), the proprietary and the executive directors of Mediaset España refrained from participating in the discussions, negotiation and voting on the Common Cross-Border Merger Plan, which has therefore been approved with the votes cast by the “other external” and independent directors of the board. Therefore only the signatures of those members of the Board of Directors Mediaset España appear in the Common Cross-Border Merger Plan.
10
2.
VALUES ATTRIBUTED TO MEDIASET AND MEDIASET ESPAÑA FOR THE PURPOSE OF DETERMINING THE EXCHANGE RATIOS
2.1.
Introduction
As anticipated in Paragraph 1.1 of this Report, due to the tripartite structure of the Merger, two Exchange Ratios have been calculated: the Exchange Ratio I (for the exchange of Mediaset shares for DutchCo Ordinary Shares) and the Exchange Ratio II (for the exchange of Mediaset España shares for DutchCo Ordinary Shares).
On the basis of the assumption that, in accordance with Exchange Ratio I, Mediaset shareholders will receive one (1) DutchCo Ordinary Share for each Mediaset share owned, the Board of Directors of Mediaset analysed, in the context of the Merger, the relative valuation of Mediaset and Mediaset España, aimed at determining the Exchange Ratio II between Mediaset España shares and DutchCo Ordinary Shares or, equivalently (given the Exchange Ratio I), between Mediaset España shares and Mediaset shares.
As is apparent from Section 19 of the Common Cross-Border Merger Plan, the Board of Directors of Mediaset España entrusted the analysis of the envisaged Transaction, the corresponding decision-making process and the preparation of the Common Cross-Border Merger Plan to the Merger Committee.
In the context of the Merger and for the purposes of the determination of the Exchange Ratios, the Board of Directors of Mediaset and the Board of Directors of Mediaset España have been advised by their respective financial advisors. In particular, the Board of Directors of Mediaset — and, solely in connection with the Fairness Opinion, also the Board of Directors of DutchCo — have been assisted by Citigroup Global Markets Ltd (
Citi
) and the Board of Directors of Mediaset España has been assisted by J.P. Morgan Securities plc (
JP Morgan
).
Citi and JP Morgan have delivered a fairness opinion on the Exchange Ratio II (which — as indicated above — is predicated on Exchange Ratio I) of the Merger to the boards of directors of Mediaset and DutchCo and to the board of directors of Mediaset España, respectively (the
Fairness Opinions
and each a
Fairness Opinion
); each Fairness Opinion carries out a relative valuation with respect to Mediaset (including DutchCo) and Mediaset España.
The financial and valuation analysis carried out by Citi must be considered as a whole and an evaluation of this analysis is not entirely mathematical; on the contrary, the analysis carried out by Citi has required complex considerations and judgments around financial and operating features, as well as any other factors, which might have an impact on the valuation, the stock market value or other valuations of the companies analyzed. For additional details on the activities carried out by Citi, as well as for a more detailed description of the valuation aspects and methods used and of the analysis carried out, reference should be made to the Fairness Opinion issued on 7 June 2019, the full text of which is attached hereto as
Schedule A
(together with an Italian courtesy translation).
According to the conclusions of the Fairness Opinions, each dated as of 7 June 2019 on the basis of and subject to the factors, limitations and assumptions and procedures specified therein, the proposed Exchange Ratio II (which — as indicated above — is predicated on Exchange Ratio I) is fair from the financial viewpoint, to the holders of ordinary shares in the capital, respectively, of Mediaset and of Mediaset España (other than Mediaset S.p.A. and its affiliates).
The Fairness Opinions do not constitute a recommendation as to how any director or shareholder should vote or act with respect to the Merger or any other matter and do not give rights to any third parties other than the respective clients (
i.e.
, the Board of Directors of Mediaset and DutchCo and the Board of Directors of Mediaset España, respectively).
The Common Cross-Border Merger Plan contemplates that, for the purposes of the Merger, the financial statements of Mediaset as at 31 December 2018 (as approved by the shareholders’ meeting of Mediaset on 18 April 2019), the financial statements of Mediaset España as at 31 December 2018 (as approved by the shareholders’ meeting of Mediaset España on 10 April 2019) and the financial statements of DutchCo as at 31 December 2018 (as approved by the general shareholders’ meeting of DutchCo on 17 April 2019) shall be considered the merger balance sheets pursuant to the applicable laws. The abovementioned financial statements have been audited by the respective auditing firms which have released their clean opinions.
Any material changes in the assets or liabilities arising between the date of the Common Cross-Border Merger Plan and the date(s) of the shareholders meetings of the Merging Companies that have to decide on the Merger, shall be reported to the relevant shareholders meeting and to the boards of directors of the other Merging Companies in accordance with the provisions of Article 39.3 of the LME and Article 2501-
quinquies
, paragraph 3, of the Italian civil code. Furthermore (and as regards Mediaset España, for purposes of Article 31 .9ª LME), the assets and liabilities of Mediaset and Mediaset España will be
11
recognized by DutchCo in its accounts within the limits of the carrying amounts detailed in the consolidated financial statements of Mediaset prior to the execution of the Merger.
2.2.
Valuation approach and methodologies
In order to determine the economic value of the ordinary shares of Mediaset and Mediaset España and, therefore, the Exchange Ratios, the Board of Directors of Mediaset followed generally accepted valuation methodologies, with particular regard to those most commonly used at national and international levels in similar transactions, giving priority to the principle of consistency and comparability of the valuation criteria, applied compatibly with the distinctive elements of each of Mediaset and Mediaset España.
In particular, best practice requires that companies operating in a similar business and involved in a merger are valued on the basis of consistent criteria, in order for the results of the relative valuation analysis to be fully comparable.
The definition of any exchange ratio is the quantification of the relative value (rather than absolute value) of the individual companies taking part in the transaction, considering that the ultimate objective is not to calculate an economic value in absolute terms for each company involved in a transaction, but rather to determine homogeneous and comparable values in relative terms. As such, it has been deemed appropriate to solely express ranges for the Exchange Ratios, derived from the homogeneous application of each valuation methodology adopted; therefore, the estimated relative values should not be taken as a reference in contexts different from the Merger.
The valuation has been carried out considering Mediaset and Mediaset España as separate entities on a stand-alone basis and also taking into account that Mediaset currently owns shares representing approximately 51.63% of Mediaset España’s share capital, reflecting financial and economic assumptions based upon the information available as of 5 June 2019, which may change or be affected by market conditions as well as exogenous and/or endogenous events affecting the current and future performance and/or the economic and financial prospects of Mediaset and Mediaset España.
In addition, the valuations of the Merging Companies have been carried out not taking into account any potential economic and financial impacts of the Merger, including cost efficiencies and savings.
The following valuation methodologies were used to calculate the Exchange Ratios: (i) historical stock prices; (ii) research analyst target prices; (iii) discounted free cash flow. Such methodologies, however, should not be analyzed individually, but should rather be considered an integral part of a single and comprehensive valuation process.
The historical stock prices and research analyst target prices methodologies are based on the market capitalization and research stock price targets of Mediaset and Mediaset España, thus reflecting the equity value that the market attributes to each company.
The discounted free cash flow method leads to an enterprise value; hence to compute the value of shareholders’ equity in order to determine the Exchange Ratios, customary adjustments (including, but not limited to, net financial debt adjusted for the Euro 0.31557917 dividend per share paid by Mediaset España on 30 April 2019 and for the buyback executed by Mediaset España
post
31 December 2018 and until 5 June 2019, minority interests, pensions liabilities and investments in associates and in other companies) have been made to the enterprise value.
In the light of all the above and for the purpose of the analysis, the Board of Directors of Mediaset is not presenting absolute values attributed to Mediaset and Mediaset España but only the Exchange Ratios resulting from the estimate of relative values.
2.3.
Documentation used for the purposes of the valuation
For the purposes of the valuation and determination of the Exchange Ratios, the Board of Directors of Mediaset, with the assistance of its financial advisor, reviewed the following documentation:
(i)
the 2018 separate and consolidated financial statements of Mediaset and Mediaset España;
(ii)
the 2018 financial statements of DutchCo;
(iii)
the consolidated interim financial report of Mediaset and Mediaset España as at 31 March 2019;
(iv)
projections derived from an extensive number of equity research reports for the period 2019- 2021, with the addition of extrapolations for the three-year period 2022-2024 validated by the respective management of Mediaset and Mediaset España;
(v)
net debt data and other balance sheet items as at 31 December 2018 used to calculate the equity value from the enterprise value (referred to as “bridge-to-equity”);
(vi)
target prices contained in an extensive number of equity research reports;
12
(vii)
information on the number of Mediaset and Mediaset España shares as of the date of this Report;
(viii)
evolution of Mediaset and Mediaset España share prices on their respective stock exchanges (
i.e.
MTA and Spanish Stock Exchanges).
Other publicly available information was also taken into account, including the following:
·
research reports, financial statements and reports, analyses related to companies operating in the media and broadcasting sectors;
·
share price evolution, downloaded from professional service providers, for the companies previously mentioned;
·
certain other publicly available information on Mediaset and Mediaset España deemed relevant for the purpose of the application of the selected valuation methodologies.
2.4.
Description of the valuation methodologies
The valuation methods used to determine the Exchange Ratios are detailed below.
(i)
Historical stock prices
This method is based on the market capitalization of Mediaset and Mediaset España. Historical stock prices reflect the economic value that a stock market attributes to a company.
The timeframe on which to calculate the price must balance any short-term volatility driven by events of exceptional nature, short-term fluctuations and speculative tension (therefore a longer time horizon is preferable) and the need to reflect the most recent market and company conditions, where recent prices should be taken into consideration. Thus, the volume weighted average prices (VWAP) for Mediaset and Mediaset España have been considered for 1 month, 3 months and 6 months prior to 5 June 2019 (included) and compared on a like for like basis. The volume weighted average prices for Mediaset España have been adjusted to take into account the payment of the Euro 0.31557917 dividend per share paid on 30 April 2019 (ex-dividend date 26 April 2019).
To be noted that on 24 January 2019, Mediaset España has announced to undertake a program of share buyback up to Euro 200 million. As of the date of this Report, a total of 14,419,910 shares were purchased by Mediaset España, for an aggregate amount of Euro 95,532,864.96. As such, it cannot be excluded that the recent and current trading of Mediaset España stock may have been affected by such buyback program.
(ii)
Research analyst target prices
Research analysts summarize their recommendations on listed companies identifying a “target price” of the stocks, offering an indication of an implicit value of the company. However, this method gives a useful indication for determining the value of companies whose shares are listed on a stock exchange, completing the framework of the references for the valuation.
For each of Mediaset and Mediaset España (i) only research reports published by research analysts after the publication of 2018 results and prior to 17 May 2019 (including those published after 1
st
quarter 2019 results) were considered; (ii) equity research reports having the highest and lowest EBIT 2020 projections were not taken into consideration.
(iii)
Discounted free cash flow
This valuation methodology was adopted in order to take into account the specific features of Mediaset and Mediaset España, reflects a dynamic conception of the company’s activity and is based on the idea that the business value is determined by its capacity to generate cash flows in the future. In addition, this method reflects,
inter alia,
the business potential in the medium and long term, in terms of profitability, growth, risk level, capital structure and expected level of investments.
This method has been based on the following estimates:
(i)
unlevered free cash flow estimates for each business. Unlevered free cash flows are a proxy to the business cash flow generation before financial income and expenses, after having applied the corporate tax and having considered capital expenditures (“capex”) and working capital swings;
(ii)
net present value of the forecasted free cash flow estimates applying a discount rate (“WACC”). The discount rate takes into consideration the implicit business risk as well as the time value of money;
(iii)
businesses terminal value, assuming a perpetuity growth at the end of the free cash flow annual projection period. The previously mentioned discount rate is applied to the terminal value to obtain the net present value.
13
For additional information on the approach and the relevant forecasts used for the purposes of this valuation methodology, see Paragraph 3.4.
The enterprise value can be estimated adding the net present value of the projected free cash flows and terminal value.
In particular, with reference to Mediaset only, the discounted cash flow valuation has been performed on a “sum of the parts basis”, by performing two discounted cash valuations for Mediaset España and the Italian business (
i.e.
Mediaset business net of the stake held by Mediaset in Mediaset España).
The discounted free cash flow method leads to an enterprise value; hence, to compute the value of shareholders’ equity in order to determine the Exchange Ratios, customary adjustments (including, but not limited to, net financial debt adjusted for the Euro 0.31557917 dividend per share paid by Mediaset España on 30 April 2019 and for the buyback executed by Mediaset España
post
31 December 2018 and until 5 June 2019, minority interests, pensions liabilities and investments in associates and in other companies) have been made to the enterprise value.
The implied per share equity value was calculated by dividing such equity values by the number of Mediaset and Mediaset España ordinary shares outstanding (i.e. net of the respective number of treasury shares held as of 5 June 2019).
3.
DETERMINATION OF THE EXCHANGE RATIOS
3.1.
Introduction
The Merger will entail the allotment of DutchCo Ordinary Shares to Mediaset and Mediaset España shareholders (other than Mediaset, as the shares held by Mediaset in Mediaset España will be cancelled by operation of law pursuant to Section 2:325(4) of the Dutch Civil Code) in exchange for Mediaset and Mediaset España shares, which will be cancelled.
On the basis of the assumption that, in accordance with Exchange Ratio I, Mediaset shareholders will receive one (1) DutchCo Ordinary Share for each Mediaset share owned, the Board of Directors of Mediaset analysed, in the context of the Merger, the relative valuation of Mediaset and Mediaset España, aimed at determining the Exchange Ratio II between Mediaset España shares and DutchCo Ordinary Shares or, equivalently (given the Exchange Ratio I), between Mediaset España shares and Mediaset shares.
No additional consideration, either in cash or otherwise, will be paid by DutchCo, Mediaset and Mediaset España to the Mediaset and Mediaset España shareholders in connection with the Merger, without prejudice to the withdrawal rights, as described in Paragraph 11.
The treasury shares held by Mediaset and Mediaset España as at the Merger Effective Date, if any, will not be exchanged and will be cancelled pursuant to Article 2504-
ter
of the Italian civil code and Article 26 of the LME, respectively, as well as pursuant to Section 2:325(4) of the Dutch Civil Code.
3.2.
Application of the selected methodologies
Without prejudice to the considerations, assumptions and limitations described in the foregoing paragraphs, the following table sets forth a summary of the results achieved through the application of the various valuation methodologies described above for the purpose of determining the Exchange Ratio II, that is the number of the DutchCo Ordinary Shares to be issued for each Mediaset España share.
|
|
|
Range of Mediaset España Exchange Ratios
|
|
Methodology
|
|
(Exchange Ratio II)
|
|
|
|
|
|
(i) 1 month VWAP
|
|
2.19-2.68
|
|
|
|
|
|
(ii) 3 months VWAP
|
|
2.11-2.57
|
|
|
|
|
|
(iii) 6 months VWAP
|
|
2.05-2.50
|
|
|
|
|
|
(iv) research analyst target prices
|
|
2.14-2.62
|
|
|
|
|
|
(v) discounted cash flow
|
|
2.16-2.64
|
The range of Exchange Ratio II has been determined applying a +/- 10% to:
·
as far as historical stock prices, the exchange ratio between the VWAP for each period of analysis;
·
as far as research analyst target price, the exchange ratio between the medians of the each analysts panels;
14
·
as far as discounted cash flow, the exchange ratio between the central values resulting from the application of the DCF methodology.
The overlapping area of the Exchange Ratios resulting from the comparison of the relevant methodologies is between 2.19 and 2.50 (
Overlapping Range
).
3.3.
Exchange Ratios established
Considering the results of the valuation methodologies applied, the Boards of Directors of Mediaset, DutchCo and Mediaset España, after having examined the valuations set out in the Fairness Opinions issued by their respective financial advisors (
i.e.
Citi and JP Morgan), have resolved to propose:
·
the Exchange Ratio I of 1 (one) DutchCo Ordinary Share (having a nominal value of Euro 0.01) for each Mediaset share (having a nominal value of Euro 0.52); and
·
the Exchange Ratio II of 2.33 (two/thirtythree) DutchCo Ordinary Shares (having a nominal value of Euro 0.01 each) for each Mediaset España share (having a nominal value of Euro 0.50).
The Exchange Ratio II agreed among parties and hereby proposed falls within the Overlapping Range.
Each holder of ADRs representing Mediaset shares shall be granted such number of DutchCo ADRs representing DutchCo Ordinary Shares as results from the Exchange Ratio I.
No fractional DutchCo Ordinary Shares shall be allotted to any holders of shares of Mediaset España. Those shareholders who hold a number of Mediaset España shares such as to enable them to receive, in accordance with the Exchange Ratio II, a non-whole number of DutchCo Ordinary Shares, shall receive such whole number of DutchCo Ordinary Shares which is immediately below said non-whole number. Mediaset España shares (or any fractions thereof) in excess of those required, pursuant to the Exchange Ratio II, to receive a whole number of DutchCo Ordinary Shares (i.e., Mediaset España shares or any fractions thereof representing fractional entitlements to DutchCo Ordinary Shares) shall be transferred on behalf of the Mediaset España shareholders, through their depositaries, to the Fractions Agent.
The Fractions Agent, acting at its own risk and for its own account, shall pay in cash to these shareholders, in consideration for each of the Mediaset España shares (or any fractions thereof) so transferred, their market value. The Fractions Agent will, in turn, exchange the Mediaset España shares (and any fractions thereof) arising from the aggregation of such fractions so purchased and exchange them, in its own name and on its own behalf, for the relevant whole number of DutchCo Ordinary Shares resulting from the Exchange Ratio II, with any remainder fractional entitlements to DutchCo Ordinary Shares corresponding to the Mediaset España shares (or fractions thereof) held by the Fractions Agent being disregarded.
Based upon the Exchange Ratios, as indicated above, if the participation of Mediaset in Mediaset España remained unaltered, and provided that the number treasury shares held at the date of the Report by Mediaset (No. 44,071,568) and by Mediaset España (No. 14,269,073) is maintained as treasury shares and therefore such shares were cancelled upon effectiveness of the Merger, DutchCo would issue No. 1,472,925,998 DutchCo Ordinary Shares, with a nominal value of Euro 0.01 per share, resulting in a total nominal value of Euro 14,729,259.98 . The exact amount of the share capital increase will depend,
inter alia
, on the number of treasury shares held by Mediaset and Mediaset España at the Merger Effective Date.
3.4.
Difficulties and limits faced in evaluating the Exchange Ratios
Pursuant to Article 2501-
quinquies
, paragraph 2, of the Italian civil code, the challenges arising from the application of the valuation methodologies adopted to determine the Exchange Ratios have been taken into account.
In particular:
·
Mediaset issued (i) mid-term financial targets (2020) in January 2017 (limited to EBIT compared to 2016) and (ii) mid-term (2020-2021) guidelines in March 2019. Whilst Mediaset updates regularly the market on the guidance
vis-à-vis
targets and progress on previously communicated strategy, there is no full business plan for Mediaset and Mediaset España available for the purpose of the determination of the Exchange Ratios. Therefore, the valuation analysis, and the discounted cash flow methodology in particular, is based on projections resulting from the application of the following approach as agreed by Mediaset and Mediaset España respective managements:
·
for the period 2019-2021: projections derived from an extensive number of equity research reports, representing all the research reports about Mediaset and Mediaset España published by research analysts after the publication of full year 2018 results and
15
prior to 17 May 2019 (including those published after 1
st
quarter 2019 results), and reporting projections for the whole 2019-2021 period, with the exclusion from such panel of two equity research reports having the highest and lowest EBIT 2020 projections;
·
for the period 2022-2024: extrapolations in line with the current long-term expectations that the Italian and Spanish managements have on the respective businesses. In particular, the two managements have indicated a long-term top-line growth of 0.5% for the last year of projections (2024) whereas mostly of the other cash-flow items have been assumed to be in line with 2021 projections, in terms of percentage on sales, for the whole extrapolations period;
·
the approach described above was the same for both Mediaset and Mediaset España and has been agreed and validated by the respective managements of Mediaset and Mediaset España, who confirmed that the projections and extrapolations are broadly in line with their current long-term expectations, respectively, on the respective businesses. However, such forecasts are subject by nature to substantial uncertainty.
·
In consideration of the mechanics and timetable envisaged for the exercise of the right of withdrawal and creditor opposition, and since it is not possible to quantify their future impact in terms of cash outlay, the effects of the (potential) exercise of such rights by Mediaset shareholders who do not vote in favor of the Merger and by Mediaset España shareholders who vote against the Merger in their respective shareholders’ meeting have not been taken into account also considering that its impact has been estimated not material in the context of the overall evaluations leading to the determination of the Exchange Ratios.
·
The market prices of Mediaset and Mediaset España shares have been and are subject to volatility and fluctuations also as a result of the general trend in the capital markets; moreover it assumes that the market is sufficiently liquid and efficient. Therefore, it cannot be ruled out that, while the Exchange Ratios remains congruous based upon the methodologies used for their determination, the market value of the DutchCo Ordinary Shares to be assigned in exchange at the Merger Effective Date may result in a lower or higher market value as of the date on which the Exchange Ratios were set.
·
In relation to the share buyback program announced by Mediaset España, although the trading of Mediaset España shares might have been affected by the execution of such share buyback program, it is not possible to quantify the related impact and isolate it from other events that might have influenced the trading.
·
Different methodologies have been applied, both analytical and market-based, which have required the use of different data, parameters and assumptions. In applying such methodologies, the Board of Directors of Mediaset and Mediaset España considered the characteristics and limitations inherent in each of them, in accordance with professional valuation practice followed at national and international level.
·
The comparable companies trading multiples methodology was considered not relevant given that both Mediaset and Mediaset España are listed on an EU regulated market. In particular, the utilization of the trading multiples of comparable companies, although a commonly used valuation methodology, has the limit of being based on sector average ranges rather than on the peculiarities of Mediaset and Mediaset España, which are known to the market and theoretically reflected in their own trading multiples and share prices.
·
Also the transaction multiples methodology was considered not relevant given the limit of being based on sector average ranges rather than on the peculiarities of Mediaset and Mediaset España. Precedent transactions and historical takeover
premia
have been considered but not deemed relevant on the grounds that both Mediaset and Mediaset España shareholders would get MFE shares, hence they would participate in the value potentially created by the Merger via the shares they would get as consideration. Moreover, Mediaset is already the controlling shareholder of Mediaset España, hence no control premium would apply for a change of ownership.
·
A litigation between Mediaset and Vivendi S.A. is ongoing following the non-completion of a transaction involving Mediaset Premium. Should the outcome of the litigation be favorable to Mediaset, Mediaset may be recognized some monetary damage repair. Prudentially, the Board of Directors of Mediaset did not consider any proceeds from the litigation for the purpose of determining the Exchange Ratio.
·
In general, no evolution regarding any specific ongoing or potential litigations for both Mediaset and Mediaset España has been considered, given the uncertainty of their outcomes and timings.
16
·
Mediaset and Mediaset España tax losses carryforward and fiscal credits have been taken into consideration in the discounted cash flow valuation methodology. As far as Mediaset España tax losses carryforward utilization, we have not considered any limitation as per paragraph 8.1.2 and 8.2.1.
3.5.
Results obtained by the experts and Fairness Opinions
At the request of DutchCo, Deloitte will prepare a report in relation to the fairness of the Exchange Ratios in accordance with Section 2:328, paragraph 1, of the Dutch Civil Code. In addition, Deloitte will issue a second report in accordance with Section 2:328, paragraph 2, of the Dutch Civil Code. These reports will be made available to the public in accordance with applicable laws and regulations.
At the request of Mediaset, PwC will prepare a report in relation to the fairness of the Exchange Ratios as referred to in Article 2501-
sexies
of the Italian civil code and Article 9 of the Legislative Decree 108. This report will be made available to the public in accordance with applicable laws and regulations.
At the request of Mediaset España, Grant Thornton, as independent expert appointed by the Commercial Register of Madrid, will deliver a report on the Common Cross-Border Merger Plan (including on the fairness of the Exchange Ratio II), as referred to in Article 34 of the LME. This report will be made available to the public in accordance with applicable laws and regulations.
Citi, in its capacity as financial advisor of Mediaset, has delivered to the board of directors of Mediaset and to the board of directors of DutchCo a Fairness Opinion, dated 7 June 2019, on the basis of and subject to the factors, assumptions, limitations and procedures specified therein, on the fairness from a financial point of view, to the holders of shares in the capital of Mediaset, of the Exchange Ratio II (which — as indicated above — is predicated on Exchange Ratio I) in relation to the proposed Merger. A copy of the Citi Fairness Opinion is attached hereto as Schedule A (together with an Italian courtesy translation).
JP Morgan, in its capacity as financial advisor of Mediaset España, has provided to the board of directors of Mediaset España a Fairness Opinion, dated 7 June 2019, based on the factors, assumptions and procedures specified therein, on the fairness from a financial point of view, to the holders (other than Mediaset) of shares in the capital of Mediaset España, of the Exchange Ratio II in relation to the proposed Merger.
The Fairness Opinions do not constitute a recommendation as to how any director or shareholder should vote or act with respect to the Merger or any other matter and do not give rights to any third parties other than the respective clients (
i.e.
, the Board of Directors of Mediaset S.p.A. and Mediaset Investment N.V. and the Board of Directors of Mediaset España, respectively).
4.
CONSOLIDATED PRO-FORMA FINANCIAL INFORMATION FOR MEDIASET GROUP
This paragraph presents the relevant pro-forma income statement, statement of financial position and cash flow statement data of the group of companies headed by Mediaset (Mediaset Group) as at 31 December 2018 (the “
Pro Forma Consolidated Financial Data
”), as well as some notes to these statements.
The Proforma Consolidated Financial Data have been prepared in accordance with Communication No. DEM/1052803 of 5 July 2001 of the Italian Authority for the Supervision of Financial Markets (Consob), in order to retroactively reflect the significant effects of the Merger and related transactions on the historical data of the Mediaset Group. More specifically, the Pro Forma Consolidated Financial Data have been prepared to retroactively reflect the effects produced by the Merger as if it had taken place, in terms of effects on the balance sheet, on 31 December 2018 and, with reference only to the economic and cash flow effects, on 1 January 2018.
For a correct interpretation of the information provided by the Pro Forma Consolidated Financial Data, it is necessary to consider that:
i.
since these are representations based on assumptions, if the Merger had actually been carried out on the dates used as reference for the preparation of the Pro-forma Consolidated Data, rather than on the actual date, the historical data would not necessarily have been the same as the pro forma data;
ii.
the pro forma adjustments represent the most significant effects on the balance sheet and income
statement, as well as financial, directly related to the Merger;
iii.
the Pro Forma Consolidated Financial Data have been prepared for the sole purpose of providing
a representation of the identifiable and objectively measurable effects of the Merger, as if the Merger had taken place on the date indicated above in this paragraph. Therefore, the Pro Forma Consolidated Financial Data represent a hypothetical situation and, therefore, do not represent the actual financial situation or results of the Mediaset Group;
17
iv.
the Pro Forma Consolidated Financial Data do not reflect forward-looking data and are in no way intended to represent a forecast of the future financial, economic and asset situation of the Mediaset Group after the Merger;
v.
given the different purposes of the Pro Forma Consolidated Financial Data compared to the historical data included in the annual financial report and given the different methods of calculation of the pro forma adjustments made to the Mediaset Group’s Consolidated Financial Statements, the pro forma consolidated income statement, statement of financial position and cash flow statement should be examined and interpreted separately, without seeking accounting links between the income statement and the cash flow statement, and the balance sheet.
The Pro Forma Consolidated Financial Data have not been examined by the Independent Auditors.
The Pro forma Consolidated Financial Data shown below include:
·
the relevant historical data
(
Income Statement, Statement of Financial Position, Cash Flow Statement
) taken from the Consolidated Financial Statements of the Mediaset Group as at 31 December 2018, prepared in accordance with IFRS and audited by Deloitte & Touche S.p.A., which issued its unqualified report on 27 March 2019;
·
the pro-forma adjustments
applied to the historical data to reflect the effects of relevant transactions related to the Merger;
·
the Mediaset Group’s
Pro Forma Consolidated Financial Data
as at 31 December 2018.
The valuation criteria adopted for the preparation of the pro-forma adjustments and for the preparation of the Pro-Forma Consolidated Financial Data are the same as those applied in the Consolidated Financial Statements of the Mediaset Group as at 31 December 2018, to which reference should be made.
The Pro Forma Consolidated Financial Data below should be read in the light of the description of the assumptions and methods used to prepare them and the other information contained in this paragraph.
Unless otherwise indicated, the figures are shown in millions of euro.
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
Financial
|
|
|
|
|
Consolidated
|
|
|
|
Statement
|
|
|
|
|
Financial Statement
|
|
|
|
Merging
|
|
|
|
|
Mediaset Group
|
|
Total Pro-forma
|
|
Company
|
|
|
(Eur million)
|
|
(Historic)
|
|
Adjustment
|
|
(Pro-forma)
|
|
|
|
|
|
|
|
|
|
|
|
STATEMENT OF INCOME
|
|
|
|
|
|
|
|
|
|
|
3,401.5
|
|
—
|
|
3,401.5
|
|
|
Net Consolidated Reveneus
|
|
73.7
|
|
—
|
|
73.7
|
|
|
EBIT
|
|
67.0
|
|
—
|
|
67.0
|
|
|
EBT
|
|
597.7
|
|
—
|
|
597.7
|
|
|
Net Profit
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
Equity shareholders of the parent company
|
|
471.3
|
|
96.9
|
|
568.1
|
|
|
-
from continuing operations
|
|
-48.7
|
|
96.9
|
|
48.2
|
|
|
-
from discontinued operations
|
|
520.0
|
|
|
|
520.0
|
|
|
- Minority Interest
|
|
126.4
|
|
-96.9
|
|
29.5
|
|
|
-
from continuing operations
|
|
96.5
|
|
-96.9
|
|
-0.4
|
|
|
-
from discontinued operations
|
|
30.0
|
|
|
|
30.0
|
|
|
|
|
|
|
|
|
|
|
|
STATEMENT OF FINANCIAL POSITION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
|
|
5,252.1
|
|
—
|
|
5,252.1
|
|
|
|
|
|
|
|
|
|
|
|
Group Shareholders Equity
|
|
2,412.4
|
|
437.6
|
|
2,850.0
|
|
|
Minority Interest
|
|
443.7
|
|
-437.6
|
|
6.1
|
|
|
Total Shareholders’ Equity
|
|
2,856.1
|
|
—
|
|
2,856.1
|
|
|
Liabilities
|
|
2,396.0
|
|
—
|
|
2,396.0
|
|
|
Total Shareholders’ Equity and Liabilities
|
|
5,252.1
|
|
—
|
|
5,252.1
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW STATEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from operating activities (A)
|
|
1,241.7
|
|
—
|
|
1,241.7
|
|
|
Net cash flow from investing activities (B)
|
|
-738.6
|
|
—
|
|
-738.6
|
|
|
Net cash flow from financing activities (C)
|
|
-286.0
|
|
—
|
|
-286.0
|
|
|
Change in Cash and Cash Equivalents
(D=A+B+C)
|
|
217.1
|
|
—
|
|
217.1
|
|
18
Basic assumptions of the Pro Forma Consolidated Financial Data
The Merger, as a reorganisation of existing companies, does not give rise to any transfer of control of these companies, and essentially involves the acquisition of the shares held by the minority shareholders of Mediaset España in exchange for the issue of new shares in DutchCo, currently a wholly-owned subsidiary of Mediaset. The Merger will also involve the incorporation of Mediaset into DutchCo at the same time.
As indicated in paragraph 7 below, the Merger therefore constitutes a “business combination involving entities or businesses under common control” and, as such, is excluded from the mandatory scope of application of IFRS 3 - Business Combinations. Accordingly, the Pro forma Consolidated Financial Data have been prepared by applying the principle of continuity of values, which gives rise to the recognition in the balance sheet of assets and liabilities equal to those resulting from the Mediaset Group’s consolidated financial statements prior to the Merger.
Therefore, historical consolidated data of the Mediaset Group already include the consolidated data of the Mediaset España Group, as they are consolidated on a line-by-line basis: more specifically, since Mediaset held an interest equal to 51.63% of the share capital of Mediaset España at 31 December 2018, the portion of profit and shareholders’ equity relating to the Mediaset España Group to which they are entitled was allocated to the minority interests in the profit and shareholders’ equity prepared at that date.
Pro-forma adjustments
Taking into account the above, the
pro-forma adjustments
consist in highlighting the allocation to the Mediaset Group after the Merger of the minority interests in Mediaset España prior to the Merger.
More specifically, following the elimination of the minority shareholders of Mediaset España, as at 31 December 2018, the post-merger Mediaset Group would have been allocated a minority interest in the result for 2018 of 96.9 million euro and a minority interest in equity of 437.6 million euro.
At the level of the consolidated cash flow statement, the Merger does not entail any pro-forma adjustment.
Other effects
It should also be noted that the pro-forma adjustments do not include:
·
direct costs associated with the Merger, as they are not considered significant.
·
the effects deriving from the changes resulting from the Merger to the share-based incentive plans, as these changes will be implemented with the aim of substantially maintaining the fair value of the equity instruments unchanged without entailing accounting effects.
Finally, it should be noted that the Merger does not have a tax impact, as described in paragraph 8 below.
19
Pro-forma financial data per share
Below are the historical data per share of the Mediaset Group as at 31 December 2018 and the pro-forma data per share after the Merger as at 31 December 2018.
|
|
|
|
|
Pro-forma
|
|
|
(EUR per share)
|
|
Historic data
|
|
data
|
|
|
|
|
|
|
|
|
|
EPS (Net consolidated Income)
|
|
0.41
|
|
0.39
|
|
|
EPS (Net Consolidated Income from Continuing Operations)
|
|
-0.04
|
|
0.03
|
|
|
No. ordinary shares excluding treasury shares (EPS)
|
|
1,137,142,325
|
|
1,472,925,998
|
|
The historical and pro-forma data of the Net Results per share have been calculated on the basis of the Profit for the year attributable to the shareholders of the parent company and the total number of shares in circulation of the parent company, respectively,as at 31 December 2018 and following the Merger (as specified under Paragraph 3.3).
5.
ALLOCATION OF DUTCHCO SHARES TO MEDIASET AND MEDIASET ESPAÑA SHAREHOLDERS AND DATE OF DISTRIBUTION ENTITLEMENT
5.1.
DutchCo Ordinary Shares
Characteristics of DutchCo Ordinary Shares
As a result of the Merger becoming effective, by operation of law all Mediaset shares and Mediaset España shares currently issued will be cancelled and DutchCo will increase its share capital and will allot DutchCo Ordinary Shares in exchange of, respectively:
(i)
Mediaset shares (other than treasury shares, which shall be cancelled by operation of law and without any exchange pursuant to Section 2:325(4) of the Dutch Civil Code and Article 2504-
ter
of the Italian civil code) on the basis of the Exchange Ratio I, as specified under Paragraph 3; and
(ii)
Mediaset España shares (other than (i) treasury shares, which shall be cancelled by operation of law and without any exchange pursuant to Section 2:325(4) of the Dutch Civil Code and Article 26 of the LME; and (ii) shares held in Mediaset España by Mediaset, which will be cancelled by operation of law pursuant to Section 2:325(4) of the Dutch Civil Code) on the basis of the Exchange Ratio II, as specified under Paragraph 3.
The DutchCo Ordinary Shares to be allotted upon completion of the Merger will be issued with effect as of the Merger Effective Date in dematerialized form and delivered to the beneficiaries through the applicable centralized clearing systems organized by Monte Titoli S.p.A.,
Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A. U.
(
Iberclear
) and the relevant depositaries with which the shares of Mediaset and Mediaset España are held or deposited.
No fractional DutchCo Ordinary Shares shall be allotted to any holders of shares of Mediaset España. Those shareholders who hold a number of Mediaset España shares such as to enable them to receive, in accordance with the Exchange Ratio II, a non-whole number of DutchCo Ordinary Shares, shall receive such whole number of DutchCo Ordinary Shares which is immediately below said non-whole number. Mediaset España shares (or any fractions thereof) in excess of those required, pursuant to the Exchange Ratio II, to receive a whole number of DutchCo Ordinary Shares (i.e., Mediaset España shares or any fractions thereof representing fractional entitlements to DutchCo Ordinary Shares) shall be transferred on behalf of the Mediaset España shareholders, through their depositaries, to the Fractions Agent.
The Fractions Agent, acting at its own risk and for its own account, shall pay in cash to these shareholders, in consideration for each of the Mediaset España shares (or any fractions thereof) so transferred, their market value. The Fractions Agent will, in turn, exchange the Mediaset España shares (and any fractions thereof) arising from the aggregation of such fractions so purchased and exchange them, in its own name and on its own behalf, for the relevant whole number of DutchCo Ordinary Shares resulting from the Exchange Ratio II, with any remainder fractional entitlements to DutchCo Ordinary
20
Shares corresponding to the Mediaset España shares (or fractions thereof) held by the Fractions Agent being disregarded.
Without prejudice to the withdrawal rights described in Paragraph 11 — and aside from the DutchCo Ordinary Shares to be delivered in exchange for the Mediaset and Mediaset España shares — no additional consideration, either in cash or otherwise, will be paid by DutchCo, Mediaset or Mediaset España to the Mediaset and Mediaset España shareholders in connection with the Merger.
DutchCo will bear the costs of the exchange of Mediaset and Mediaset España shares for DutchCo Ordinary Shares other than any costs charged to the holders of shares of Mediaset and Mediaset España by their respective custodians.
The DutchCo Ordinary Shares issued to the shareholders of Mediaset and Mediaset España to service the Exchange Ratios will be entitled, as of the Merger Effective Date, to participate in the profits of DutchCo under the same terms and conditions as the existing DutchCo Ordinary Shares.
The ADRs representing DutchCo Ordinary Shares to be allotted upon completion of the Merger will be issued by the depository bank, effective as of the Merger Effective Date, in dematerialized form and delivered to the beneficiaries.
DutchCo treasury shares
The 90,000 DutchCo shares, held by Mediaset, and any additional DutchCo shares issued to or otherwise acquired by Mediaset hereafter and that are held by Mediaset at the Merger Effective Date, in part will be cancelled, in accordance with Section 2:325, paragraph 3, of the Dutch Civil Code, and in part will be split (and will have a nominal value of Euro 0.01 each) and will become DutchCo Ordinary Shares held as treasury shares.
According to Dutch law, the current articles of association of DutchCo and the proposed version of the articles of association of MFE, during the time that shares in DutchCo are held by DutchCo itself, these shares shall not be entitled to any distribution or voting rights. DutchCo treasury shares will be allocated to serve (i) the incentive plans indicated in Paragraph 12.3, (ii) trading and hedging operations, (iii) the Videotime Exchange Ratio (as defined below) in relation to the merger of Videotime S.p.A. in Mediaset (effective as of 1 March 2018), or may be offered and allocated for trading on the market after the Merger in accordance with applicable laws and regulations or used for any other purpose in compliance with the applicable laws and regulations.
On 1 March 2018 the merger by absorption of Videotime S.p.A., an Italian joint stock company (
società per azioni
), 99.2% owned by Mediaset (
Videotime
), in Mediaset (the
Videotime Merger
), became effective. As a result of the Videotime Merger, Videotime shareholders (other than Mediaset) have become entitled to receive 0.294 Mediaset shares for each Videotime share held (the
Videotime Exchange Ratio
).
Several former shareholders of Videotime have not yet requested and, thus, received Mediaset shares pursuant to the Videotime Exchange Ratio; therefore, at the Merger Effective Date, DutchCo will have to hold the necessary amount of treasury shares to serve such shareholders. It is envisaged that MFE will have to hold around No. 113,174 treasury shares to service former shareholders of Videotime.
In light of the foregoing, MFE is currently expected to hold, as at the Merger Effective Date, No. 5,000,000 treasury shares.
5.2. Special Voting Shares
In order to foster the development and continued involvement of a core base of long-term shareholders in a manner that reinforces the Group’s stability, the proposed version of the articles of association of MFE provide for a special voting structure (the
Special Voting Structure
). The purpose of the Special Voting Structure is to reward long-term ownership of DutchCo Ordinary Shares and to promote stability of the DutchCo shareholders-base by granting long-term DutchCo shareholders with Special Voting Shares (as defined below) to which multiple voting rights are attached in addition to the one granted by each DutchCo Ordinary Share that they will hold.
The characteristics of the Special Voting Shares are set out in the proposed version of the articles of association of MFE attached as
Schedule 2
to the Common Cross-Border Merger Plan and in the “
Terms and Conditions for Special Voting Shares
”, attached as
Schedule 5
to the Common Cross-Border Merger Plan.
5.2.1 The Special Voting Structure
More precisely, according to the Special Voting Structure:
(a)
Entitlement to 3 voting rights. Allotment of Special Voting Shares A
(i)
Initial Allotment
: the thirtieth calendar day after the Merger Effective Date, those Mediaset
21
and Mediaset España shareholders who have so requested prior to, respectively, the Mediaset Extraordinary Meeting and the Mediaset España General Meeting, will be entitled to 3 voting rights for each DutchCo Ordinary Share held. For this purpose, MFE will issue special voting shares attaching 2 voting rights each, having a nominal value of Euro 0.02 (
Special Voting Shares A
). On the thirtieth calendar day after the Merger Effective Date (the
Initial Allocation Date A
), such Special Voting Shares A will be allotted to those eligible Mediaset and Mediaset España shareholders;
(ii)
Subsequent Allotment
: as an alternative to the Initial Allotment procedure, described under (i), after three years of uninterrupted ownership as well as uninterrupted registration of DutchCo Ordinary Shares in a special loyalty register, shareholders of MFE will be entitled to 3 voting rights for each DutchCo Ordinary Share held. For this purpose, MFE will issue Special Voting Shares A. On the day falling three years after the registration of the DutchCo Ordinary Shares in a special loyalty register (the
Subsequent Allocation Date A
), such Special Voting Shares A will be allotted to those eligible MFE shareholders.
(b)
Entitlement to 5 voting rights. Allotment of Special Voting Shares B.
After two years of uninterrupted ownership of Special Voting Shares A — as well as of uninterrupted registration in a special loyalty register of the DutchCo Ordinary Shares for which such Special Voting Shares A have been allotted — shareholders of MFE will be entitled to 5 voting rights for each DutchCo Ordinary Share held. For this purpose, each Special Voting Share A held will be converted into one special voting share B attaching 4 voting rights, having a nominal value of Euro 0.04 (
Special Voting Shares B
). On the day falling two years after the date of allotment of Special Voting Shares A — whether it be the Initial Allocation Date A or the Subsequent Allocation Date A, as the case may be — such Special Voting Shares B will be acquired by those eligible MFE shareholders by way of conversion of Special Voting Shares A already held.
(c)
Entitlement to 10 voting rights. Allotment of Special Voting Shares C.
After three years of uninterrupted ownership of Special Voting Shares B — as well as uninterrupted registration in a special loyalty register of the DutchCo Ordinary Shares for which such Special Voting Shares B have been allotted — shareholders of MFE will be entitled to 10 voting rights for each DutchCo Ordinary Share held. For this purpose, each Special Voting Share B held will be converted into one special voting share C attaching 9 voting rights, having a nominal value of Euro 0.09 (
Special Voting Shares C
). On the day falling three years after the date of allotment of Special Voting Shares B, such Special Voting Shares C will be acquired by those eligible MFE shareholders by way of conversion of the Special Voting Shares B already held.
Special Voting Shares A, Special Voting Shares B and Special Voting Shares C are collectively referred to as
Special Voting Shares
.
Special Voting Shares are not part of the Exchange Ratios, as described under Paragraph 3.
5.2.2 Allotment of Special Voting Shares
Initial Allotment of Special Voting Shares A
Holders of Mediaset and Mediaset España shares who wish to receive Special Voting Shares A on the Initial Allocation Date A are required to follow the procedure described, respectively, in the “
Terms and Conditions for the initial allocation of special voting shares A
—
Mediaset
” and the “
Terms and Conditions for the initial allocation of special voting shares A
—
Mediaset España
”, attached as
Schedule 3
and
Schedule 4
, respectively, to the Common Cross-Border Merger Plan, as well as in the “
Terms and Conditions for Special Voting Shares
” attached as
Schedule 5
to the Common Cross-Border Merger Plan.
For this purpose, Mediaset and Mediaset España shareholders will have to:
(i)
transmit an election form (the
Initial Election Form
), which will be made available on the corporate website of Mediaset
(www.mediaset.it) and Mediaset España (www.telecinco.es), duly filled in and signed, to their respective depository intermediary in order for the latter to procure that the Initial Election Form is received by Mediaset or by Mediaset España, as the case may be, during the period starting from 15 July 2019 to 26 August 2019 (
i.e.
, the seventh business day prior to the Mediaset Extraordinary Meeting); and
(ii)
continuously own their Mediaset or Mediaset España shares (as well as the DutchCo Ordinary Shares received upon completion of the Merger in accordance with the Exchange Ratio I or the Exchange Ratio II, as the case may be), in relation to which allotment of Special Voting Shares A
22
will have been requested, during the period between the day when the Initial Election Form is transmitted to their respective depository intermediary and the Initial Allocation Date A.
In filling in the Initial Election Form, shareholders shall indicate the number of Mediaset or Mediaset España shares held in relation to which they wish to receive a corresponding number of Special Voting Shares A.
Once the Initial Election Form has been duly filled in and signed by requesting shareholders, it shall be received by Mediaset or by Mediaset España, through the respective depositary intermediary
— where the relevant shares are registered — within and no later than 26 August 2019.
The ownership of Mediaset or Mediaset España shares as of the date of transmission of the Initial Election Form to the depository intermediary will be attested by the depositary intermediary itself.
By signing the Initial Election Form, the requesting shareholder will also grant a power of attorney to an agent (the
Agent
) whereby he will irrevocably instruct and authorize the Agent to act on his behalf and to represent him in connection with the issuance, allocation, acquisition, conversion, sale, repurchase and transfer of Special Voting Shares in accordance with and pursuant to the
“
Terms and Conditions for Special Voting Shares
”. In accordance with the “
Terms and Conditions for Special Voting Shares
”, MFE will be entitled to entrust the Agent with such powers and duties (in whole or in part). The Agent will be entitled to represent MFE as well as to execute and sign all the relevant documentation relating to Special Voting Shares on behalf of MFE.
Mediaset and Mediaset España shares
— which, upon completion of the Merger, will be exchanged for DutchCo Ordinary Shares pursuant to the Exchange Ratio I and the Exchange Ratio II, respectively — in relation to which allotment of Special Voting Shares A at the Initial Allocation Date A has been requested, will be automatically registered in a separate register held by DutchCo pursuant to the “
Terms and Conditions for Special Voting Shares
” (the
Loyalty Register
).
As from the date on which DutchCo Ordinary Shares will have been registered in the Loyalty Register in the name of one and the same shareholder or his loyalty transferee (as defined in the
“
Terms and Conditions for Special Voting Shares
”), such DutchCo Ordinary Shares will become initial electing ordinary shares (
Initial Electing Ordinary Shares
). After an uninterrupted period of thirty days since the Merger Effective Date, such shares will entitle the relevant holder to be granted with a corresponding number of Special Voting Shares A, and will thus become qualifying ordinary shares A (the
Qualifying Ordinary Shares A
). On the same date, the relevant holder will receive one Special Voting Share A per each Qualifying Ordinary Share A held.
Mediaset and Mediaset España shareholders who exercise their withdrawal right in connection with the resolution to be adopted, respectively, by the Mediaset Extraordinary Meeting and Mediaset España General Meeting shall not be entitled to receive DutchCo Ordinary Shares nor, consequently, Special Voting Shares.
Subsequent Allotment of Special Voting Shares A
Following the completion of the Merger, shareholders of MFE who wish to receive Special Voting Shares A will have to request MFE to have their DutchCo Ordinary Shares registered (in whole or in part) in the Loyalty Register by submitting, through their respective depository intermediaries, an election form (the
Election Form
), which will be made available on the corporate website of Mediaset
(www.mediaset.it) and of Mediaset España (www.telecinco.es), duly filled in and signed.
The ownership of DutchCo Ordinary Shares as of the date of transmission of the Election Form to the depository intermediary will be attested by the depositary intermediary itself.
By signing the Election Form, the requesting shareholder will also grant a power of attorney to the Agent whereby he will irrevocably instruct and authorize the Agent to act on his behalf and to represent him in connection with the issuance, allocation, acquisition, conversion, sale, repurchase and transfer of Special Voting Shares in accordance with and pursuant to the
“
Terms and Conditions for Special Voting Shares
”. In accordance with the “
Terms and Conditions for Special Voting Shares
”, MFE will be entitled to entrust the Agent with such powers and duties (in whole or in part). The Agent will be entitled to represent MFE as well as to execute and sign all the relevant documentation relating to Special Voting Shares on behalf of MFE.
As from the date on which DutchCo Ordinary Shares will have been registered in the Loyalty Register in the name of one and the same shareholder or his loyalty transferee (as defined in the
“
Terms and Conditions for Special Voting Shares
”), such DutchCo Ordinary Shares will become electing ordinary shares (
Electing Ordinary Shares
). After 3 years of uninterrupted ownership — as well as of uninterrupted registration in the Loyalty Register — of Electing Ordinary Shares, such shares will become Qualifying
23
Ordinary Shares A and the relevant holder will receive one Special Voting Share A per each Qualifying Ordinary Share A held.
Allotment of Special Voting Shares B by way of conversion of Special Voting Shares A
After two years of uninterrupted ownership — as well as uninterrupted registration in the Loyalty Register — of Qualifying Ordinary Shares A, shareholders of DutchCo will be entitled to 5 voting rights for each Qualifying Ordinary Share A held. On the same date, Qualifying Ordinary Shares A will become qualifying ordinary shares B (
Qualifying Ordinary Shares B
) and the relevant eligible shareholder will receive 1 (one) Special Voting Share B by way of conversion of each of the Special Voting Shares A already held.
Allotment of Special Voting Shares C by way of conversion of Special Voting Shares B
After three years of uninterrupted ownership — as well as uninterrupted registration in the Loyalty Register — of Qualifying Ordinary Shares B, shareholders of DutchCo will be entitled to 10 voting rights for each Qualifying Ordinary Share B held. On the same date, Qualifying Ordinary Shares B will become qualifying ordinary shares C (
Qualifying Ordinary Shares C
and, jointly with Qualifying Ordinary Shares A and the Qualifying Ordinary Shares B, the
Qualifying Ordinary Shares
) and the relevant eligible shareholder will receive 1 (one) Special Voting Share C by way of conversion of each of the Special Voting Shares B already held.
5.2.3 Requirements of shareholders for the allotment of Special Voting Shares
Pursuant to Article 42.1 of the proposed version of the articles of association of MFE as well as to the “
Terms and Conditions for Special Voting Shares
”, each allotment of Special Voting Shares will be conditional upon requesting shareholders meeting the Qualified Shareholding Obligation and the Contract Obligation (both as defined under Paragraph 12.1).
The New Board of Directors of DutchCo (as defined under Paragraph 12.1) will refuse
(a)
the registration of one or more DutchCo Ordinary Shares in the Loyalty Register; and/or
(b)
the allocation of Special Voting Shares A; and/or
(c)
the conversion of Special Voting Shares A into Special Voting Shares B; and/or
(d)
the conversion of Special Voting Shares B into Special Voting Shares C, as the case may be, if the requesting shareholder (i) does not meet the Qualified Shareholding Obligation or will no longer meet the Qualified Shareholding Obligation as a result of the allocation of Special Voting Shares A, and/or the conversion of Special Voting Shares A into Special Voting Shares B, and/or the conversion of Special Voting Shares B into Special Voting Shares C, as the case may be, and/or (ii) does not meet the Contract Obligation.
In case of violation of the Qualified Shareholding Obligation, the refusal from the New Board of Directors of DutchCo will be limited to the number of DutchCo Ordinary Shares and/or of Special Voting Shares which will be held in violation of the Qualified Shareholding Obligation. For further information, please refer to the “
Terms and Conditions for Special Voting Shares
”.
5.2.4 Characteristics of the Special Voting Shares
Special Voting Shares will not be tradable on the Mercato Telematico Azionario and on the Spanish Stock Exchanges.
In connection with the issuance of Special Voting Shares, shareholders of MFE will not be required to pay the respective nominal value to MFE. In accordance with Article 13.4 of the proposed version of the articles of association of MFE, in fact, MFE will maintain a reserve in shareholders’ equity (the
Special Capital Reserve
) in order to pay up the nominal value of the Special Voting Shares to be allocated to holders of Qualifying Ordinary Shares.
However, Article 13.5 of the proposed version of the articles of association of MFE allows the holder of Special Voting Shares — the issuance of which has been charged on the Special Capital Reserve — to substitute such charge at any time by making an actual payment to MFE of a sum equal to the nominal value of the Special Voting Shares held (the
Special Shares Paid-up in Cash
). Pursuant to the applicable dispositions of the proposed version of the articles of association of MFE, Special Shares Paid-up in Cash will be the only Special Voting Shares to entitle the relevant holders to an economic entitlement.
In particular, pursuant to Article 28.2 of the proposed version of the articles of association of MFE, Special Shares Paid-up in Cash will give entitlement to a dividend equal to 1% of the nominal value actually paid. Such dividends, however, will be paid only insofar as the profits have not been appropriated in full to increase and/or form reserves.
Furthermore, pursuant to Article 41.4 of the proposed version of the articles of association of MFE, any residual amounts available after payment of all creditors of MFE in liquidation will be allocated as follows: firstly, the nominal value paid by holders of Special Shares Paid-up in Cash will be reimbursed; secondly, any outstanding amount will be proportionally reimbursed to holders of DutchCo Ordinary Shares.
24
Pursuant to Article 14.2 of the “
Terms and Conditions for Special Voting Shares
”, the “
Terms and Conditions for Special Voting Shares
” may be amended pursuant to a resolution by the New Board of Directors of DutchCo (as defined under Paragraph 12.1), only insofar as non-material and/or merely technical amendments are at stake. Material and/or not merely technical amendments will be subject to the approval of the general meeting of shareholders of MFE and of the combined meeting of holders of Special Voting Shares, except for amendments required to ensure compliance with applicable laws or listing regulations.
5.2.5 Transfer of Initial Electing Ordinary Shares, Electing Ordinary Shares, Qualifying Ordinary Shares and Special Voting Shares: cancellation from the Loyalty Register
Whilst DutchCo Ordinary Shares are freely transferrable, Special Voting Shares may not be transferred to third parties (except for limited circumstances).
In order to transfer Initial Electing Ordinary Shares, Electing Ordinary Shares or Qualifying Ordinary Shares, the relevant shareholder will have to request the de-registration from the Loyalty Register of its Initial Electing Ordinary Shares, Electing Ordinary Shares or Qualifying Ordinary Shares, as the case may be; after such de-registration, the relevant DutchCo Ordinary Shares will cease to be Initial Electing Ordinary Shares, Electing Ordinary Shares or Qualifying Ordinary Shares and shall be freely transferable.
Pursuant to the “
Terms and Conditions for Special Voting Shares
”, in case of transfer of (i) Initial Electing Ordinary Shares prior to the Initial Allocation Date A, or (ii) Electing Ordinary Shares prior to the Subsequent Allocation Date A (in both cases, with the exception of transfers to loyalty transferees, as defined in the “
Terms and Conditions for Special Voting Shares
”), as well as upon occurrence — prior to the same relevant dates — of a change of control over a shareholder, such shareholder will not be entitled to receive Special Voting Shares A.
Pursuant to the “
Terms and Conditions for Special Voting Shares
”, in case of transfer of Qualifying Ordinary Shares (with the exception of transfers to loyalty transferees, as defined in the “
Terms and Conditions for Special Voting Shares
”), as well as upon occurrence of a change of control over a shareholder, the voting rights attached to the Special Voting Shares shall be suspended with immediate effect and the Special Voting Shares shall be transferred to MFE without consideration (
om niet
).
For the sake of completeness, with respect to the initial allocation procedure of Special Voting Shares A, it shall be noted that the holder of Mediaset shares — in relation to which allotment of Special Voting Shares A at the Initial Allocation Date A is requested — can transfer such shares to his loyalty transferee (as defined in the “
Terms and Conditions for Special Voting Shares
”) without such transfer resulting in the loss of the entitlement to receive Special Voting Shares A. On the contrary, the holder of Mediaset shares — in relation to which allotment of Special Voting Shares A at the Initial Allocation Date A is requested — shall no longer be entitled to receive Special Voting Shares A upon the occurrence, over such shareholder, of a change of control. For further details, please refer to the “
Terms and Conditions for the initial allocation procedure of special voting shares A
” and to the “
Terms and Conditions for Special Voting Shares
”.
6.
EFFECTIVENESS OF THE TRANSACTION FOR THE PURPOSES OF THE DUTCHCO FINANCIAL STATEMENTS
According to Dutch applicable accounting regulations, the assets, liabilities and other legal relationships of Mediaset and Mediaset España will be reflected in the accounts and other financial reports of DutchCo as of the first day of the DutchCo’s financial year in which the Merger Effective Date has occurred, and, therefore, the accounting effects of the Merger will be recorded in DutchCo’s annual accounts from that date.
According to Italian applicable accounting regulations, the accounting effects of the Merger in Italy as regards Mediaset will be backdated as of the first day of DutchCo’s financial year in which the Merger Effective Date has occurred.
According to Spanish applicable accounting regulations (
Plan General de Contabilidad)
, the accounting effects of the Merger in Spain as regards Mediaset España will be backdated as of the first day of DutchCo’s financial year in which the Mediaset España General Meeting has approved the Merger.
Therefore, should the Merger Effective Date occur by the end of 2019, the accounting effects of the Merger in Spain, Italy and the Netherlands would be backdated to 1 July 2019; should the Merger Effective Date occur in 2020 instead, the accounting effects of the Merger in Italy and in the Netherlands would be backdated to 1 January 2020, while the accounting effects of the Merger in Spain would be backdated to 1 July 2019.
According to Article 172, paragraph 9, of Italian Presidential Decree No. 917 of 22 December 1986 (the
ITC
), the Merger Deed will provide that for the purposes of Italian income taxes the effects of the Merger
25
will be backdated to the first day of the tax period of the Absorbing Company in which the Merger Effective Date has occurred.
The DutchCo Ordinary Shares issued to the shareholders of Mediaset and Mediaset España in application of the Exchange Ratios will be entitled, as of the Merger Effective Date, to participate in the profits of DutchCo under the same terms and conditions as the existing DutchCo Ordinary Shares.
No particular rights to the dividends will be granted in connection with the Merger.
It is envisaged that, after the Merger Effective Date, MFE will make a distribution of a dividend, pursuant to Dutch law, for a total gross amount of Euro 100 million to all shareholders of MFE.
Shareholders of Mediaset and Mediaset España who will exercise their withdrawal rights in connection with the Merger will have no rights to dividends which will be potentially distributed after the Merger Effective Date.
7.
ACCOUNTING TREATMENT APPLICABLE TO THE TRANSACTION
DutchCo, Mediaset (both for consolidated and individual accounts) and Mediaset España (only for consolidated purpose) prepare their financial statements in accordance with IAS/IFRS.
Following the Merger, MFE will prepare its consolidated financial statements and its company only financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.
Under IFRS, the Merger consists in a reorganization of existing legal entities which does not give rise to any change of control, being DutchCo’s share capital currently entirely owned by Mediaset and being the majority of Mediaset España’s share capital currently owned by Mediaset; therefore, the Merger is outside the scope of application of IFRS 3 — Business Combinations. Any difference between the fair value of the newly-issued shares in DutchCo and the carrying value of the non-controlling interests attributable to the minority shareholders of Mediaset España (at the Merger date) will be recorded in an Equity Reserve as an equity transaction.
Accordingly, the assets and liabilities of Mediaset and Mediaset España will be recognized by DutchCo in its individual accounts within the limits of the carrying amounts detailed in the consolidated financial statements of Mediaset prior to the execution of the Merger.
The accounting effects of the Merger will be recorded in DutchCo’s annual accounts backdated at the beginning of the financial year in which the Merger will have become effective.
Mediaset Reorganization
From an Italian standpoint, the
principle of pooling of interest
applies to transaction between companies forming part of the same group as occurs in the envisaged contribution in-kind (
i.e
Mediaset Reorganization). According to this principle the contributing company (i.e. Mediaset) shall measure its equity investment in the newly incorporated Italian wholly-owned direct subsidiary at the net carrying amount at which the contributed items are recognized, in accordance to the accounting principles (i.e. IAS/IFRS) applied in the preparation of its individual annual accounts, at the transaction date. The acquirer company that will prepare its individual financial statement in accordance with IAS/IFRS, shall recognize those items at the same amount.
Mediaset España Segregation
From a Spanish standpoint, 21
st
Valuation Rule of the Spanish General Accounting Plan applies to transactions between companies forming part of the same group(1), as occurs in the envisaged non-monetary contribution (
i.e.
, Mediaset España Segregation). Consequently, the Mediaset España Segregation will be registered as follow:
·
the contributing company (
i.e.
, Mediaset España) shall measure its investment at the carrying amount at which the contributed items are recognized in the consolidated annual accounts at the transaction date, in accordance with the rules applied for consolidated annual accounts;
·
the acquirer (
i.e.
, GA Mediaset) shall recognize those items at the same amount;
(1) Pursuant to 13
th
standard for the preparation of annual accounts: “
for the purposes of presentation of a company’s annual accounts, another company shall be considered to form part of the group when there is a relationship of direct or indirect control between the two companies similar to that foreseen in article 42 of the Commercial Code for groups of companies, or when the companies are controlled by any means, by one or more individuals or legal entities in conjunction or which are solely managed in accordance with statutory clauses or agreements
”.
26
·
the consolidated annual accounts used for this purpose shall be those of the largest Spanish group or subgroup into which the items are integrated. In the event that preparation of those consolidated annual accounts is not required, pursuant to any of the exemptions provided for in the consolidation standards, the amounts recognized in the individual annual accounts of the contributing company prior to the transaction shall be used.
8.
TAX IMPACTS OF THE TRANSACTION
8.1 Italian tax implications
8.1.
Main tax implications of the Mediaset Reorganization
Income tax implications
According to Article 176 of Presidential Decree No. 917 of 22 December 1986 (the Italian Tax Code -
ITC
), the Mediaset Reorganization
— having as object the contribution in kind of a going concern - constitutes a neutral transaction for corporate income tax (
IRES
) purposes.
Therefore, the contributing company (
i.e.
, Mediaset) will not realize any taxable capital gain (even if a capital gain arises from an accounting perspective) and the receiving company will keep the original tax basis of assets and liabilities that they had in the hands of the contributor.
Furthermore, the Mediaset Reorganization will not be relevant for Regional income tax (
IRAP
) purposes.
However, the receiving company will be allowed to elect, both for IRES and IRAP purposes, for a step up of the tax basis of tangible and intangible assets (including goodwill) received through the Mediaset Reorganization, up to the book value attributed to such assets its balance sheet, by paying a substitutive tax at a rate ranging from 12% up to 16%.
Indirect tax implications
The Mediaset Reorganization is not subject to VAT, pursuant to Article 2 of Presidential Decree 26 October 1972, No. 633. However, a registration tax will be due at the nominal amount of Euro 200.00. If the Mediaset Reorganization implies the transfer of real estate assets, mortgage and cadastral taxes will be due at the nominal amount of Euro 200.00 each.
Joint liability regime
As a result of the Mediaset Reorganization, the receiving company will bear joint liability with the contributing company (
i.e.
, Mediaset), without prejudice to the prior enforcement of the contributing company, for both actual or potential Italian tax obligations (including penalties and interest) of the contributing company (
i.e.
, Mediaset) that are related to or challenged over the fiscal year in which the Mediaset Reorganization occurs or in the two preceding fiscal years.
Such joint liability will be limited to the value of the contributed going concern and may be further limited by applying to the Italian Tax Authorities (the
ITA
) requesting the issuance of a certificate stating the pending actual or potential Italian tax liabilities of the contributing company.
If the mentioned certificate does not report any pending actual or potential tax liability, the receiving company will not incur any joint liability at all. If any liability is shown in the certificate, the liability of the contributing company will be limited to the lower between:
·
the amount of the liabilities shown in the certificate; and
·
the value of the transferred going concern.
The limitation under the certificate applies with sole reference to tax related liabilities (and not with regard to commercial/social security liabilities) and may not be valid if it was claimed that the transaction was executed for fraudulent purposes
vis-à-vis
the ITA.
Implications on the Mediaset Fiscal Unit
The company receiving the contribution as result of the Mediaset Reorganization will be allowed to join the existing Mediaset Fiscal Unit (as defined at paragraph 8.1.2), as consolidated company, from the fiscal year in which such company is incorporated, provided that its incorporation occurs prior to the deadline for the filing of the income tax return (
i.e.
, 30 September 2019 if the Mediaset Reorganization is concluded in 2019). In this case, the receiving company will be required to elect to join the Mediaset Fiscal Unit together with Mediaset by such deadline.
27
Implications of the Mediaset Reorganization on the Mediaset VAT Group Liquidation
The Mediaset Reorganization will not trigger the early interruption of the Mediaset VAT Group Liquidation. The company receiving the contribution as result of the Mediaset Reorganization will be allowed to join the existing Mediaset VAT Group Liquidation, as a controlled company.
8.1.2
Main tax implications of the Merger
Income tax regime applicable to the Merger
i.
Tax neutrality/exit taxation
Since DutchCo is resident in Italy for tax purposes, the Merger will be subject to Italian tax rules ordinarily applicable to domestic and intra-EU mergers.
In particular, according to Article 172 and Article 178 of the ITC, mergers between Italian resident companies and mergers where an Italian resident company incorporates a company resident in another EU Country are tax neutral transactions for income tax purposes both for the companies involved in the merger and their shareholders(2)-(3). As a consequence:
a)
the Merger will not trigger the realization nor the distribution of taxable capital gains or deductible capital losses on the assets of the Merging Companies, including those related to inventories and goodwill;
b)
assets and liabilities which are transferred to DutchCo by Mediaset will keep the same tax basis that they had in the hands of Mediaset prior to the Merger. However, DutchCo, as the entity resulting from the Merger, will be allowed to elect for a step up of the tax basis of tangible and intangible assets, (including any goodwill, if accounted) received through the Merger, up to the book value attributed to such assets in the post-Merger balance sheet, by paying a substitutive tax at a rate ranging from 12% up to 16%. As the Merger will be a reverse merger, tangible and intangible assets whose tax value may be stepped-up are those owned by DutchCo prior to the Merger; and
c)
the assets and liabilities which are transferred by Mediaset España to DutchCo will have a tax basis equal to their fair market value as per Article 166-
bis
of the ITC.
ii.
Implications on tax attributes
Tax losses accrued (and not yet deducted) by DutchCo and Mediaset before the relevant joining the Mediaset Fiscal Unit (as defined below) as well as non-deducted excess interest expenses and ACE notional deductions not transferred to the fiscal unit, can be carried forward with the Merger and offset against the taxable income realized by the surviving company (
i.e.
, DutchCo):
a)
up to DutchCo’s and Mediaset’s respective net equity as resulting from the last annual financial statements preceding the Merger or from the financial statements that were to be prepared according to Article 2501 -
quater
of Italian civil code, if lower, without taking into account contributions/equity injections carried out in the last 24 months (s.c. “equity test”); and provided that
b)
DutchCo and Mediaset have booked, respectively, in their P&L accounts for the fiscal year prior to the Merger gross revenues and labor costs which were greater than 40% of the average of the same revenues and costs incurred in the two previous fiscal years (s.c. “vitality test”).
If one or both of the above companies do not meet the equity test and/or the vitality test, it is possible to file an
ad hoc
ruling with the ITA aimed at not applying the above limitations.
Tax losses accrued by Mediaset España before the Merger (and during its Spanish tax residence) shall not be carried forward by DutchCo.
iii.
Tax regime applicable to any merger deficit or merger surplus
Any merger surplus (
avanzo da fusione
) or merger deficit (
disavanzo da fusione
) accounted by DutchCo as result of the Merger will not be relevant for income tax purposes.
(2)
Without prejudice to tax regime applicable to the foreign absorbed company (
i.e.
, Mediaset España) in the other EU Country (see paragraph 8.2.2).
(3)
In case of cash adjustments (
conguagli in denaro
), Mediaset’s shareholders and the Medisaet España’s Italian shareholders will proportionally realize their participations. In such a case, the positive difference between the cash adjustment received and the tax basis of the participation realized is treated for tax purposes as: (i) a dividend distribution for individual and non-resident shareholders; or (ii) a capital gain for Italian corporate shareholders. For the applicable tax regime see paragraph 8.1.3 below.
28
The merger surplus shall be allocated with priority to certain equity reserves subject to a tax deferral regime (if any), as better described at sub-paragraph 8.1 .2(iv).
The merger deficit can be allocated for accounting purposes by DutchCo to the higher value of its own tangible and/or intangible assets and, upon election, also stepped-up for tax purposes by paying a substitute tax at a rate ranging from 12% to 16% (please see sub-paragraph 8.1.2(i) above)(4).
iv.
Taxation of equity reserves
As a general principle, reserves subject to an Italian tax deferral regime which are recorded in the balance sheets of Mediaset and DutchCo before the Merger must be reinstated by the resulting company (
i.e.
, DutchCo) by allocating to them the merger surplus (if any) and other equity items (where the merger surplus is not sufficient). If, and to the extent that, such reserves were not reinstated, such reserves would give rise to taxable income in the hands of the resulting company (
i.e.
, DutchCo).
Reserves subject to a tax deferral regime that are taxable only upon distribution (e.g. equity reserves recognized upon revaluation of specific assets) are instead taxable only in so far that the merger surplus is distributed or the amount of the capital increase of the resulting entity (for the portion exceeding the aggregate of the share capital of the merged companies) is repaid to the shareholders.
v.
Other relevant tax implications
As a general rule, the tax effects of the Merger can be backdated - for corporate income tax (
IRES
) and Regional income tax (
IRAP
) purposes - to a date that does not precede the year-end date of the financial year of the incorporated companies (
i.e.
, Mediaset and Mediaset España) or, if subsequent, the year-end date of the financial year of the incorporating company (
i.e.
, DutchCo) .
Therefore, assuming that the Merger will be executed by the end of 2019, the tax effects of the Merger will be backdated to 1 July 2019 (
i.e.
, the date following the year-end date of the last financial year of DutchCo).
The backdating effects of the Merger must be stated in the Merger Deed.
vi.
Indirect tax regime applicable to the Merger
The Merger is not subject to VAT, while registration tax will apply at the nominal amount of Euro 200.00.
vii.
Applicability of anti-abuse provisions
Under the Italian general anti-avoidance rules (the
GAAR
) an abuse of law may occur where one or more transactions show a lack of economic substance and although being formally in compliance with tax law, are essentially aimed at obtaining undue tax savings.
The GAAR provides that:
·
transactions are deemed to be lacking of economic substance where they consist of facts, acts and contracts, that are interconnected, and which do not generate significant effects other than tax savings; and
·
undue tax savings consist of tax benefits, (whether or not achieved in the short-run), obtained contrary to the object and purpose of tax provisions or the principles of the tax system.
If the above conditions are met, the ITA is entitled to:
·
disregard the tax treatment applied by the taxpayer to the transaction(s); and
·
claim the higher taxes (and administrative penalties) payable on the basis of the tax rules that have been circumvented by the taxpayer. In the context of the claim, the ITA must consider the taxes already paid by the taxpayer.
In the case at hand, the Merger is grounded on genuine business purposes (
i.e.
, purposes other than tax savings) as it falls within a wider reorganization process as explained under Paragraph 1 (
Description and Rationale of the Transaction
), and therefore, in principle it does not appear to be challengeable under the GAAR.
(4) The step-up regime does not apply to assets transferred by Mediaset España to DutchCo through the Merger, since the tax value of these assets in the hands of DutchCo will be equal to their relevant fair market value (see sub-paragraph 8.1.2(i)).
29
viii.
Liability of the entity resulting from the Merger vis-à-vis the ITA for any tax violations committed by the merged entities prior to the Merger
The company resulting from the Merger (
i.e.
, DutchCo) will inherit all the Italian tax obligations previously in the hands of the absorbed companies (
i.e.
, Mediaset and Mediaset España) including those relating to the payment of administrative penalties.
ix.
Implications of the Merger on the Mediaset Fiscal Unit
Mediaset has opted, as consolidating entity, for the domestic tax consolidation regime along with its Italian subsidiaries in accordance with Article 117 and ff. of the ITC (the
Mediaset Fiscal Unit
).
DutchCo has elected to join the Mediaset Fiscal Unit as a consolidated entity starting from the fiscal year 2018, by making the relevant election with Mediaset.
Therefore, any taxable income or tax loss realized by DutchCo with respect to the fiscal year 2018 will be transferred to the Mediaset Fiscal Unit and be subject to tax together with, or set-off against, the taxable income of the other participating companies at level of the Mediaset Fiscal Unit.
The early termination of DutchCo’s financial year at 30 June 2019 will determine the exit of DutchCo from the Mediaset Fiscal Unit starting from 2019 tax period. However, the realignment of its financial year to 31 December 2019 to be resolved by DutchCo (within 30 September 2019) will allow DutchCo to re-make the proper election to join the Mediaset Fiscal Unit, as consolidated entity, starting from the tax period 1 July 2019 — 31 December 2019.
A tax ruling will be filed with the competent ITA in order to obtain a confirmation that the merger of Mediaset with and into DutchCo does not trigger the early interruption of the Mediaset Fiscal Unit and that, consequently, the Mediaset Fiscal Unit will continue in the hands of DutchCo, as consolidating entity, without re-attribution of the tax losses carried forward by the Mediaset Fiscal Unit to the companies from which such losses have been originated.
x.
Implications of the Merger on the Mediaset VAT Group Liquidation
Mediaset has opted, as a controlling entity, for the VAT Group liquidation regime with its Italian subsidiaries in accordance with Article 73 of Presidential Decree No. 633 of 26 October 1972 (the
Mediaset VAT Group Liquidation
).
The Merger will not trigger the interruption of the Mediaset VAT Group Liquidation. Considering that DutchCo has joined the Mediaset VAT Group Liquidation starting from fiscal year 2019, and assuming that the Merger will be executed in the fiscal year 2019, based on the guidelines released by the ITA, the Mediaset VAT Group Liquidation regime shall continue in the hands of the company resulting from the Merger with respect to all group entities previously included in such regime.
8.1.3
Taxation of dividends and capital gains
Taxation of dividends distributed by DutchCo
The tax regime applicable to dividends distributed by DutchCo and capital gains realized on DutchCo’s shares will depend upon the nature and the tax residency of the shareholders and on the nature (qualifying or not qualifying) of the participations owned in DutchCo and can be summarized as follows.
i.
Italian tax resident individual shareholders
The tax regime applicable to dividends received by individuals, not holding the participation in connection with a business activity, depends on the tax periods in which distributed earnings have been accrued and on the qualifying or not qualifying nature of the participation owned(5). In particular, dividends received by:
(i)
shareholders owning a non-qualified participation are subject to a 26% final withholding tax(6)-(7);
(ii)
shareholders owning a qualified participation(8):
(5)
With respect to listed companies, a participation is “qualified” if the shareholder holds either more than 2% of the voting rights, or more than 5% of the share capital, in the relevant company.
(6)
In lieu
of the final withholding tax, the gross amount of dividend paid to Italian tax resident individual shareholders of Italian listed companies whose shares are registered in a centralized deposit system managed by Monte Titoli S.p.A. are generally subject to a 26% final substitute tax.
(7)
Dividends received by individual shareholders owning the shares within an asset portfolio for which they have opted for the
s.c.
“Risparmio Gestito
” are not subject to any withholding or substitutive tax and contribute to determine the annual net accrued result of the portfolio, which is subject to an
ad-hoc
26% substitutive tax.
(8)
Please note that dividends distributed after 31 December 2022 are subject to a 26% final withholding tax, (or substitutive tax), irrespective of the period in which they were accrued and the qualifying or non-qualified nature of the participation owned by the relevant shareholder.
30
a.
are included for 40% of their amount in the taxable income of the relevant shareholder if paid out of profits realized until the fiscal year ongoing on 31 December 2007;
b.
are included for 49.72% of their amount in the taxable income of the relevant shareholder if paid out of profits realized from the fiscal year following the one ongoing on 31 December 2007 until the fiscal year in course on 31 December 2016;
c.
are included for 58.14% of their amount in the taxable income of the relevant shareholder if paid out of profits realized in the fiscal year following the one ongoing on 31 December 2016; and
d.
are subject to a 26% final withholding tax if paid out of profits realized in the fiscal year following the one ongoing on 31 December 2017 (9)-(10).
Dividends received by individual shareholders who hold the shares in the context of their business activities are included in the taxable personal income (subject to progressive tax rates up to a 43% rate) to the extent of
(i)
58.14%, for profits realized from the fiscal year following the one ongoing on 31 December 2016;
(ii)
49.72%, for profits realized from the fiscal year following the one ongoing on 31 December 2007 up to the fiscal year in course on 31 December 2016;
(iii)
40%, for profits realized until the fiscal year ongoing on 31 December 2007(11).
ii.
Italian tax resident corporate shareholders
An amount equal to 5% of the dividends paid by DutchCo will be subject to Italian corporate income tax (
IRES
) at the ordinary 24% rate (with an effective tax rate equal to 1.2%) in the hands of any shareholder which is an Italian tax resident corporate entity (e.g. limited liability companies or joint stock companies)(12).
Dividends paid by DutchCo to IAS/IFRS adopter shareholders accounting DutchCo’s shares as trading securities, are entirely considered for the determination of the relevant IRES taxable base.
Dividends received by commercial partnerships, (
i.e.
, “
società in nome collettivo
” and “
società in accomandita semplice
”), are considered for the determination of the relevant taxable base, (allocated to the relevant partners on a look-through basis) to the extent of:
(i)
58.14%, for profits realized from the fiscal year following the one ongoing on 31 December 2016;
(ii)
49.72%, for profits realized from the fiscal year following the one ongoing on 31 December 2007 up to the fiscal year in course on 31 December 2016; and
(iii)
40%, for profits realized until the fiscal year ongoing on 31 December 2007(13).
Dividends are in principle not subject to Regional Income Tax (
IRAP
), unless the percipient is a bank or other financial entity.
iii.
Non-Italian tax resident individual shareholders
Dividends paid to non-Italian tax resident individual shareholders are generally subject to a final withholding tax at a rate of 26%. If the recipient can give evidence (by providing adequate documentation issued by the tax authorities of its country of residence) that it has paid a final tax abroad on the same dividends, the recipient may be refunded up to 11/26 of the withholding tax applied in Italy. Such withholding tax may be reduced according to the Double Tax Treaty entered into between Italy and the country of residence of the foreign shareholder, if applicable.
iv.
Non-Italian tax resident limited companies
As a general rule, dividends paid to non-Italian tax resident limited companies are subject to a 26% final withholding tax, which may be reduced to 1.2% provided that the recipient company is:
(a)
resident for tax purposes in another EU or EEA Member State that allows an adequate exchange of information with Italy and subject to corporate income tax in that other State; and
(b)
the beneficial owner of the dividends.
(9)
If DutchCo’s earnings reserves are accrued in different tax periods, dividends are considered to be firstly paid with earnings accrued earlier.
(10)
Dividends received by individual shareholders owning the shares within an asset portfolio for which they have opted for the
s.c.
“Risparmio Gestito
” are not subject to any withholding or substitutive tax and contribute to determine the annual net accrued result of the portfolio, which is subject to an
ad-hoc
26% substitutive tax.
(11)
If DutchCo’s earnings reserves are accrued in different tax periods, dividends are considered to be firstly paid with earnings accrued earlier.
(12)
For banks and financial intermediaries IRES applies at a 27.5% rate and, therefore, the effective tax rate on dividends is 1.375%.
(13)
If DutchCo’s earnings reserves are accrued in different tax periods, dividends are considered to be firstly paid with earnings accrued earlier.
31
Moreover, according to Italian domestic law provisions implementing the EU Parent-Subsidiary Directive, no withholding tax applies to the extent that the recipient company:
·
is resident for tax purposes in another EU Member State and subject, without being exempt, to corporate income tax in that State;
·
holds at least the 10% of corporate capital of DutchCo for an uninterrupted period of at least one year; and
·
is the beneficial owner of dividend payments.
In the other cases, the ordinary 26% withholding tax may be reduced according to the Double Tax Treaty entered into between Italy and the country of residence, if any.
Taxation of capital gains
i.
Italian tax resident individual shareholders
Capital gains realized by Italian tax resident individual shareholders upon disposal of the DutchCo shares will be subject to a substitute tax at a rate of 26%, regardless of whether their participation is qualified or not(14).
ii.
Italian tax resident corporate shareholders
If conditions set out in Article 87 of ITC are met, capital gains realized by Italian tax resident corporate shareholders will be subject to
IRES
only for the 5% of the relevant amount, with an effective tax rate equal to the 1.2% (the “
participation exemption regime
” or “
PEX
). If PEX requirements are met, any capital loss realized by Italian tax resident corporate shareholders will be not deductible for tax IRES purposes.
Capital gains realised by commercial partnerships, (
i.e.
, “
società in nome collettivo
” and “
società in accomandita semplice
”), with reference to participations having the PEX requirements are considered for the determination of the relevant taxable base, (allocated to the relevant partners on a look-through basis), for 49.72% of the relevant amount. If PEX requirements are met, any capital loss realized by Italian tax resident commercial partnerships will be not deductible for 50.28% of the relevant amount.
If the PEX requirements are not met, capital gains (and losses) on DutchCo’s shares will be entirely considered for the determination of taxable base of commercial corporate shareholders.
In principle, such capital gains or losses are not relevant for
IRAP
purposes.
iii.
Non-Italian tax resident shareholders (individuals and corporate)
Capital gains realized by non-Italian tax resident shareholders holding a “non-qualified shareholding” in a listed company (such as DutchCo) are tax exempt in Italy.
If such shares are no longer listed in a regulated market at the time of the relevant disposal (even as a consequence of a delisting), any capital gains on a non-qualified shareholding will not be subject to taxation in Italy if realized by: (i) shareholders who are resident in a country allowing for an adequate exchange of information with Italy for tax purposes; (ii) entities or international bodies set up in compliance with international treaties entered into force in Italy; (iii) institutional investors, whether or not subject to tax, established in a country allowing for an adequate exchange of information with Italy for tax purposes; and (iv) central banks or organizations also managing official State reserves.
Capital gains realized by non-Italian tax resident shareholders holding a qualified shareholding in DutchCo will be subject to a final 26% substitute tax, unless a Double Tax Treaty prevents Italy from taxing the capital gain.
8.2 Spanish tax implications
8.2.1
Main tax implication of Mediaset España Segregation
To the extent that the Mediaset España Segregation is carried out for sound business reasons and that the special regime of tax neutrality applicable to mergers, divisions, partial divisions, transfer of assets and exchanges of shares is not expressly waived up:
i.
the transfer of assets and liabilities to GA Mediaset will not give rise to any corporate income taxation (
CIT
) on capital gains and the difference between the market value of the assets and liabilities transferred by Mediaset España and their tax basis would be rolled-over to GA Mediaset.
(14) Capital gains realized by individual shareholders who opt for the
s.c.
“Risparmio Gestito
” contribute to determine the annual net accrued result of the portfolio, which is subject to an
ad-hoc
26% substitutive tax.
32
ii.
the value of securities representing the capital of GA Mediaset received by Mediaset España will be the same tax value the branch of activity had immediately before its contribution to GA Mediaset;
iii.
no TIVUL (local tax on the urban lands’ increased value) will be triggered upon the transfer of real estate properties from the transferring company to GA Mediaset; and,
iv.
GA Mediaset takeover the losses and other tax credits of the transferring company which has not been exhausted for tax purposes; in the event of tax losses carryforward, with some possible limitations(15).
For the application of this tax neutrality regime, GA Mediaset must notify such transaction to the Spanish Tax Authorities within three months of the registration of the public deed in which the Mediaset España Segregation is formalized.
Please note that, whether or not the special regime is applied, the Mediaset España Segregation will not be subject to VAT or to Capital Duty and will be subject to but exempt from any Transfer Tax or Stamp Duty that could be levied on the transfer of real estate or any other assets.
8.2.2
Main tax implication of the Merger
Tax implications for Mediaset group
To the extent that the Merger is carried out for sound business reasons and that the special regime of tax neutrality applicable to mergers, divisions, partial divisions, transfer of assets and exchanges of shares is not expressly waived up:
i.
no CIT taxation will be levied on capital gains arising from the transfer of GA Mediaset shares from Mediaset España to DutchCo, and the difference between the market value of those shares and their tax basis will be rolled-over to the acquiring company provided that GA Mediaset shares remain affected to a permanent establishment of DutchCo located in Spain; for this purpose, DutchCo should create a Spanish branch (the
Spanish Branch
) to which GA Mediaset shares are assigned;
ii.
although the Merger would imply the termination of any CIT group in Spain of which Mediaset España could be the parent company or the representative of the parent company, provided that all the entities belonging to the former group form part of the new one, the termination of the group will be neutral and the implications linked to the termination(16) will only be triggered when the new group is terminated.
For the application of tax neutrality regime, the Merger should be notified to the Spanish Tax Authorities within three months of the registration of the public deed in which the Merger is formalized.
Please note that, whether or not the special regime is applied, the Merger will not be subject to VAT or to Capital Duty and will be subject to but exempt from Transfer Tax or Stamp Duty.
Tax implications for minority shareholders
i.
Shareholders resident in Spain or in a member state of the European Union will benefit from the roll over relief under the tax neutrality regime and should attribute to the securities received the same value for tax purposes the securities exchanged had immediately before the Merger.
ii.
Shareholders resident in a country with which Spain has entered into a double taxation agreement which contains an exchange of information clause are exempt from taxation since the Merger involves the transfer of securities listed on the Spanish Stock Exchanges.
iii.
Shareholders resident in other countries are subject to Spanish NRIT at a 19% rate on the capital gain deriving from the difference between the market value of securities representing the capital of DutchCo received in exchange for securities representing the capital of Mediaset España and their tax basis.
(15) Specifically: (a) the amount of tax losses carryforward is reduced by the positive difference between the value of shareholders’ contributions corresponding to the stake held in the transferring company and its tax basis, and (b) GA Mediaset will not be able to offset any tax losses which had caused an impairment deductible for tax purposes in the hands of Mediaset España or in a different company of the group.
(16) As a general rule, intragroup results obtained by companies taxed under the CIT consolidation regime are eliminated from the group CIT taxable base and deferred until the tax year in which assets acquired within the group are transferred to a third party, or until the entity triggering the capital gain is transferred out of the group. When a tax group is terminated (i) any previous eliminations from the group CIT taxable base should be positively adjusted to the taxable base of the parties to the previous intra-group transactions, and (ii) each company should takeover the losses and other tax credits of the group in proportion to their contribution to the generation of the tax credit. The same applies to entities leaving the CIT group.
33
8.2.3
Taxation of dividends and capital gains
Distribution of dividends by DutchCo
i.
Corporate shareholders resident in Spain: dividends are exempt from CIT base provided that (i) the shareholder holds, directly or directly and indirectly, a minimum stake of at least 5% of the share capital or voting rights of the distributing entity (or with an acquisition value of at least EUR 20 million) which has been uninterruptedly held for a period of one year prior to the distribution, or completed afterwards; and (ii) the distributing company is subject to and not exempt from a tax of a similar nature to Spanish CIT at a nominal rate of at least 10% during the period in which the profits have been obtained.
If these requirements are not met, dividends are included in the CIT taxable base and taxed, generally, at a 25% tax rate.
Any Italian withholding tax levied by the distributing company upon the dividend distribution is creditable by the Spanish shareholder against its CIT liability up to the amount to be withheld in accordance with the Convention for the avoidance of double taxation entered into between Spain and Italy (15%) provided that it does not exceed the tax that would have been paid in Spain on the dividends distributed should they be Spanish-source dividends.
ii.
Individuals resident in Spain: dividends are included in the savings base of the PIT and be taxed under a scale of progressive tax rates: 19% for the first EUR 6,000 of taxable income; 21% for income between EUR 6,000 and 50,000; and 23% onwards.
Any Italian withholding tax levied by the distributing upon the dividend distribution is creditable by the shareholder against its PIT liability up to the amount withheld in accordance with the Convention for the avoidance of double taxation entered into between Spain and Italy (15%) provide it does not exceed the result of applying the average effective tax rate to foreign-source taxable income. For these purposes, the effective average tax rate is that. corresponding to the net savings taxable base.
Distribution of dividends by GA Mediaset
Dividends distributed by GA Mediaset to the Spanish Branch are exempt from taxation. Profits distributed by the Spanish Branch to DutchCo are will not be subject to Spanish Non-Resident Income Tax.
Transfer of the GA Mediaset shares
If GA Mediaset shares assigned to the Spanish Branch are moved outside the Spanish territory through the liquidation of the Spanish Branch, the gain resulting from the difference between the market value and the inherited tax basis of those shares is subject to Spanish Non-Resident Income Tax at a 25% tax rate.
If GA Mediaset shares assigned to the Spanish Branch are transferred, the gain realized may be subject to NRIT at a 25% tax rate (without entitlement to the Spanish participation exemption regime) on the difference between the fair value of the business at the time it was contributed to GA Mediaset and the tax basis of shares in GA Mediaset (
i.e.
, the historical tax basis of the business for the contributing entity). The amount of the capital gain that exceeds that difference should be eligible for the Spanish participation exemption, pursuant to article 21 of the CIT.
Pursuant to article 88.3 of the Spanish CIT Law, in order to mitigate double taxation, GA Mediaset would be entitled to make a negative adjustment in its CIT taxable base equal to the amount of the capital gain that has been subject to taxation in the hands of the contributing company (i.e., the Spanish Branch in case of transfer of shares). In order to mitigate the double taxation that may occur under the tax neutrality regime, the Spanish Branch may benefit from the following exemptions:
i.
CIT exemption applied to those dividends distributed against the income obtained by GA Mediaset from the transfer of assets received as a result of the contribution. This exemption will apply regardless of the stake held and the holding period.
ii.
CIT exemption applied to the capital gain arising from the transfer of GA Mediaset shares, provided that the income derived from the transfer of assets contributed has been taxed in GA Mediaset.
If double taxation has not been eliminated through these adjustments, GA Mediaset should be entitled to revert the adjustments made under the regime of the tax neutrality at the time of its dissolution or, prior to it, if it is able to prove that gains obtained by its former shareholder (i.e., Spanish Branch) in the transfer of the securities received in the contribution have been subject to taxation. In the latter case, the adjustment will not exceed the amount that was taxed in the hands of the shareholder.
34
8.3 Dutch tax implications
Tax residency of DutchCo
DutchCo is incorporated under the laws of the Netherlands and is therefore in principle a Dutch tax resident for Dutch tax purposes and subject to Dutch corporate income tax (
Dutch CIT
) and Dutch dividend withholding tax (
Dutch DWT
). However, because its place of effective management is located in Italy, DutchCo should be considered to be an exclusive resident of Italy on the basis of the tax treaty in place between Italy and the Netherlands (
Tax Treaty
)(17).
Dutch corporate income tax - General
Provided that DutchCo should not be considered a tax resident of the Netherlands pursuant to the Tax Treaty, DutchCo should not be subject to Dutch CIT save for any profits allocable to a permanent establishment or permanent representative in the Netherlands or any other specific sources of Dutch income. Based on the current facts and circumstances, DutchCo should not be subject to Dutch CIT.
Dutch tax consequences in relation to the Merger
The Merger should not result in any adverse Dutch tax consequences for DutchCo as DutchCo is not a tax resident of the Netherlands for Tax Treaty purposes and as the Merger does not involve any material Dutch assets or liabilities.
General remark on Dutch dividend withholding tax
DutchCo should in principle withhold Dutch DWT in respect of profit distributions in whatever kind or form on the basis that it is incorporated in the Netherlands. However, pursuant the Tax Treaty, profit distributions should effectively not be subject to Dutch DWT since DutchCo is resident in Italy for tax purposes, save from profit distributions made to Dutch (or deemed Dutch) tax resident shareholders. In the latter case, whereby DutchCo distributes profits to Dutch (or deemed Dutch) tax resident shareholders, DutchCo would generally be required to withhold Dutch DWT. A Dutch tax resident shareholder can generally credit Dutch DWT against its Dutch individual income tax (in case the Dutch shareholder is an individual) or Dutch CIT (in case the Dutch shareholder is an entity) liability, as applicable, and such shareholder is generally entitled to a refund in the form of a negative assessment of Dutch individual income tax or Dutch CIT, as applicable, to the extent that such Dutch DWT, together with any other creditable domestic and/or foreign taxes, exceeds such shareholder’s aggregate Dutch individual income tax or aggregate Dutch CIT liability.
Pursuant to domestic rules to avoid dividend stripping, Dutch DWT will only be credited against Dutch individual income tax or Dutch CIT, as applicable, exempted, reduced or refunded if the shareholder is the beneficial owner of the profit distribution.
9.
SHAREHOLDER STRUCTURE AND CONTROL OF MFE SUBSEQUENT TO THE TRANSACTION
The following table shows the current shareholdings of major shareholders of Mediaset as well as the related percentage of voting rights, on the basis of the publicly-available information, as of 7 June 2019.
|
Shareholder
|
|
% on the issued share capital
|
|
% voting rights
|
|
|
Fininvest S.p.A.
|
|
44.18
|
%
|
45.89
|
%
|
|
Simon Fiduciaria S.p.A.(*)
|
|
19.19
|
%
|
19.94
|
%
|
|
Vivendi S.A.
|
|
9.61
|
%
|
9.98
|
%
|
|
Mediaset (treasury shares)
|
|
3.73
|
%
|
n.a.
|
|
|
Other Shareholders(**)
|
|
23.29
|
%
|
24.19
|
%
|
(*)Vivendi S.A. (announcement dated 12 April 2018, as required by Article 120 of the TUF), in compliance with the Italian Media Authority Decision No. 178/17/CONS, signed a consulting agreement with Simon Fiduciaria S.p.A. and its sole shareholder Ersel SIM S.p.A., relating to the exercise of voting rights over the shares held by the fiduciary company according to the instructions given by Ersel SIM, through its Chairman. Vivendi S.A. has kept its right to instruct the fiduciary company on the exercise of voting rights at the shareholders’ meeting of Mediaset S.p.A. on matters for which the shareholders who did not take part in the decision are authorised to exercise their right of withdrawal.
(**) Within “Other Shareholders”, directors of the group who hold shares of Mediaset are included.
The following table shows the current shareholdings of major shareholders of Mediaset España, as well as the related percentage of voting rights on the basis of the publicly-available information, as of 7 June 2019,
(17)
On 8 May 1990 the Kingdom of the Netherlands and the Republic of Italy concluded an agreement for the avoidance of double taxation and with respect to taxes on income and on capital and for the prevention of fiscal evasion. The tax treaty entered into force on 3 October 1993 with effective date of 1 January 1993. We note that the OECD Multilateral Instrument (
MLI
) may amend the terms of the Tax Treaty in the near future. However, based on the current facts and circumstances and provided that Italy has reserved the right for Article 4 (Dual resident entities) of the MLI not to apply to the Tax Treaty, the MLI should not impact the Italian tax residence of DutchCo for the purposes of the Tax Treaty.
35
and taking into consideration the effects of the buyback announced by Mediaset España on 24 January 2019 and executed until 5 June 2019.
|
Shareholder
|
|
% on the issued share capital
|
|
% voting rights
|
|
|
Mediaset
|
|
51.63
|
%
|
53.98
|
%
|
|
Mediaset España (treasury shares)
|
|
4.36
|
%
|
n.a.
|
|
|
Other Shareholders(*)
|
|
44.01
|
%
|
46.02
|
%
|
(*) Within “Other Shareholders”, directors of the group who hold shares of Mediaset España are included.
The following table shows the expected shareholdings of major shareholders of MFE, as well as the related percentage of voting rights, following the Merger Effective Date. The calculation is based on the proposed Exchange Ratios and assumes the cancellation (i) of Mediaset and Mediaset España treasury shares and (ii) of any shares in either of the absorbed companies (
i.e.
, Mediaset and Mediaset España) held by the other absorbed company, as well as the holding by MFE of No. 5,000,000 treasury shares. Nevertheless, it remains subject to the effects of the potential exercise of the withdrawal rights. The calculation has been made regardless the effect deriving from the allocation of the Special Voting Shares. For further information on the Special Voting Shares, please refer to Paragraph 5.
|
Shareholder
|
|
% on the issued share capital
|
|
% voting rights
|
|
|
Fininvest S.p.A.
|
|
35.31
|
%
|
35.43
|
%
|
|
Simon Fiduciaria S.p.A.(*)
|
|
15.34
|
%
|
15.39
|
%
|
|
Vivendi S.A.
|
|
7.68
|
%
|
7.71
|
%
|
|
MFE — MEDIAFOREUROPE N.V.
|
|
0.34
|
%
|
n.a.
|
|
|
Other Shareholders
|
|
41.33
|
%
|
41.47
|
%
|
(*)Vivendi S.A. (announcement dated 12 April 2018, as required by Article 120 of the TUF), in compliance with the Italian Media Authority Decision No. 178/17/CONS, signed a consulting agreement with Simon Fiduciaria S.p.A. and its sole shareholder Ersel SIM S.p.A., relating to the exercise of voting rights over the shares held by the fiduciary company according to the instructions given by Ersel SIM, through its Chairman. Vivendi S.A. has kept its right to instruct the fiduciary company on the exercise of voting rights at the shareholders’ meeting of Mediaset S.p.A. on matters for which the shareholders who did not take part in the decision are authorised to exercise their right of withdrawal.
In particular, upon completion of the Merger, Fininvest S.p.A. — which, as of 7 June 2019 holds a participation in the issued capital of Mediaset equal to 44.18% and voting rights equal to 45.89% — will hold an amount of DutchCo Ordinary Shares equal to 35.31% and voting rights equal to 35.43% (subject to the effects of the exercise of the withdrawal right as well as to the cancellation of (i) Mediaset and Mediaset España treasury shares held at the Merger Effective Date and (ii) any shares in either of the absorbed companies —
i.e.
, Mediaset and Mediaset España — held, at the Merger Effective Date, by the other absorbed company).
As a consequence of the Special Voting Structure, the voting power of a shareholder of MFE will depend on the extent to which the shareholders will take part to the Special Voting Structure in MFE. For further information as regards the Special Voting Shares issued by MFE and the relative impact on MFE’s ownership structure, please refer to Paragraph 5.
10.
EFFECTS OF THE TRANSACTION ON SHAREHOLDERS’ AGREEMENTS
On the basis of the information available to the public, as of the date of this Report, no shareholders agreements pursuant to Article 122 TUF have been executed in relation to Mediaset.
On the basis of the information available to the public, as of the date of this Report, no shareholders agreements have been executed in relation to Mediaset España.
11.
EVALUATION ON THE WITHDRAWAL RIGHTS — SHAREHOLDERS ENTITLED TO EXERCISE WITHDRAWAL RIGHTS
Withdrawal right of Mediaset shareholders
Mediaset shareholders who do not participate in the adoption of the resolution on the Merger will be entitled to exercise their withdrawal rights pursuant to Article 2437, paragraph 1, of the Italian civil code, and Article 5 of Legislative Decree 108, given that MFE, as resulting company from the Merger, will be organized and managed under the laws of a country other than Italy (
i.e.
, the Netherlands) (the
Withdrawing Shareholders
).
In accordance with Article 2437-
bis
of the Italian civil code, Withdrawing Shareholders may exercise their withdrawal right, in relation to some or all of their shares, by sending a notice via registered mail to the official seat of Mediaset no later than 15 days following registration with the Companies’ Register of Milan
36
of the minutes of the Mediaset Extraordinary Meeting approving the Merger. Notice of the registration will be published in a daily newspaper and on the Mediaset corporate website.
Shareholders exercising their withdrawal rights must submit a specific communication - to be issued by an authorized intermediary - stating the continuous ownership of the shares for which the shareholder has exercised his withdrawal right from prior to the Mediaset Extraordinary Meeting to the date of the notification. Further details for the exercise of the withdrawal right will be provided to Mediaset shareholders in accordance with the applicable laws and regulations.
Mediaset shares in relation to which the withdrawal right is exercised shall not be sold or disposed until they are either transferred or it has been verified that the conditions precedent will not be satisfied or waived, as applicable.
In accordance with Article 2437-
ter,
paragraph 3, of the Italian civil code, the redemption price payable to Withdrawing Shareholders will be equal to Euro 2.770 per each Mediaset share. The redemption price has been determined by referring to the arithmetic average of the daily closing prices of Mediaset shares during the six-month period prior to the date of publication of the notice for convening the Mediaset Extraordinary Meeting (envisaged for 4 September 2019).
Once the 15-day exercise period has expired and before the Merger becomes effective, the shares with respect to which withdrawal rights have been exercised will be offered by Mediaset to its existing shareholders and subsequently, if any such shares remain unsold, they may be offered to third parties; potential outstanding and unsold shares will be acquired by MFE at the redemption price. The above offer and sale procedure, as well as any payment of the redemption price to Withdrawing Shareholders, will be conditional upon completion of the Merger.
If the Merger is not consummated, the shares in relation to which the withdrawal rights have been exercised will continue to be held by the shareholders who exercised such rights; no payment will be made to such shareholders and Mediaset shares will continue to be listed on the Mercato Telematico Azionario.
Withdrawal right of Mediaset España shareholders
Mediaset España shareholders who vote against the Merger in the Mediaset España General Meeting will be entitled to exercise their withdrawal rights pursuant to Article 62 of the LME (the Mediaset España shareholders who make use of this right shall hereinafter be referred to as the
ME Withdrawing Shareholders
).
In accordance with Article 348 of the LSC, Mediaset España shareholders may exercise their withdrawal rights, in relation to some or all of their shares, within one month of the publication in the Official Gazette of the Commercial Register (
Boletín Oficial del Registro Mercantil
— the
BORME
) of the approval of the Merger by the Mediaset España General Meeting, by means of a written notice to the relevant depositaries with which the ME Withdrawing Shareholders have their shares deposited.
Given the exceptional character of the withdrawal rights, the Mediaset España shares of the ME Withdrawing Shareholders will be immobilized by the depositaries with which the relevant withdrawn shares are deposited, from the date of exercise of the withdrawal right until payment of the redemption price and settlement of the transaction (or until it has been verified that the conditions precedent to the Merger have not been satisfied and, should it be the case, not waived). The document by virtue of which the ME Withdrawing Shareholders exercise the right of withdrawal must contain an instruction to the relevant depositary to immobilize the withdrawn shares in order for the withdrawal right to be deemed validly exercised.
In accordance with Article 353.2 of the LSC, in connection with applicable securities market regulations, the redemption price payable to the ME Withdrawing Shareholders is Euro 6.5444 per Mediaset España share, which corresponds to the average trading price of Mediaset España shares during the three-month period prior to (and excluding) the date of the approval of the Common Cross-Border Merger Plan and the announcement of the Transaction, deducting the dividend in the gross amount of Euro 0.31557917 per Mediaset España share paid on 30 April 2019 from the average weighted price for the trading sessions comprised between 7 March and 25 April 2019 (both inclusive), where the Mediaset España shares were traded
cum dividend.
The ME Withdrawing Shareholders shall receive the redemption price through the relevant depositaries before the Merger Effective Date.
If it has been verified that the conditions precedent to the Merger will not be satisfied or waived, as applicable, and provided the redemption price has not been paid to the ME Withdrawing Shareholders yet, the Mediaset España shares in relation to which the withdrawal rights have been exercised will continue to be held by the corresponding ME Withdrawing Shareholders, will cease to be immobilized and will
37
continue to be listed on the Spanish Stock Exchanges. Consequently, in this case, no payment of redemption price will be made to ME Withdrawing Shareholders.
Once the withdrawn shares have been acquired by Mediaset España, these shares then held as treasury shares could be subsequently transferred to third parties (shareholders or not) pursuant to any purchases or prior commitments to purchase by such third parties, as deemed appropriate by the board of directors of Mediaset España if it is determined to be beneficial to the corporate interest of Mediaset España and the Transaction.
Withdrawal right of DutchCo shareholders
The Merger will not trigger any withdrawal rights for the sole shareholder of DutchCo.
12. IMPACT OF THE TRANSACTION ON THE SHAREHOLDERS, CREDITORS AND EMPLOYEES
Pursuant to Article 8 of the Legislative Decree 108, the impact of the Merger on the current shareholders, creditors and employees of Mediaset and Mediaset España is described below.
12.1 Impact of the Transaction on shareholders
Rights to which Mediaset and Mediaset España shareholders will be entitled as a consequence of the Merger
Current rights of Mediaset shareholders (who will become shareholders of MFE) will change following the Merger Effective Date as a consequence of the Dutch nationality of MFE and the proposed version of the articles of association of MFE. There are some differences between the current rights enjoyed by the Mediaset shareholders and the rights to which they will be entitled as holders of DutchCo Ordinary Shares and the protections guaranteed in accordance with Italian law to the current shareholders of Mediaset may not be available (or, in any case, may differ from) those available under Dutch law.
In this regard, the following most significant differences should be noted: (i) the shareholders’ meetings of MFE will be held in Amsterdam or Haarlemmermeer (Schiphol Airport), the Netherlands, (ii) shareholders of MFE will be subject to a higher threshold for the exercise of their right to convene the meeting (10%) and only after being authorized to do so by the court in preliminary relief proceedings, compared to the current rights applicable to the Mediaset shareholders (5%), (iii) pursuant to Dutch law, no discipline is contemplated which specifically regulates the solicitation of proxies, while pursuant to Italian law one or more shareholders of Mediaset (or Mediaset or any other authorised subject) or any other entitled person whatsoever can solicit proxies by shareholders, subject to express rules and regulations, (iv) shareholders of MFE will not have a right of withdrawal similar to that of the shareholders of Mediaset in the circumstances foreseen under Italian legislation, (v) Mediaset shareholders who requested to benefit from the multiple voting mechanism, as approved by the general meeting of shareholders of Mediaset on 18 April 2019, will lose their entitlement as a consequence of the Merger becoming effective, without prejudice to their right to request the assignment of Special Voting Shares, in accordance with the conditions provided under Paragraph 5, and (vi) the directors of DutchCo will no longer be appointed through the voting list system which is currently provided for in the articles of association of Mediaset.
In addition to the above, the proposed version of the articles of association of MFE provides for certain specific dispositions, and namely:
(i)
the prohibition for shareholders — whether on their own or together with persons acting in concert — to hold, at any time, directly or indirectly, a participation in MFE representing a percentage of DutchCo Ordinary Shares and/or of voting rights which:
·
is in excess of the percentage permitted by any provision of law (including laws safeguarding media pluralism and antitrust law) which is applicable to
(a)
MFE and/or
(b)
any of its group companies, and/or
(c)
shareholders of MFE and/or
(d)
Mediaset and/or Mediaset España, as legal predecessors of MFE; and/or
·
is in violation of a decision, issued by any authority, which is applicable to
(a)
MFE, and/or
(b)
any of its group companies, and/or
(c)
shareholders of MFE, and/or
(d)
Mediaset and Mediaset España, as legal predecessors of MFE.
(the
Qualified Shareholding Obligation
);
(ii)
the obligation, on part of any shareholder of MFE, to always act in compliance with any contractual arrangements relating to the DutchCo Ordinary Shares held by such shareholder which is effective between such shareholder and MFE (including, for the avoidance of doubt, any contractual arrangements inherited by MFE from Mediaset and/or Mediaset España — and originally relating to shares issued by the same —, as legal predecessors)
38
(the
Contractual Obligation
);
(iii)
the possibility that the New Board of Directors of DutchCo (as defined below) resolve to suspend the voting rights (as well as the rights to participate at the general meetings of MFE) attached to DutchCo Ordinary Shares — or to Special Voting Shares, if received — held by shareholders acting in violation of the Qualified Shareholding Obligation and/or the Contractual Obligation.
With respect to the differences between the current rights enjoyed by the Mediaset España shareholders and the rights to which they will be entitled as holders of DutchCo Ordinary Shares, please refer to the “
Comparative table of the rights to which shareholders of Mediaset, Mediaset España and MFE are entitled
”, attached as
Schedule 1
to the “Questions and Answers” relating to the Merger, which will be prepared by Mediaset in accordance with Article 127-
ter
, paragraph 2, of TUF and will be made available on the Mediaset corporate website (www.mediaset.it).
For further information on the rights and obligations of shareholders subsequent to the Merger, please refer to the proposed version of the articles of association of MFE attached to the Common Cross-Border Merger Plan as
Schedule 2.
Furthermore, additional information will be available on Mediaset corporate website (www.mediaset.it) through the “Questions and Answers” relating to the Merger, which will be prepared by Mediaset in accordance with Article 127-
ter
, paragraph 2, of TUF.
As to the new shareholder structure and control of DutchCo subsequent to the Merger, please refer to Paragraph 9, while as to the tax impacts on shareholders, please refer to Paragraph 8.
Corporate bodies of MFE
Before the completion of the Merger, the general meeting of shareholders of DutchCo shall appoint a new board of directors of DutchCo which will take office effective as from the Merger Effective Date (the
New Board of Directors of DutchCo
).
MFE will have a one-tier board, consisting of executive and non-executive directors. The directors shall hold office for a period not exceeding four years and could be re-appointed.
The New Board of Directors of DutchCo shall consist of a minimum of 7 to a maximum of 15 directors.
On the Merger Effective Date — or in the period immediately afterwards — it is expected that the New Board of Directors of DutchCo shall establish an audit committee and a compensation and nominating committee within its members. The New Board of Directors of DutchCo shall have the power to establish other committees, determining the related tasks and powers, it being understood that, in any event, the board of directors shall remain fully responsible for the decisions taken by these committees.
MFE shall adopt a policy regarding the remuneration of the members of the board of directors. With due observance of such remuneration policy, the board of directors is authorized to decide on the remuneration of directors in relation to the performance of their duties. MFE shall not grant personal loans or guarantees to its directors except in the normal course of business and after approval by the board of directors.
Auditors of MFE
MFE will adopt a system of governance which does not foresee a board of statutory auditors and therefore no board of statutory auditors will be appointed (without prejudice to the appointment of the audit committee within the New Board of Directors of DutchCo).
In accordance with the proposed version of the articles of association of MFE, an external auditor is appointed by the general meeting of shareholders of MFE in order to examine the annual financial statements prepared by the board of directors, report to the board of directors with respect to the annual financial statements and express an opinion. In this connection, the general meeting of shareholders of DutchCo, held on 17 April 2019, ratified the appointment of Deloitte for financial year 2018; Deloitte will become the auditor of the Group on the Merger Effective Date. The main terms and conditions of the engagement, including the term of office, shall be determined by the New Board of Directors of DutchCo.
For further information on the new corporate governance structure following the Merger, please refer to the proposed version of the articles of association of MFE, attached to the Common Cross-Border Merger Plan as
Schedule 2.
Furthermore, additional information will be made available on Mediaset corporate website (www.mediaset.it) prior to the Mediaset Extraordinary Meeting through the “Questions and Answers” relating to the Merger, prepared by Mediaset in accordance with Article 127-
ter
, paragraph 2, of TUF.
Dutch corporate governance code
The Dutch corporate governance code contains best practice principles for listed companies. The principles may be regarded as reflecting the general views on good corporate governance and create a set of standards governing the conduct of the respective corporate bodies of a listed company.
39
The application of the Dutch corporate governance code is based on the so-called “comply-or-explain” principle. Accordingly, listed companies are required to disclose, in their annual board report, whether or not they are complying with the various best practice principles of the Dutch corporate governance code. If a company deviates from a best practice principle in the Dutch corporate governance code, the reason for such deviation must be properly explained in the annual board report.
The Board of Directors of Mediaset acknowledges the importance of good corporate governance. The Board of Directors of Mediaset agrees with the general approach and with the majority of the provisions of the Dutch corporate governance code. However, considering DutchCo’s interests and the interest of its shareholders, it is expected that the Senior Non-Executive Director — unlike what is provided for under the Dutch corporate governance code — will not be an independent director.
Main provisions on mandatory tender offers under Dutch law and the proposed version of the articles of association of MFE
The Dutch Act on Financial Supervision contains provisions under which, in summary, a shareholder who has predominant control over a listed public company, is obliged to launch a public takeover bid for all the other shares. The purpose is to ensure that all shareholders benefit from the control premium. According to the Act on Financial Supervision predominant control means that a shareholder can exercise 30% or more of the voting rights in a general meeting of shareholders. The articles of association may also provide for other (and additional) thresholds, which can, however, not replace the statutory threshold.
In order to better safeguard the position of minority shareholders, article 43 of the new articles of association of MFE will include mandatory bid provisions providing that acquisition of predominant control includes the acquisition of the right to exercise either directly or indirectly 25% or 30% of the voting rights in MFE as from the announcement date of the Merger (i.e. 7 June 2019) (calculated on the basis of the Exchange Ratios and the shareholdings held on such date). Following such acquisition of predominant control an obligation to launch a public takeover bid is triggered. These provisions do not replace the statutory mandatory offer provisions of the Act on Financial Supervision, that as described above, will be triggered at a threshold of 30% of the voting rights, but which will only be applicable after completion of the Merger and listing of the ordinary shares of MFE.
The provisions of the Act on Financial Supervision (
Wet op het financieel toezicht
) and the Dutch Public Takeover Bid Decree (
Besluit openbare biedingen Wft
) will also apply to the public takeover bid that is made following the mandatory offer provisions in the articles of association.
Exempted from the obligation to launch a public takeover bid is — in line with the statutory mandatory offer rules of the Act on Financial Supervision — such shareholder who decreases its interest below the applicable threshold within 30 calendar days, as well as a party that made a public takeover bid and as a result can exercise more than fifty percent of the voting rights in the general meeting of shareholders of the company.
In addition, a person who, either on its own or together with persons acting in concert, already holds predominant control of at least 30% at 7 June 2019 (calculated on the basis of the Exchange Ratios and the shareholdings held on such date) will be exempted from making a public takeover bid. Also a person who, either on its own or together with persons acting in concert, already holds predominant control of at least 25% but below 30% at 7 June 2019 (calculated on the basis of the Exchange Ratios and the shareholdings held on such date) will be exempted from making a public takeover bid, save that such person will be obliged to make a public takeover bid if he crosses the 30% threshold after 7 June 2019. On the other hand, any person who does not hold predominant control of at least 25% at 7 June 2019 (calculated on the basis of the Exchange Ratios and the shareholdings held on such date) and crosses the 25% threshold after 7 June 2019 will be obliged to make a public takeover bid.
Furthermore, Article 43 of the new articles of association stipulates that anyone holding ordinary shares in violation of the Qualified Shareholding Obligation, and/or the Contract Obligation and at the same time exceeds a predominant control threshold, must take action to lose such predominant control within 5 days upon written request from MFE. Failing to do so will authorise the board of directors to dispose of the excess shares in order to have the relevant person to lose predominant control.
Any shareholder who is obliged to make a mandatory offer must notify the company immediately.
12.2 Impact of the Transaction on creditors
Mediaset creditors
Mediaset creditors, whose claims precede the registration of the Common Cross-Border Merger Plan with the Companies’ Register of Milan, will be entitled to oppose the Merger pursuant to Article 2503 of the Italian civil code within 60 days from the date on which the resolution of the Mediaset Extraordinary Meeting has been registered with the Companies’ Register of Milan, unless Mediaset has deposited the
40
necessary amounts to satisfy its opposing creditors with a bank. Should an opposition to the Merger be made, the competent Court — provided that the risk of prejudice to creditors is deemed ungrounded or adequate guarantees have been given by the company in order to satisfy its creditors — may nonetheless authorize the Merger despite the opposition, pursuant to Article 2503 of the Italian civil code in conjunction with Article 2445 of the Italian civil code.
Mediaset España creditors
Mediaset España creditors whose non-secured credits arose before publication of the Common Cross- Border Merger Plan on the Mediaset España corporate website and were not due and payable before such date will be entitled to oppose the Merger in the terms provided for under Article 44 of the LME.
DutchCo creditors
DutchCo creditors will have the right to oppose the Merger by filing a formal objection to the Common Cross-Border Merger Plan with the local Court of Amsterdam, the Netherlands, pursuant to Section 2:316 of the Dutch Civil Code, within a period of one month starting from the day following the day of publication, on a Dutch national newspaper, of a notice regarding the filing of the Common Cross-Border Merger Plan. DutchCo may need to provide security to opposing creditors if DutchCo’s financial condition after the Merger will provide less security for payments of amounts owed to the relevant opposing creditor. Should creditor’s opposition be filed in time, the Merger Deed may not be executed unless the Court ruling to release the opposition has immediate effect or the opposition is withdrawn.
12.3 Impact of the Transaction on employees
Article 19 of Legislative Decree 108 and Title IV of Spanish Law 31/2006 of 18 October on the involvement of workers in European joint-stock companies and cooperatives do not apply to the Merger, since DutchCo, as the surviving company in the Merger, is a Dutch company (and not an Italian or a Spanish company) and neither Mediaset nor Mediaset España nor DutchCo apply an employee participation system within the meaning of the Directive.
Mediaset
—
impacts of the Mediaset Reorganization and incentive plans
By virtue the Mediaset Reorganization, NewCo Italia will substantially assume the same business organization as Mediaset’s in terms of human resources, policies and procedures that have been in force as regards personnel management. Therefore, the Merger is not expected to have any material impact on the employees of Mediaset (whereby such employees are currently envisaged to be employees of NewCo Italia upon completion of the Mediaset Reorganization). Currently DutchCo does not have any employees.
The communication procedure to trade unions, as provided for under Article 2112 of the Italian civil code and Article 47 of Italian Law No. 428 of December 29, 1990, as subsequently amended, will be carried out by Mediaset and NewCo Italia with respect to the Mediaset Reorganization.
Since, upon completion of the Mediaset Reorganization, Mediaset is not currently envisaged to have any employees, the mentioned communication procedure to trade unions will not have to be repeated by Mediaset and DutchCo with respect to the Merger.
In accordance with the provisions of Article 8 of Legislative Decree 108, the present Report will be made available to Mediaset employees at least 30 days prior to the Mediaset Extraordinary Meeting.
Mediaset has adopted (i) the 2015-2017 medium-long term incentive plan (the
2015-2017 Plan
) and (ii) the 2018-2020 medium-long term incentive plan (the
2018-2020 Plan
), each of which is divided into three-year cycles, for the benefit of the executives (both of Mediaset and of its subsidiaries) who are in charge of functions that are significant for achieving the Group’s strategic results.
By way of implementation of the second three-year cycle (2016-2017-2018) of the 2015-2017 Plan, the beneficiaries of such plan will receive, during the course of 2019 and before the Merger Effective Date, Mediaset shares pursuant to the terms and conditions set forth under the plan and in the regulation thereof. Such shares will be exchanged for DutchCo Ordinary Shares pursuant to the Exchange Ratio I.
Taking into consideration the effect of the Merger on the implementation of the 2015-2017 Plan and the 2018-2020 Plan, the Board of Directors of Mediaset, upon release of a favourable opinion by the Remuneration Committee, pursuant to the relevant regulations, resolved to suspend the implementation of the third three-year cycle of the 2015-2017 Plan and the 2018-2020 Plan.
It is envisaged that the New Board of Directors of DutchCo, upon release of an opinion by its compensation and nominating committee, pursuant to the relevant regulations, (i) with respect to the 2015- 2017 Plan (and to third three-year cycle of the same), will make appropriate adjustments in order to maintain substantially unchanged the respective economic content (to the extent possible), according to the rules commonly accepted in the financial markets, and (ii) with respect to the 2018-2020 Plan, will resolve, acting in the best interest of the group, whether to make appropriate adjustments in order to
41
maintain substantially unchanged the respective economic content (to the extent possible) or to cancel the plan, thus determining the procedure for early settlement. It is envisaged that the New Board of Directors of DutchCo will adopt the relevant resolutions within the end of the semester following the Merger Effective Date.
The incentive plans adopted by Mediaset will not be transferred to NewCo Italia in the context of the Mediaset Reorganization and therefore will remain in Mediaset and will be transferred to MFE following the Merger.
Mediaset España
—
impacts of the Mediaset España Segregation and incentive plans
The merger of Mediaset España with and into DutchCo is not expected to have any material impact on the employees of Mediaset España because due to the Mediaset España Segregation all employees will be transferred by operation of law to GA Mediaset.
The Merger, together with the Mediaset España Segregation, will be notified by Mediaset España to the relevant labor authorities and the General Treasury of the Social Security (
Tesorería General de la Seguridad Social)
.
The information referred to in Article 39 of the LME and Article 44.6 of the Spanish Law of the Workers’ Statute as regards the Merger (and the Mediaset España Segregation) will be made available to Mediaset España’s workers’ representatives before the call of the Mediaset España General Meeting is published.
Mediaset España has adopted (i) the 2017-2019 long term incentive plan, (ii) the 2018-2020 long term incentive plan, and (iii) the 2019-2021 long term incentive plan (collectively, the
ME Plans
), for the benefit of the executives (both of Mediaset España and its subsidiaries) who are in charge of functions that are significant for achieving the group’s strategic results.
The Board of Directors of Mediaset España, upon release of a favourable opinion by the appointment and remuneration committee, has resolved to suspend the implementation of the ME Plans. This resolution, which is expressly contemplated in the regulations applicable to the ME Plans, has been adopted in light of the effects that the Merger could have on the ME Plans.
It is envisaged that the New Board of Directors of DutchCo, upon release of an opinion by its compensation and nominating committee, will resolve that (i) the 2017-2019 long term incentive plan will be amended in order to maintain substantially unchanged the respective economic content (to the extent possible), according to the rules commonly accepted in the financial markets; (ii) as regards the 2018-2020 and 2019-2021 long term incentive plans, acting in the best interest of the group, whether to make appropriate adjustments in order to maintain substantially unchanged the respective economic content (to the extent possible) and/or to implement an early settlement of any of the plans.
It is envisaged that the board of directors of MFE will adopt the relevant resolutions within the end of the semester following the Merger Effective Date.
MFE
MFE may approve new stock incentive plans for directors and/or employees of MFE. Newly issued DutchCo Ordinary Shares and/or treasury shares of MFE may be used to serve these plans.
13. ADDITIONAL TRANSACTION FEATURES
Upon the completion of the Merger, MFE plans to make a distribution of a dividend, pursuant to Dutch law, for a total gross amount of Euro 100 million to all shareholders of MFE.
In addition, after the completion of the Merger, MFE plans to launch a buy-back program for a maximum aggregate amount of Euro 280 million (less the aggregate amount necessary to purchase the withdrawn shares, if any). MFE will buy back shares up to a maximum price per share of Euro 3.4.
In the context of the Transaction, Mediaset España announces the discontinuation on 5 June 2019 of the share buy-back program disclosed by it on 24 January 2019.
In line with the current dividend policy, the following factors will be taken into consideration in connection with MFE’s future dividend policy: group profits, free cash flow generation, any financial or other economic commitments and potential strategic investments. Unless contingent circumstances (including the above) suggest adopting a different policy, the remuneration of the shareholders, through ordinary dividends or other technical forms, will not be lower than 50% of the net consolidated profits in any year.
42
14. PROPOSED RESOLUTION
The proposed resolution to be submitted to your approval is attached to the present Report.
Milan, 7 June 2019
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On behalf of the Board of
|
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Directors
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the Chairman
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Fedele Confalonieri
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43
** * **
Proposal of resolution
“The shareholders’ meeting
resolves
1.
to approve the common cross-border merger plan (together with the annexes thereto, including the proposed version of the articles of association of Mediaset Investment N.V.) relating to the merger by absorption of “Mediaset S.p.A.” and “Mediaset España Comunicación, S.A.” with and into “Mediaset Investment N.V.” (which will — upon effectiveness of the merger — be renamed “MFE - MEDIAFOREUROPE N.V.”), a Dutch wholly-owned direct subsidiary of “Mediaset S.p.A.”, having its official seat in Amsterdam (the Netherlands) and its principal offices at viale Europa 46, 20093 Cologno Monzese (Milan — Italy), registered in the Dutch commercial register under number 70347379, which, as a result of the merger, will issue maximum No. 1,500,000,000 ordinary shares, with a nominal value of Euro 0.01 (one Euro cent) per share; each of such ordinary shares will carry entitlement to participation in the profits potentially distributed as from the first day of the financial year in which the merger will have become effective, and will be allotted in dematerialized form and delivered, through the applicable centralized clearing system, in application of the respective share exchange ratios and the procedures for the assignment of the shares, as set out in the common cross-border merger plan, to:
(i)
shareholders of “Mediaset S.p.A.”, other than the company itself, without any additional payment in cash, without prejudice to the exercise of the withdrawal right pursuant to Article 2437, paragraph 1, of the Italian Civil Code and to Article 5 of the Italian Legislative Decree no. 108/2008; and
(ii)
shareholders of “Mediaset España Comunicación, S.A.”, other than the company itself and “Mediaset S.p.A.”, without any additional payment in cash, without prejudice to the exercise of the withdrawal right pursuant to Article 62 of Spanish Law 3 April 2009, No. 3 (as subsequently amended) and to Articles 348 ss. of the Royal Legislative Decree 2 July 2010, No. 1;
2.
to acknowledge that the surviving company will be entitled to issue, in addition to the ordinary shares and in accordance with its new articles of association and the “Terms and Conditions for Special Voting Shares”, attached to the common cross-border merger plan as
Schedule 2
and
Schedule 5,
respectively, special voting shares A, with nominal value of Euro 0.02 (two Euro cents) each, to which multiple voting rights will be attached in addition to the one granted by each ordinary share, to be assigned to eligible shareholders of the surviving company, other than the company itself, who have requested to receive them; special voting shares A, which will not be part of the share exchange ratios and will not be tradable on the market, will be convertible into Special Voting Shares B, with nominal value of Euro 0.04 (four Euro cents) each, to which a greater amount of voting rights than those granted by each special voting share A will be attached; special voting shares B will be convertible into Special Voting Shares C, with nominal value of Euro 0.09 (nine Euro cents) each, to which a greater amount of voting rights than those granted by each special voting share B will be attached;
3.
to establish that the completion of the merger and the subsequent payment of the withdrawal rights referred to under No. 1) above will be conditional upon the satisfaction of the conditions precedent set out in Paragraph 17.1 of the common merger plan, without prejudice to the fact that Mediaset and Mediaset España may jointly waive the conditions set out in Paragraph 17.1, sub (iv) and (v);
4.
not to open negotiations with regard to arrangements of co-determination of employees, in accordance with Section 2:333k paragraph 12 of the Dutch Civil Code, and therefore no special negotiation body will be set up and the reference provisions of Section 1:31 subsections 2 and 3 of the Employee Involvement (European Companies) Act will apply;
5.
to grant the board of directors with any and all authority and power necessary or even only appropriate in order to waive the satisfaction of the conditions precedent to the effectiveness of the merger, as set out in Paragraph 17.1, sub (iv) and (v) of the common cross-border merger plan;
6.
to grant to the board of directors, and on its behalf to its Chairman and its Chief Executive Officer pro tempore in office, as well as to the director Marco Giordani, severally and not jointly — each of them being entitled to appoint special attorneys to this end — with all other necessary powers in order to execute the merger, in accordance with the applicable laws and the contents of the mentioned common merger plan, and with the power and authority — in particular — to verify and ascertain the satisfaction or the waiver (to the extent provided) of each condition precedent referred to in the common merger plan, to issue and sign deeds and statements with respect to such circumstance, to
44
establish the effects of the transaction, to execute and sign deeds and documents in general and to carry out anything necessary, or even only appropriate, in order to properly complete the transaction
”.
45
Schedule A
Copy of the Fairness Opinion issued by Citi on 7 June 2019.
46
7 June 2019
The Board of Directors
Mediaset S.p.A.
via Paleocapa, 3
20121 Milan
Mediaset Investment N.V.
Viale Europa 46
20093 Cologno Monzese (Milan)
To the attention of the Board of Directors of Mediaset S.p.A. and of the Board of Directors of Mediaset Investment N.V.:
You have requested our opinion as to the fairness, from a financial point of view, to the holders of ordinary shares of Mediaset S.p.A. (
“Mediaset”
) of the Merger Exchange Ratio (as defined below) set forth in the Plan of Merger (as defined below) proposed to be entered into among Mediaset, Mediaset Investment N.V. (
“DutchCo”
) and Mediaset España Comunicacion S.A. (
“Mediaset
España”).
As more fully described in the tripartite common cross-border plan of merger (the
“Plan of Merger”),
each of Mediaset and Mediaset Espana will be simultaneously merged by way of incorporation into DutchCo in a single transaction (the
“Merger”
) and:
(i)
as to the merger of Mediaset, each outstanding ordinary share of Mediaset will be converted into the right to receive one ordinary share of DutchCo (“
DutchCo Ordinary
Share”
) (the
“Mediaset Italy Exchange Ratio”);
and
(ii)
as to the merger of Mediaset España, each outstanding ordinary share of Mediaset Espana will he converted into the right to receive 2.33 DutchCo Ordinary Shares (as predicated on the Mediaset Italy Exchange Ratio, the
“Merger Exchange Ratio”).
Mediaset is the controlling entity of DutchCo and Mediaset España and, in particular, Mediaset holds: (a) the entire share capital of DutchCo, a company incorporated under the laws of the Netherlands; and (b) approximately 51.63% of the share capital of Mediaset España, a company incorporated under the laws of Spain. In accordance with applicable laws and regulations: (i) any shares held by Mediaset in Mediaset España (or any shares held by Mediaset España in Mediaset, if any) and any treasury shares held by Mediaset and Mediaset España, in each case as at the effective date of the Merger will not be exchanged in the Merger and will be cancelled; and (ii) any shares held by Mediaset in DutchCo as at the effective date of the Merger, in part will be cancelled, and in part will be split into DutchCo Ordinary Shares and held as treasury shares. We have assumed, with your consent, that DutchCo will hold 5,000,000 DutchCo Ordinary Shares as treasury shares.
In this transaction structure, as presented to us by management of Mediaset: (i) DutchCo will operate merely as a vehicle of Mediaset for the purpose of causing the resulting company of the Merger to be incorporated in the Netherlands and, since DutchCo is a wholly owned non-operating subsidiary of Mediaset with substantially no assets or liabilities, the shareholders of Mediaset will receive DutchCo Ordinary Shares at an exchange ratio of one DutchCo ordinary share per each Mediaset ordinary share, representing a merely arithmetical exchange ratio whose
Citigroup Global Markets limited
Registered to England with number 1763297
Registered office Citigroup Centre, Canada Square, London E14 5LB
Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority
determination did not involve the relative valuation of Mediaset and DutchCo; and (ii) the Mediaset Espa
ña shareholders will receive DutchCo ordinary shares at the Merger Exchange Ratio, which reflects the relative valuation of Mediaset (including its wholly owned subsidiary DutchCo) and Mediaset España and assumes that the holders of Mediaset ordinary shares will receive one DutchCo Ordinary Share per each Mediaset ordinary share held. Therefore, from the perspective of the holders of Mediaset ordinary shares, the Merger Exchange Ratio effectively represents the ratio at which, in the Merger, the Mediaset España ordinary shares will indirectly be exchanged for Mediaset ordinary shares, and Mediaset and DutchCo have been regarded as one and the same party to the Merger for the purposes of the valuation. As such, our opinion relates only to the relative values of Mediaset (including DutchCo) and Mediaset España and to the fairness, from a financial point of view, to the holders of ordinary shares of Mediaset of the Merger Exchange Ratio.
As detailed in the Plan of Merger, the Merger is conditional upon a number of condition precedents, including,
inter alia:
(i) the admission to listing and trading on the
Mercato Telematico Azionario
organized and managed by Borsa Italiana S.p.A. (the
‘‘Italian Stock Exchange”
) of the DutchCo Ordinary Shares; (ii) that shareholders of Mediaset and Mediaset España exercising their withdrawal right in relation to the Merger and creditors of Mediaset and Mediaset España exercising their right of opposition to the Merger. in accordance with applicable law, in an amount not exceeding a certain amount set forth in the Plan of Merger; and (iii) certain regulatory conditions. In addition, it is expected that DutchCo will request admission to listing of the DutchCo Ordinary Shares also on the Spanish stock exchanges of Barcelona, Bilbao, Madrid and Valencia.
In arriving at our opinion, we reviewed a draft dated June 5
th
, 2019 of the Plan of Merger and held discussions with certain senior officers, directors and other representatives and advisors of Mediaset, DutchCo and Mediaset España concerning the businesses, operations and prospects of Mediaset (including DutchCo) and Mediaset España. We examined certain publicly available business and financial information relating to Mediaset (including DutchCo) and Mediaset España as well forecasts, certain equity research reports, and other information and data relating to Mediaset (including DutchCo) and Mediaset España which were provided to or discussed with us by the respective managements of Mediaset, DutchCo and Mediaset España. We reviewed the financial terms of the Merger as set forth in the draft Plan of Merger in relation to, among other things: the current and historical market prices and trading volumes of Mediaset and Mediaset España shares; the historical and projected earnings and other operating data of Mediaset and Mediaset España, including as published by equity research analysts; target trading prices and forecasts for each of Mediaset and Mediaset España published by equity research analysts; and the capitalization and financial condition of Mediaset, DutchCo and Mediaset España. We analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations we considered relevant in evaluating those of Mediaset (including DutchCo) and Mediaset España. In addition to the foregoing, we conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as we deemed appropriate in arriving at our opinion. The issuance of our opinion has been authorized by our fairness opinion committee.
In rendering our opinion, we have assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with us and upon the assurances of the managements of Mediaset, DutchCo and
Mediaset España that they are not aware of any relevant information that has been omitted or that remains undisclosed to us. With respect to forecasts, equity research reports, and other information and data relating to Mediaset (including DutchCo)
2
and Mediaset Espa
ña provided to or otherwise reviewed by or discussed with us, we have been advised by the respective managements of Mediaset and Mediaset España that such third-party estimates and other information and data were in line with the best currently available estimates and judgments of the managements of Mediaset and Mediaset España as to the future financial performance of Mediaset (including DutchCo) and Mediaset España. We do not take responsibility for such estimates and projections, or the basis on which they were prepared. No representation or warranty, express or implied, is made as to the accuracy or completeness of such information and nothing contained herein is, or shall be relied upon as, a representation, whether as to the past, the present or the future.
We have assumed, with your consent, that the Merger will be consummated in accordance with its terms contained in the draft Plan of Merger, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the Merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on Mediaset Espa
ña, DutchCo or Mediaset. Representatives of Mediaset have advised us, and, for purposes of this opinion, we further have assumed, that the final terms of the Plan of Merger will not vary materially from those set forth in the draft reviewed by us. We also have assumed, with your consent, that the Merger will be treated as a tax-neutral reorganization. We have assumed, with your consent, that there are no material undisclosed liabilities of Mediaset, DutchCo or Mediaset España for which appropriate reserves or other provisions have not been made.
Our opinion, as set forth herein, relates to the relative values of Mediaset and Mediaset Espa
ña. As indicated above, this is because in the context of the tripartite Merger DutchCo is a wholly owned subsidiary of Mediaset, acting as a vehicle to cause the resulting company of the Merger to be incorporated in the Netherlands and whose valuation is not relevant in the determination of the Mediaset Italy Exchange Ratio and, as such, the Merger Exchange Ratio is the only exchange ratio relevant for the holders of Mediaset ordinary shares.
We are not expressing any opinion as to what the value of the DutchCo Ordinary Shares actually will be when issued pursuant to the Merger or the price at which the DutchCo Ordinary Shares will trade at any time. We have not made or been provided with an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Mediaset, DutchCo or Mediaset Espa
ña nor have we made any physical inspection of the properties or assets of Mediaset, DutchCo or Mediaset España. Our opinion addresses only the fairness, as of the date hereof from a financial point of view, to the holders of Mediaset ordinary shares of the Merger Exchange Ratio and does not address any other aspect or effect of the Merger, including without limitation, any legal, tax, governance, regulatory or accounting matters, the form or structure of the Merger (including the envisaged special voting shares structure), or any other agreement, arrangement or understanding entered into in connection with, or contemplated by, the Merger, or otherwise. Our opinion reflects the relative valuation of Mediaset (including its wholly owned subsidiary DutchCo) and Mediaset España and does not address any matter related to the potential exercise of withdrawal rights in the context of the Merger. The relative value of Mediaset and Mediaset España have been determined on a standalone basis and, with your consent, we have not calculated or considered any potential operational benefits anticipated by the management of Mediaset to result from the Merger or their allocation among the merging companies.
We were not requested to, and we did not, solicit third party indications of interest in the possible acquisition of all or a part of Mediaset, nor were we requested to consider, and our opinion does not address, the underlying business decision of Mediaset to effect the Merger, the relative merits of the Merger as compared to any alternative business strategies that might exist for Mediaset or
3
the effect of any other transaction in which Mediaset might engage. We also express no view as to, and our opinion does not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to the Merger, or any class of such persons, relative to the Exchange Ratio. Our opinion is necessarily based upon information available to us, and financial, stock market and other conditions and circumstances existing, as of the date hereof.
A brief summary of certain analyses and valuation methodologies performed for the purposes of this opinion is attached hereto as
Appendix A.
This summary should not be considered to be, nor does it represent, a comprehensive description of all analyses performed.
Citigroup Global Markets Limited has acted as financial advisor to Mediaset in connection with the proposed Merger, and also to DutchCo in connection with the delivery of this opinion, and will receive a fee for such services, a significant portion of which is contingent upon the consummation of the Merger. We also will receive a fee in connection with the delivery of this opinion. We and our affiliates in the past have provided certain escrow agent services to an affiliate of Mediaset unrelated to the proposed Merger, for which services we and such affiliates have received compensation. In the ordinary course of our business, we and our affiliates may actively trade or hold the securities of Mediaset and Mediaset Espa
ña (or their successors) or their respective affiliates for our own account or for the account of our customers and, accordingly, may at any time hold a long or short position in such securities. In addition, we and our affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with, or provide services to, Mediaset and Mediaset España (or their successors) and their respective affiliates and also, for the sake of completeness, also to certain of its largest shareholders.
Our advisory services and the opinion expressed herein are provided for the information of the Board of Directors of Mediaset (in its capacity as such) and of the Board of Directors of DutchCo (in its capacity as such) in their evaluation
of
the proposed Merger and may not be used by any person other than the Board of Directors of Mediaset or the Board of Directors of DutchCo or for any other purpose. Our opinion is not intended to address or operate for the benefit of any person other than the Board of Directors of Mediaset or the Board of Directors of DutchCo, nor shall any person, other than the Board of Directors of’ Mediaset or the Board of Directors of DutchCo, have any rights hereunder. Our opinion is not intended to be and does not constitute a recommendation to any shareholders as to how such shareholders should vote or act on any matters relating to the proposed Merger. Except as expressly required by applicable laws and regulations or by competent authorities, our opinion may not be quoted, referred to or otherwise disclosed, in whole or in part, nor may any public reference to Citigroup Global Markets Limited be made, without our prior written consent. This opinion and its content is subject to the contractual arrangements by and between Mediaset, DutchCo and Citigroup Global Markets Limited.
Based upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deemed relevant, we are of the opinion that, as of the date hereof, the Merger Exchange Ratio is fair, from a financial point of view, to the holders of Mediaset ordinary shares.
Very truly yours,
CITIGROUP GLOBAL MARKETS LIMITED
[ILLEGIBLE]
4
Appendix A
We set out in this appendix a brief summary of certain analyses and valuation methodologies performed for the purpose of arriving at the opinion to which this appendix is attached (the “Opinion”). Capitalized terms used but not defined in this appendix have the meanings ascribed thereto in the Opinion. This summary is qualified in its entirety by reference to the full text of the Opinion. This summary should not be considered to be, nor does it represent, a comprehensive description of all analyses performed and factors considered in connection with the Opinion.
In preparing the Opinion, we performed a variety of financial and comparative analyses, including those described below. The preparation of a fairness opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances, and, therefore, a fairness opinion is not readily susceptible to summary description. We arrived at the Opinion based on the results of all analyses undertaken by us and assessed as a whole, and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of the Opinion. Accordingly, we believe that our analyses must be considered as a whole and that selecting portions of our analyses and factors, without considering all analyses and factors, could create a misleading or incomplete view of the processes underlying our analyses and the Opinion.
In the preparation of the Opinion, for the purpose of the valuation of Mediaset and Mediaset Espa
ña, we, among other activities, (i) performed a discounted cash flow analysis, (ii) analyzed the target trading prices for the Mediaset and Mediaset España ordinary shares published by a selection of equity research analysts, and (iii) analyzed the historical trading prices for the Mediaset and Mediaset España ordinary shares.
We also reviewed selected precedent transactions in the media sector and a selected companies analysis (which is an analysis designed to estimate an implied value of a company through an analysis of the public valuation and trading multiples of similar publicly traded companies); however, for the purpose of the Opinion we have not deemed these relevant valuation methodologies. More specifically, (i) we have disregarded the selected companies analysis on the grounds that both Mediaset and Mediaset Espa
ña are listed on a EU regulated market (and, in particular, the utilization of the trading multiples of comparable companies, although a commonly used valuation methodology, has the limit of being based on sector average ranges rather than on the peculiarities of Mediaset and Mediaset España, which are known to the market and theoretically reflected in their own trading multiples and share prices); and (ii) precedent transactions (and historical Spanish takeover premia) have been considered but deemed to be not relevant on the grounds that: (a) Mediaset is already the controlling shareholder of Mediaset España, hence no control premium would apply for a change of ownership; (b) Mediaset España shareholders would receive Mediaset shares in the Merger, hence they would participate in the value potentially created by the Merger via the shares they would get as consideration; (c) being a relative valuation exercise, precedent transaction multiples provide a reference point for Mediaset España but no applicable reference metric would be available for Mediaset.
Our financial analyses have focused on relative rather than absolute economic values estimates, with the purpose to derive ranges for the Merger Exchange Ratio. In particular, our Opinion relates to the relative values of Mediaset and Mediaset Espa
ña. As indicated in the Opinion, this is because in the context of the tripartite Merger DutchCo is a wholly owned subsidiary of Mediaset, acting as a vehicle to cause the resulting company of the Merger to be incorporated in the Netherlands and whose valuation is not relevant in the determination of the Mediaset Italy Exchange Ratio and, as such, the Merger Exchange Ratio is the only exchange ratio relevant for the holders of Mediaset ordinary shares.
5
For the purpose of the Opinion, we considered sector trends, commercial, financial, economic and market conditions and other matters existing as of the date of the Opinion, many of which are not under Mediaset’s or Mediaset Espa
ña’s control. No company, activity or transaction used herein for comparability purposes is identical to Mediaset, Mediaset España or the Merger. An evaluation of these analyses is not entirely mathematical; rather, our analyses required complex considerations and judgments around financial and operating features, as well as other factors, which may have an impact on the valuation, the stock market value or other valuations of the companies analyzed by us.
The estimates contained in our analyses and the valuation ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by our analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, our analyses are inherently subject to substantial uncertainty.
Except as otherwise noted and to the extent based on market information, the following quantitative information is based on market information as it existed on or before 5 June, 2019.
H
istorical Share Price
We reviewed the current and historical trading prices for the ordinary shares of Mediaset and Mediaset Espa
ña during the period of one month, three months, six months prior to 5 June, 2019.
The volume weighted average price (“VWAP”) for Mediaset ordinary shares at one month, three months, six months prior to 5 June 2019 were €2.74, €2.79 and €2.73, respectively.
The volume weighted average prices for Mediaset Espa
ña ordinary shares have been adjusted to take into account the payment of the Euro 0.3156 dividend per share paid on 30 April 2019 (ex-dividend date as at 26 April 2019). The VWAP for Mediaset España ordinary shares at one month, three months, six months prior to 5 June 2019, as adjusted, were €6.66, €6.54 and €6.21, respectively.
The results of this analysis, based on the comparison of the VWAP +/- 10% for Mediaset and Mediaset Espa
ña ordinary shares at one month, three months, six months prior to 5 June 2019, yielded a range of Merger Exchange Ratio between 2.19 and 2.68 (one month period); between 2.11 and 2.57 (three months period) and between 2.05 and 2.50 (six months period).
Equity Research Analysts Target Prices
We performed an equity research target prices analysis, which is an analysis designed to estimate the share price of a company through the target prices of selected equity research analysts.
For each of Mediaset and Mediaset Espa
ña (i) only research reports published by research analysts after the publication of 2018 results and prior to 17 May 2019 were considered; (ii) equity research reports representing the outliers in terms of EBIT 2020 projections were not taken into consideration.
We reviewed, to the extent publicly available, the target prices of the following 14 selected equity research analysts for the Mediaset ordinary shares, which are set forth in the table below (ordered by date):
6
|
Date
|
|
Broker
|
|
Target Price
|
|
|
17 May 2019
|
|
Broker #1
|
|
2.90
|
|
|
15 May 2019
|
|
Broker #2
|
|
2.90
|
|
|
15 May 2019
|
|
Broker #3
|
|
3.60
|
|
|
15 May 2019
|
|
Broker #4
|
|
2.75
|
|
|
15 May 2019
|
|
Broker #5
|
|
3.20
|
|
|
15 May 2019
|
|
Broker #6
|
|
3.20
|
|
|
15 May 2019
|
|
Broker #7
|
|
3.25
|
|
|
15 May 2019
|
|
Broker #8
|
|
2.70
|
|
|
15 May 2019
|
|
Broker #9
|
|
1.70
|
|
|
15 May 2019
|
|
Broker #10
|
|
2.10
|
|
|
14 May 2019
|
|
Broker #11
|
|
3.00
|
|
|
14 May 2019
|
|
Broker #12
|
|
1.60
|
|
|
14 May 2019
|
|
Broker #13
|
|
2.60
|
|
|
27 March 2019
|
|
Broker #14
|
|
3.50
|
|
We reviewed, to the extent publicly available, the target prices of the following 24 selected equity research analysts for the Mediaset Espa
ña ordinary shares, which are set forth in the table below (ordered by date):
|
Date
|
|
Broker
|
|
Target Price
|
|
|
17 May 2019
|
|
Broker #1
|
|
7.61
|
|
|
17 May 2019
|
|
Broker #2
|
|
7.60
|
|
|
14 May 2019
|
|
Broker #3
|
|
6.55
|
|
|
14 May 2019
|
|
Broker #4
|
|
6.70
|
|
|
10 May 2019
|
|
Broker #5
|
|
5.91
|
|
|
10 May 2019
|
|
Broker #6
|
|
7.10
|
|
|
10 May 2019
|
|
Broker #7
|
|
7.40
|
|
|
10 May 2019
|
|
Broker #8
|
|
7.25
|
|
|
9 May 2019
|
|
Broker #9
|
|
5.50
|
|
|
9 May 2019
|
|
Broker #10
|
|
7.00
|
|
|
9 May 2019
|
|
Broker #11
|
|
7.00
|
|
|
9 May 2019
|
|
Broker #12
|
|
8.10
|
|
|
9 May 2019
|
|
Broker #13
|
|
9.00
|
|
|
9 May 2019
|
|
Broker #14
|
|
6.70
|
|
|
9 May 2019
|
|
Broker #15
|
|
6.80
|
|
|
9 May 2019
|
|
Broker #16
|
|
6.80
|
|
|
9 May 2019
|
|
Broker #17
|
|
5.60
|
|
|
9 May 2019
|
|
Broker #18
|
|
7.90
|
|
|
9 May 2019
|
|
Broker #19
|
|
7.50
|
|
|
9 March 2019
|
|
Broker #20
|
|
4.00
|
|
|
8 May 2019
|
|
Broker #21
|
|
4.60
|
|
|
8 May 2019
|
|
Broker #22
|
|
7.60
|
|
|
5 April 2019
|
|
Broker #23
|
|
4.70
|
|
|
21 March 2019
|
|
Broker #24
|
|
6.30
|
|
7
This analysis indicated (i) a per share equity value reference range for Mediaset of between €1.60 and €3.60 (minimum and maximum of selected equity research analysts target prices), with a median of €2.90 and an average of €2.79; and (ii) a per share equity value reference range for Mediaset Espa
ña of between €4.00 and €9.00 (minimum and maximum of selected equity research analysts target prices), with a median of €6.90 and an average of €6.72.
The results of this analysis, based on the comparison of the median value +/-10% for Mediaset and Mediaset Espa
ña, yielded a range of Merger Exchange Ratio of between 2.14 and 2.62.
Discounted Cash Flow Analysis
The discounted cash flow (“DCF”) analysis is an analysis designed to estimate the implied value of a company by calculating the present value of the estimated future unlevered free cash flows of that company over the projection period and the terminal value of that company at the end of the projection period.
This method has been based on the following estimates:
i.
unlevered free cash flow estimates for each business. Unlevered free cash flows are a proxy to the business cash flow generation before financial income and expenses, after having applied the corporate tax and having considered capital expenditures (“capex”) and working capital swings;
ii.
net present value of the forecasted free cash flow estimates applying a discount rate (“WACC”). The discount rate takes into consideration the implicit business risk as well as the time value of money;
iii.
businesses terminal value, assuming a perpetuity growth at the end of the free cash flow annual projection period. The previously mentioned discount rate is applied to the terminal value to obtain the net present value.
In particular, we calculated the estimated present value of the unlevered, after-tax free cash flows that Mediaset and Mediaset Espa
ña were forecasted to generate during the calendar years ending December 31, 2019 through December 31, 2024. With reference to Mediaset only, the discounted cash flow valuation has been performed on a “sum of the parts basis”, by performing two discounted cash valuations for Mediaset España and the Italian business (i.e., Mediaset business net of the stake held by Mediaset in Mediaset España).
Mediaset issued (i) mid-term financial targets (2020) in January 2017 (limited to EBIT compared to 2016) and (ii) mid-term (2020-2021) guidelines in March 2019. Whilst Mediaset updates regularly the market on the guidance vis-à-vis targets and progress on previously communicated strategy, there is no full business plan for Mediaset available for the purpose of the determination of the Exchange Ratio. Therefore, the discounted cash flow methodology is based on projections resulting from the application of the following approach:
(a)
for the period 2019-2021: projections derived from a selection of equity research reports published by research analysts after the publication of full year 2018 results and prior to 17 May 2019, and reporting projections for the whole 2019-2021 period, with the exclusion from such panel of two equity research reports including the highest and lowest EBIT 2020 projections;
(b)
for the period 2022-2024: extrapolations in line with the long-term expectations that the Italian and Spanish managements have on the businesses. In particular, the two managements have indicated a target long-term top-line growth of 0.5% for the last year of
8
projections (2024) whereas mostly of the other cash-flow items have been assumed to be in line with 2021 projections, in terms of percentage on sales, for the whole extrapolations period.
The approach described above was the same for both the Mediaset and Mediaset Espa
ña and has been agreed and validated by the respective managements of Mediaset and Mediaset España, who confirmed that the projections and extrapolations are broadly in line with their respective long-term expectations. However, such forecasts are subject by nature to substantial uncertainty.
Based on our professional judgment and experience, we then calculated the implied estimated terminal value for the Italian business’s (i.e., Mediaset business net of the stake held by Mediaset in Mediaset Espa
ña) and Mediaset España’s operations based on perpetuity growth rates ranging from 0.25% to 0.75% for the Italian business and ranging from 0.25% to 0.75% for Mediaset España’s and then discounted to present value (as of December 31, 2018) the unlevered, after-tax free cash flows and implied estimated terminal value using discount rates ranging from 8.4% to 8.9% for the Italian business and ranging from 7.6% to 8.1% for Mediaset España, reflecting an estimate of the weighted average cost of capital.
For the purpose of determining the approximate implied per-share equity value, the enterprise value range stemming from this analysis was then adjusted in respect of Mediaset and Mediaset Espa
ña, net financial debt adjusted for the Euro 0.3156 dividend per share paid by Mediaset España on 30 April 2019 and for the buyback executed by Mediaset España post December 31, 2018 and until June 5, 2019, minority interests, pensions liabilities, investments in associates and certain other items, based on information in Mediaset and Mediaset España public financial statements as of December 31, 2018.
The implied per share equity value was calculated by dividing such equity values by the number of Mediaset and Mediaset Espa
ña ordinary shares outstanding, net of the respective number of treasury shares held as of 5 June 2019.
This analysis yielded a range of values per Mediaset Espa
ña ordinary share of between €8.00 and €8.91 with a mid-point of €8.42 and a range of values per Mediaset ordinary share of between €3.33 and €3.71 with a mid-point of €3.51.
Based on the comparison of the mid-point of the DCF +/-10% for Mediaset and Mediaset Espa
ña, the results of this analysis yielded a range of Merger Exchange Ratio of between 2.16 and 2.64.
9
Exhibit 99.11
Report of the board of directors of
Mediaset España Comunicación, S.A.
on the
cross-border common merger plan
relating to the tripartite cross-border merger of
Mediaset S.p.A.
and
Mediaset España Comunicación, S.A.
with and into
Mediaset Investment N.V.
Madrid, 7 June 2019
INDEX
|
1.
|
INTRODUCTION
|
4
|
|
|
|
|
|
1.1
|
General overview
|
4
|
|
|
|
|
|
1.2
|
Group structure before and after the Transaction
|
5
|
|
|
|
|
|
1.3
|
Regulatory framework of this Report
|
5
|
|
|
|
|
|
2.
|
PURPOSE OF THE TRANSACTION
|
6
|
|
|
|
|
|
3.
|
LEGAL ASPECTS OF THE MERGER
|
7
|
|
|
|
|
|
3.1
|
Legal structure
|
7
|
|
|
|
|
|
3.1.1
|
The Merger
|
7
|
|
|
|
|
|
3.1.2
|
Conditions precedent to the Merger
|
8
|
|
|
|
|
|
3.1.3
|
Pre-Merger formalities
|
10
|
|
|
|
|
|
3.2
|
Analysis of the mandatory legal aspects of the Common Cross-Border Merger Plan in Spain
|
12
|
|
|
|
|
|
3.2.1
|
Identification of the Merging Companies
|
12
|
|
|
|
|
|
3.2.2
|
Articles of association of DutchCo
|
12
|
|
|
|
|
|
3.2.3
|
Exchange Ratios
|
13
|
|
|
|
|
|
3.2.4
|
Exchange mechanism
|
14
|
|
|
|
|
|
3.2.5
|
Special advantages granted to the experts examining the Common Cross-Border Merger Plan, the members of the boards of directors of the Companies or their statutory auditors
|
17
|
|
|
|
|
|
3.2.6
|
Rights conferred by DutchCo to holders of Absorbed Companies’ shares to which special rights are attached and holders of securities other than Absorbed Companies’ shares, or measures proposed concerning them
|
17
|
|
|
|
|
|
3.2.7
|
Date of legal and accounting effects
|
19
|
1
|
3.2.8
|
Date from which the DutchCo Ordinary Shares entitle their holders to participate in DutchCo’s profits
|
20
|
|
|
|
|
|
3.2.9
|
Eventual impact of the Merger on employment, on gender distribution in the Companies’ management bodies and on corporate social responsibility
|
20
|
|
|
|
|
|
3.2.10
|
Merger balance sheets and information on the valuation of the assets and liabilities of the Absorbed Companies
|
21
|
|
|
|
|
|
3.3
|
Analysis of additional legal aspects of the Common Cross-Border Merger Plan
|
22
|
|
|
|
|
|
3.3.1
|
Listing of DutchCo Ordinary Shares
|
22
|
|
|
|
|
|
3.3.2
|
Special Voting Shares
|
22
|
|
|
|
|
|
3.3.3
|
Withdrawal right
|
24
|
|
|
|
|
|
3.3.4
|
Opposition right
|
27
|
|
|
|
|
|
3.3.5
|
Tax implications
|
28
|
|
|
|
|
|
3.3.6
|
Dutch corporate regulations and articles of association of MFE
|
37
|
|
|
|
|
|
3.3.7
|
Other legal aspects of the Common Cross-Border Merger Plan
|
40
|
|
|
|
|
|
3.4
|
Main corporate and capital market milestones of the Transaction in Spain
|
42
|
|
|
|
|
|
3.4.1
|
Approval of the Common Cross-Border Merger Plan, the Segregation Plan and related documents by the boards of directors
|
42
|
|
|
|
|
|
3.4.2
|
Approval of the Merger and the Segregation by the general shareholders’ meetings
|
43
|
|
|
|
|
|
3.4.3
|
Exercise of withdrawal and opposition rights
|
45
|
|
|
|
|
|
3.4.4
|
Effectiveness of the Segregation
|
45
|
|
|
|
|
|
3.4.5
|
Effectiveness of the Merger
|
45
|
|
|
|
|
|
4.
|
ECONOMIC ASPECTS OF THE MERGER
|
46
|
|
|
|
|
|
4.1
|
Merger Balance Sheets and financial statements
|
46
|
|
|
|
|
|
4.2
|
Consolidated pro-forma financial data of Mediaset group
|
46
|
|
|
|
|
|
4.3
|
Accounting treatment applicable to the Transaction
|
46
|
2
|
4.4
|
Justification of the Exchange Ratios
|
47
|
|
|
|
|
|
4.4.1
|
Introduction
|
47
|
|
|
|
|
|
4.4.2
|
Documentation used for purposes of the valuation of Mediaset and Mediaset España
|
48
|
|
|
|
|
|
4.4.3
|
Methodologies used for the valuation of Mediaset and Mediaset España
|
48
|
|
|
|
|
|
4.4.4
|
Difficulties and limits faced in evaluating the Exchange Ratios
|
52
|
|
|
|
|
|
4.4.5
|
Fairness opinions
|
54
|
|
|
|
|
|
5.
|
ADDITIONAL TRANSACTION FEATURES: REMUNERATION TO SHAREHOLDERS
|
55
|
|
|
|
|
|
SCHEDULE 1 FURTHER INFORMATION ON THE SPECIAL VOTING SHARES
|
56
|
|
|
|
|
SCHEDULE 2 CONSOLIDATED PRO-FORMA FINANCIAL DATA OF THE MEDIASET GROUP
|
61
|
|
|
|
|
SCHEDULE 3 FAIRNESS OPINION OF JPM
|
66
|
3
1.
INTRODUCTION
1.1
General overview
On the date hereof the boards of directors of the Italian company Mediaset S.p.A. (“
Mediaset
”), its Spanish 51.63%
-
owned(1) direct subsidiary Mediaset España Comunicación, S.A.(2) (“
Mediaset España
”) and its Dutch wholly-owned direct subsidiary Mediaset Investment N.V. (“
DutchCo
”) have approved a tripartite common cross-border merger plan relating to the envisaged cross-border merger of Mediaset and Mediaset España with and into DutchCo (the “
Common Cross-Border Merger Plan
”). By virtue of the tripartite cross-border merger described in the Common Cross-Border Merger Plan, Mediaset and Mediaset España will cease to exist as standalone entities and DutchCo —as surviving company and new parent company of the Group (as defined in
Section 1.2
below)— will acquire all assets and assume all liabilities and other legal relationships of Mediaset and Mediaset España (the “
Merger
”). DutchCo will be renamed MFE - MEDIAFOREUROPE N.V. upon effectiveness of the Merger (“
MFE or MEDIAFOREUROPE
”).
The Merger is part of a single and broader transaction (the “
Transaction
”) which also envisages the following reorganizations, aimed at maintaining the operations and business activities of Mediaset and Mediaset España, respectively, in Italy and Spain, to be completed prior to the effectiveness of the Merger:
(i)
the incorporation of an Italian wholly-owned direct subsidiary of Mediaset (“
NewCo Italia
”);
(ii)
the transfer by Mediaset to NewCo Italia of substantially all of its business and certain shareholdings (the “
Mediaset Reorganization
”); and
(iii)
the segregation (
segregación
) by Mediaset España of all its assets and liabilities, including its shareholdings in other companies, to Grupo Audiovisual Mediaset España Comunicación, S.A. (“
GA Mediaset
”), a Spanish wholly-owned direct subsidiary of Mediaset España, in exchange for the allotment of all the new shares in GA Mediaset that will be issued on the occasion of its share capital increase triggered by the segregation (the “
Segregation
” and, jointly with the Mediaset Reorganization, the “
Preliminary Reorganizations
”).
Therefore, before completion of the Merger, Mediaset and Mediaset España will have no activities of their own (save for certain financial activities that will remain in Mediaset and will be transferred to MFE upon effectiveness of the Merger). Therefore, upon effectiveness of the Merger, MFE will be a holding company.
As a consequence of the Merger, the Mediaset and Mediaset España shares will be extinguished on the Merger Effective Date (as defined in
Section 3.1.1
below), and they will thus no longer be respectively listed on the main equity market of the Italian stock exchange (the “
Mercato
(1)
Mediaset’s current shareholding in Mediaset España represents 53.98% of the voting rights, taking into account the treasury shares currently held by Mediaset España.
(2)
As far as Mediaset España is concerned, the proprietary and executive directors have abstained from participating in the discussions and voting related to the Transaction (and, thus, have not approved and signed the Common Cross-Border Merger Plan), as further explained in
Section 3.3.7(A)
.
4
Telematico Azionario
”) and on the Spanish stock exchanges of Barcelona, Bilbao, Madrid and Valencia (the “
Spanish Stock Exchanges
”). Instead, following completion of the Merger the DutchCo Ordinary Shares (as defined in
Section 3.2.4(B)
below) will be admitted to listing and trading on the Mercato Telematico Azionario and will be admitted to listing on the Spanish Stock Exchanges for their trading through the Spanish automated quotation system (
Sistema de Interconexión Bursátil Español
—the “
SIBE
”).
The Merger will be submitted for approval to Mediaset shareholders, to Mediaset España shareholders and to DutchCo’s sole shareholder (i.e. Mediaset) respectively at the Mediaset Extraordinary Meeting (as defined in
Section 3.1.3 (ii))
, at the Mediaset España General Meeting (as defined in
Section 3.1.3 (iii))
and at the DutchCo general shareholders’ meeting.
1.2
Group structure before and after the Transaction
The current structure of the Mediaset group (the “
Group
”) is represented below:
The structure of the Group after completion of the Preliminary Reorganizations, but prior to the completion of the Merger, is represented below:
Finally, the structure of the Group after completion of the Merger is represented below:
1.3
Regulatory framework of this Report
In view of the cross-border nature of the Merger, the Common Cross-Border Merger Plan has been prepared and approved in accordance with the European Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to certain aspects of company
5
law (the “
Directive
”) and with applicable provisions of Italian, Spanish and Dutch law. In particular, as regards Spanish law, the Common Cross-Border Merger Plan has been prepared in accordance with title II of Law 3/2009 of 3 April 2009 on structural modifications to business companies (the “
LME
”). Likewise, the Segregation Plan has been prepared in accordance with title III of the LME.
This report (the “
Report
”), which has been drafted for the purposes foreseen in article 95 of the Directive and article 33 of the LME, is aimed at explaining in detail the terms of the Common Cross-Border Merger Plan —particularly the share exchange ratios— and setting out the most relevant legal and economic aspects for purposes of the Merger and the Transaction in general.
Mediaset, Mediaset España and DutchCo shall be jointly referred to as the “
Companies
” or the “
Merging Companies
”. Further, in the context of this Report, Mediaset and Mediaset España shall hereinafter be jointly referred to as the “
Absorbed Companies
”, and each of them, separately, as an “
Absorbed Company
”, whereas DutchCo may also be referred to as the “
Absorbing Company
”. In the context of the Segregation, Mediaset España may hereinafter be referred to as the “
Segregating Company
”, while GA Mediaset is also referred to as the “
Recipient Company
”.
2.
PURPOSE OF THE TRANSACTION
As set out in the Common Cross-Border Merger Plan, below is a summary of the strategic rationale that has led the boards of directors of the Companies to promote the Transaction (and, especially, the Merger).
From a strategic, operational and industrial perspective, the Transaction is aimed at creating a pan-European media and entertainment group, with a leading position in its local markets and greater scale to compete and potential to expand further in specific countries across Europe. Combined sustainable capital structure and strong cash flow generation profile provide MFE with the required firepower to play a pivotal role in the context of a possible future consolidation scenario in the European video media industry.
The creation of a new holding company in the Netherlands represents the perfect and neutral ground for such an ambitious project (as proven by other companies that have adopted the same structure) and constitutes an important step in the development of a fully integrated media powerhouse, which would become a leader in linear and non-linear entertainment, leveraging tech and data to compete on an equal footing in the evolving media space.
In the context of the current constantly developing competitive landscape, internationalization, economies of scale and ability to offer tech enabled products and quality content are becoming the key critical factors in the profitable execution of modern media company strategies.
On 29 May 2019, Mediaset announced the acquisition of a 9.6% stake in the German broadcaster ProSiebenSat.1 Media, corresponding to up to 9.9% of the voting rights, excluding treasury shares. Mediaset and Mediaset España have been developing a strong relationship with ProSiebenSat.1 in the European Media Alliance (EMA) in the last five years. The goal of this alliance is to develop economies of scale which are crucial for the future of European TV.
6
In particular, Mediaset and Mediaset España boards of directors believe that this first step enables the following strategic and operational benefits, which can only be unlocked efficiently through a combined entity that is run by a single management team with a clear definition of its strategic priorities and value levers:
(i)
Scale to compete
. Integrated and diversified media company with access to a combined audience of 107 million viewers to better compete with global players. Economies of scale will be generated in key crucial areas such as: (i) audience/reach, (ii) content creation and distribution, (iii) audience data, (iv) AdTech platforms, (v) OTT (AVOD) platforms, and (vi) talent acquisition and attraction.
(ii)
New business opportunities
. Scale and international footprint will create opportunities that cannot be seized today due to the local focus and dimension, and will ample resources to invest in core business areas, such as creation of a production content house, data collection, addressable TV, digital audio, DOOH, mobile proximity.
(iii)
Stronger proprietary channel and content portfolio
. MFE will have the best content and viewing experience across all platforms (linear and non-linear). It will offer engaging content for viewers thanks to stronger in-house production resources and increased ability to supply content to 3rd parties.
(iv)
Leaner and more efficient organization
. Pan-European consolidation requires a re- engineering of the operational and organization model that will allow cost efficiencies and savings, mainly driven by technological developments. Agile decision making with a leaner organization to adapt to a changing business environment and capture combined growth opportunities.
(v)
“Driving the change”
. Scale coupled with a pan-European footprint will benefit all stakeholders by increasing bargaining power with suppliers and establishing a first- mover advantage in a consolidating media landscape.
Mediaset and Mediaset España have gone through a very detailed exercise aimed at identifying specific levers out of six buckets (content, broadcasting & digital, IT/tech, procurement, G&A expenses, sales house), where a different size and operational model can generate significant cost efficiencies, savings and opportunities. In this respect, the boards of directors of both Absorbed Companies believe that the Transaction would create cost efficiencies and savings of about Euro 100-110 million (before taxes) in the next 4 years (from 2020 to 2023), representing approximately Euro 800 million on a net present value basis.
3.
LEGAL ASPECTS OF THE MERGER
3.1
Legal structure
3.1.1
The Merger
As already briefly pointed out in
Section 1
of this Report, the integration of Mediaset and Mediaset España with and into DutchCo will be carried out by means of a tripartite cross-border merger —the Merger— within the meaning of the provisions of the Directive, which regulations on cross-border mergers of limited liability companies are in force (i) for Italian law purposes under Italian Legislative Decree No. 108 of 30 May 2008 (the “
Legislative Decree 108
”),
7
(ii) for Spanish law purposes under title II of the LME, and (iii) for Dutch law purposes under title 2.7 of the Dutch Civil Code (the “
DCC
”). From all these applicable regulations it follows that the effectiveness of the Merger shall be specifically governed by section 2:318 of the DCC.
Based on the above, and subject to the satisfaction or waiver (as the case may be) of the conditions precedent referred to in
Section 3.1.2
below, and to the completion of the pre-Merger formalities referred to in
Section 3.1.3
below, the Merger will become effective at 00.00 a.m. CET (
Central European Time
) on the day following the day on which the deed of merger (the “
Merger Deed
”) is duly executed before a civil law notary officiating in the Netherlands (the “
Merger Effective Date
”). The Dutch Commercial Register (
Kamer von Koophandel
) will subsequently inform the Companies’ Register of Milan (
Registro delle Imprese di Milano
) and the Commercial Register of Madrid (
Registro Mercantil de Madrid
) about the Merger Effective Date.
On the Merger Effective Date (and pursuant to articles 22
et seq.
of the LME as far as Mediaset España is concerned), Mediaset and Mediaset España will cease to exist and all their assets and liabilities and other legal relationships will be transferred to DutchCo. Simultaneously, in exchange thereof, the shareholders of Mediaset and Mediaset España will receive DutchCo Ordinary Shares in the terms indicated in the Common Cross-Border Merger Plan and also set out below (see
Sections 3.2.3 and 3.2.4)
.
Also upon effectiveness of the Merger, all of Mediaset España’s assets and liabilities transferred to DutchCo —namely the GA Mediaset shares— will be allocated to a branch of DutchCo located in Spain and registered with the Commercial Register of Madrid (the “
Spanish Branch
”). The Spanish Branch is required in order to apply the tax neutrality regime foreseen under Spanish law to the Merger.
3.1.2
Conditions precedent to the Merger
The completion of the Merger by means of executing the Merger Deed is subject to the satisfaction (or waiver, as the case may be) of certain conditions precedent (among them, the completion of the Preliminary Reorganizations). Such conditions precedent, which are laid down in Section 17.1 of the Common Cross-Border Merger Plan, are further explained below:
(A)
The Preliminary Reorganizations
In the context of the Transaction, and as a non-waivable condition precedent to the Merger, the Preliminary Reorganizations will have to be completed. The Preliminary Reorganizations will be completed prior to the execution of the Merger Deed(3) and will, thus, not be conditional upon completion of the Merger.
The Preliminary Reorganizations will not have any impact on the Exchange Ratios (as defined in
Section 3.2.3
below).
(3)
It is expected that the Segregation will be completed only a few days before the Merger Effective Date, immediately before settlement of the redemption price to Mediaset España Withdrawing Shareholders (as defined in
Section 3.3.3(B))
takes place. Refer to
Section 3.3.3(B)(v)
.
8
(i)
The Segregation
Mediaset España and GA Mediaset will carry out the Segregation in accordance with articles 71
et seq.
of the LME, as a non-waivable condition precedent to the Merger. By virtue of the Segregation, Mediaset España will segregate all its assets —including its shareholdings in other companies— and liabilities and other legal relationships to GA Mediaset, and will receive in exchange thereof the GA Mediaset shares to be issued on the occasion of the corresponding share capital increase in GA Mediaset. Hence, upon completion of the Segregation, Mediaset España will own 100% of the newly issued shares of GA Mediaset (and will thus stay as its sole shareholder), whereas GA Mediaset will have acquired all assets and assumed all liabilities and other legal relationships of Mediaset España. The Segregation will become effective upon its registration with the Commercial Register of Madrid pursuant to article 46 of the LME.
The segregation plan relating to the Segregation (the “
Segregation Plan
”) has been approved on this same date by the boards of directors of Mediaset España and GA Mediaset. As is apparent from the Segregation Plan, completion of the Segregation is in turn conditional upon the obtaining of the authorization of the Spanish State Secretariat for the Digital Advance (
Secretaría de Estado para el Avance Digital
—the “
SEAD
”), which is currently part of the Ministry of Economy and Business Affairs (
Ministerio de Economía y Empresa
), with regard to the transfer of the audiovisual media licenses held by Mediaset España to GA Mediaset within the framework of the Segregation.
The “subsidiarization” of all the Mediaset España assets and liabilities through the Segregation is aimed at allowing GA Mediaset to continue operating its Spanish business once the Transaction is completed, without prejudice to any potential efficiencies and savings that may be achieved within the framework of the Transaction as laid down in
Section 2
above. This corporate autonomy is desirable for the following reasons:
·
It provides the ability to leverage local expertise and sales know-how of the Spanish market, regulatory framework and customer/supplier relationships, amongst others.
·
It enables agile, local decision making to quickly respond to evolving market conditions and seize new business opportunities.
(ii)
The Mediaset Reorganization
Similarly to the Segregation, by means of the Mediaset Reorganization —the completion of which is also a non-waivable condition precedent to the Merger— Mediaset will transfer, by means of a contribution in-kind regulated by the Italian civil code, substantially all its business and certain shareholdings (excluding its shareholdings in ProsiebenSat 1 Media SE, EI Towers, S.p.A, Mediaset España and DutchCo) to NewCo Italia.
(B)
Other conditions precedent
In addition to the above, as set out in Section 17 of the Common Cross-Border Merger Plan, the completion of the Merger is subject to the satisfaction of the following conditions precedent, without prejudice to the fact that Mediaset and Mediaset España may jointly waive the conditions set out in items (iii) and (iv) below:
9
(i)
The DutchCo Ordinary Shares, which are to be issued and allotted to Mediaset and Mediaset España shareholders upon effectiveness of the Merger, shall have been admitted to listing on the Mercato Telematico Azionario and the decision to admit to trading shall have been released. The admission will be conditional upon the obtaining of the necessary authorizations by the Dutch supervisory authority (
Autoriteit Financële Markten
—the “
AFM
”) and/or other competent authorities.
(ii)
No governmental entity of a competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any order which prohibits the consummation of the Transaction or makes it void or extremely burdensome.
(iii)
The amount of cash, if any, to be paid by Mediaset and Mediaset España to (a) Mediaset and Mediaset España shareholders exercising their withdrawal right in relation to the Merger according to applicable law, and/or to (b) creditors of Mediaset and of Mediaset España exercising their right of opposition to the Merger according to applicable law (or alternatively, to financial entities for purposes of sufficiently guaranteeing the credits of such creditors of Mediaset and Mediaset España) (the “
Amount of Withdrawal Rights and Oppositions
”), shall not exceed in the aggregate the amount of Euro 180 million. For the sake of clarity, the Amount of Withdrawal Rights and Oppositions will be calculated net of the amount of cash payable by Mediaset shareholders or third parties for the purchase of Mediaset, pursuant to Article 2437-quater of the Italian civil code, and of the amount of cash payable (or paid) by third parties pursuant to any purchases or commitments to purchase. the withdrawn Mediaset and/or Mediaset España shares. Further detail on withdrawal and opposition rights is provided in
Sections 3.3.3 and 3.3.4
below.
(iv)
There shall not have been nor occurred at any time before the date of execution of the Merger Deed, at a national or international level, (a) any extraordinary event or circumstance involving changes in the legal, political, economic, financial, currency exchange or in the capital markets conditions or any escalation or worsening of any of the same or (b) any events or circumstances that, individually or taken together, have had, or are reasonably likely to have, a material adverse effect on the legal situation, on the business, results of operations or on the asset, economic or financial conditions (whether actual or prospective) of Mediaset and/or of Mediaset España and/or the market value of the Mediaset and/or Mediaset España shares and/or that could otherwise materially and negatively affect the Transaction (“
MAC Clause
”)
3.1.3
Pre-Merger formalities
In addition to the satisfaction (or waiver, as the case may be) of the conditions precedent set out in
Section 3.1.2
above, Section 17 of the Common Cross-Border Merger Plan also foresees that the following formalities shall be carried out prior to the Merger Effective Date:
(i)
A declaration shall have been issued by the local district court in Amsterdam (the Netherlands), and received by DutchCo, stating that no creditor has opposed to the Merger pursuant to section 2:316 of the DCC, or in case of the opposition pursuant to section 2:316 of the DCC, such declaration shall have been received within one month after the withdrawal or the discharge of the opposition has become enforceable.
10
(ii)
The 60-day period following the date upon which the resolution of the Mediaset extraordinary shareholders meeting approving the Merger (the “
Mediaset Extraordinary Meeting
”) has been registered with the Companies’ Register of Milan shall have expired and no creditor of Mediaset —whose claims precede the registration of the Common Cross-Border Merger Plan— shall have opposed the Merger pursuant to article 2503 of the Italian civil code or, should the Merger be opposed, (a) such opposition shall have been waived, settled or rejected, and/or (b) Mediaset shall have deposited the necessary amounts to satisfy its opposing creditors with a bank, and/or (c) the competent Court —provided that the risk of prejudice to creditors is deemed ungrounded or adequate guarantees have been given by Mediaset in order to satisfy its creditors— shall have nonetheless authorized the Merger despite the opposition, pursuant to article 2503 of the Italian civil code in conjunction with article 2445 of the Italian civil code.
(iii)
The one-month period following the publication of the resolution of the Mediaset España shareholders meeting approving the Merger (the “
Mediaset España General Meeting
”) shall have expired and no creditor of Mediaset España —whose unsecured credits have arisen before the publication of the Common Cross-Border Merger Plan on the Mediaset España website and are not due and payable before such date— shall have opposed the Merger in accordance with article 44 of the LME or, should the Merger be opposed (a) such opposition shall have been waived, settled or rejected, and/or (b) Mediaset España shall have (directly or through a credit institution) sufficiently secured such credits
.
(iv)
All other pre-merger formalities shall have been completed, including the delivery by (a) the Italian public notary selected by Mediaset and (b) the Commercial Register of Madrid to the Dutch civil law notary of the respective certificates conclusively attesting to the proper completion of the pre-merger acts and formalities within the meaning of article 127 of the Directive, by Mediaset and Mediaset España, respectively.
In the context of the pre-Merger formalities, it shall be further noted that, as referred to in the Common Cross-Border Merger Plan, and pursuant to article 96 of the Directive (and article 34 of the LME as far as Mediaset España is concerned), the Merging Companies have agreed to appoint each (or to request each the appointment of) a different independent expert that issues the compulsory expert report on the Common Cross-Border Merger Plan and, particularly, on the fairness of the Exchange Ratios (as defined in
Section 3.2.3
below). With regard to these reports, it is worth mentioning that, in accordance with applicable regulations in each case:
·
PricewaterhouseCoopers S.p.A. (“
PwC
”), the expert appointed by the Tribunal of Milan at the request of appointment filed by Mediaset, will deliver its report with respect to the fairness of the Exchange Ratios to Mediaset presumably in the coming days, and shall have delivered it in any event before the publication of the calling notice for the Mediaset España General Meeting.
·
Grant Thornton, S.L.P. (“
Grant Thornton
”), the expert appointed by the Commercial Register of Madrid at the request of appointment filed by Mediaset España, will deliver its report on the Common Cross-Border Merger Plan (including on the fairness of the Exchange Ratio II) as referred to article 34 LME to Mediaset España on this same date.
11
·
DutchCo’s appointed expert, Deloitte Accountants B.V. (“
Deloitte
”), will deliver its reports with respect to the fairness of the Exchange Ratios and a so called “
inbrengverklaring”
to DutchCo presumably in the coming days, and shall have delivered it in any event, before the publication of the calling notice for the Mediaset España General Meeting.
3.2
Analysis of the mandatory legal aspects of the Common Cross-Border Merger Plan in Spain
3.2.1
Identification of the Merging Companies
In accordance with the provisions of article 91.2.a) of the Directive and article 31 (1) of the LME, Section 1 of the Common Cross-Border Merger Plan sets out which are the Merging Companies by indicating their respective corporate names, legal forms, official seats, share capitals, registration details and tax identification numbers.
In the case of DutchCo, also the tax domicile and principal office are indicated because they differ from the company’s corporate domicile, and reference is made to the corporate name change that will take place on the Merger Effective Date. Thus, upon effectiveness of the Merger, DutchCo will be renamed “MFE - MEDIAFOREUROPE N.V.”. MFE — as surviving company — will maintain its current legal form and official seat and will therefore continue to be subject to the laws of the Netherlands, maintaining its tax residence in Italy.
Further, it is confirmed that no DutchCo shares are pledged or encumbered with a right of usufruct.
It is also worth mentioning that GA Mediaset (the recipient company of the Segregation) has its tax domicile, principal office and registered address in Spain.
Mediaset and DutchCo are related parties because DutchCo is a wholly-owned subsidiary of Mediaset. Mediaset and Mediaset España are related parties because Mediaset España is a direct subsidiary of Mediaset. Mediaset España and DutchCo are related parties because DutchCo is a wholly-owned subsidiary of Mediaset España’s parent company, Mediaset, and will become the parent company of the successor of Mediaset España pursuant to the Segregation following completion of the Merger.
3.2.2
Articles of association of DutchCo
In order to meet the requirement of article 31 (8) of the LME, Section 2 of the Common Cross- Border Merger Plan refers to DutchCo’s articles of association both as currently drafted (established by the deed of incorporation of DutchCo executed on 20 December 2017 and subsequently amended through a deed executed on 4 October 2018) and as proposed for when the Merger becomes effective. The current version of those articles of association is attached as Schedule 1 to the Common Cross-Border Merger Plan.
In order for MFE to have sufficient available reserves, according to DutchCo’s latest financial statements, to carry out a buy-back program after the Merger Effective Date (as further described in
Section 5.3),
the current articles of association of DutchCo (in particular, article 17.1) will be amended before 30 June 2019 in order to allow DutchCo’s current financial
12
year to end on 30 June 2019, with the provision that, before 30 September 2019, the articles of association of DutchCo will be amended again to provide for DutchCo’s financial year to coincide with the calendar year and, thus, end on 31 December 2019. Schedule 1 to the Common Cross-Border Merger Plan also contains the proposed wording of the aforementioned interim version of article 17.1 of the articles of association of DutchCo.
Moreover, the articles of association of DutchCo will be further amended and restated at the Merger Effective Date in accordance with the proposed version of the articles of association attached to the Common Cross-Border Merger Plan as Schedule 2. Such articles of association are aligned with Dutch law, the Dutch corporate governance code for listed companies and corporate practice in the Netherlands, as stated in
Section 3.3.6.
It is expected that, prior to the Merger Effective Date, the board of directors of DutchCo will be authorised by the shareholders’ meeting to make share capital increases, on one or more occasions, with the exclusion or the limitation of pre-emptive right, and also to issue convertible bonds. These operations can be carried out for any purpose, including that of promoting the development of a more liquid market for the DutchCo Ordinary Shares on the Mercato Telematico Azionario and on the Spanish Stock Exchanges immediately after the Merger.
3.2.3
Exchange Ratios
On the basis of the assumption that in accordance with Exchange Ratio I (as defined below), Mediaset shareholders will receive one (1) DutchCo Ordinary Share for each Mediaset share owned, the board of directors analysed, in the context of the Merger, the relative valuation of Mediaset and Mediaset España aimed at determining the Exchange Ratio II between the Mediaset España shares and DutchCo Ordinary Shares or, equivalently (given the Exchange Ratio I), between Mediaset España shares and the Mediaset shares.
Pursuant to article 91 .2.b) of the Directive and article 31 (2) of the LME, Section 3 of the Common Cross-Border Merger Plan indicates the share exchange ratios of the Merger, which determine the exchange equations between Mediaset shares and DutchCo Ordinary Shares, on the one hand, and between Mediaset España shares and DutchCo Ordinary Shares, on the other hand (the “
Exchange Ratios
”). The Exchange Ratios have been established in accordance with Article 25.1 of the LME, and calculated as explained in
Section 4.4
below.
As mentioned, due to the tripartite structure of the Merger two Exchange Ratios have been calculated, namely:
·
“
Exchange Ratio I
”: one (1) DutchCo Ordinary Share (with a nominal value of Euro 0.01) for each share held in Mediaset (with a nominal value of Euro 0.52).
·
“
Exchange Ratio II
”: 2.33 DutchCo Ordinary Shares (with a nominal value of Euro 0.01 each) for each share held in Mediaset España (with a nominal value of Euro 0.50).
No fractional DutchCo Ordinary Shares shall be allotted to any holders of shares of Mediaset España. Refer to
Section 3.2.4(D)
for further information with regard to the management of Mediaset España shares representing fractional entitlements to DutchCo Ordinary Shares.
Without prejudice to the withdrawal rights as described in
Section 3.3.3,
no consideration in addition to the DutchCo Ordinary Shares delivered in application of the Exchange Ratios, either
13
in cash or otherwise, will be paid by DutchCo, Mediaset or Mediaset España to the Mediaset and Mediaset España shareholders in connection with the Merger.
3.2.4
Exchange mechanism
As regards the terms relating to the allotment of DutchCo Ordinary Shares to the Absorbed Companies’ shareholders (cf. article 91 .2.c) of the Directive and article 31 (2) of the LME), Sections 3 and 4 of the Common Cross-Border Merger Plan put the following exchange procedure in place:
(A)
Mediaset and Mediaset España shares to be exchanged
The shares to be exchanged pursuant to the Merger by operation of law, under either Exchange Ratio I or Exchange Ratio II, as applicable, are all the issued and outstanding shares of the Absorbed Companies on the date on which the Merger Deed is executed, except as specifically provided below in items (iv) and (v). In particular:
(i)
Mediaset shares: each Mediaset shareholder, including the depositary bank under the Mediaset American Depositary Receipts (“
ADRs
”) program, shall be granted 1 (one) DutchCo Ordinary Share for each share held in Mediaset as per Exchange Ratio I;
(ii)
Mediaset ADRs: the holders of the corresponding ADRs representing Mediaset shares will be granted such number of ADRs representing DutchCo Ordinary Shares as per Exchange Ratio I.
(iii)
Mediaset España shares: each Mediaset España shareholder shall be granted 2.33 DutchCo Ordinary Shares for each share held in Mediaset España as per Exchange Ratio II.
(iv)
Notwithstanding the foregoing, any treasury shares held by Mediaset and Mediaset España as at the Merger Effective Date will not be exchanged and will be cancelled pursuant to the relevant provisions of Italian law and article 26 of the LME, respectively, as well as in accordance with Dutch law.
(v)
Likewise, any shares in either of the Absorbed Companies held by the other Absorbed Company will not be exchanged, but will be cancelled instead on the Merger Effective Date pursuant to the relevant provisions of Italian law and article 26 of the LME, respectively, as well as in accordance with Dutch law.
For clarification purposes, Mediaset España neither holds any Mediaset shares on the date hereof nor is expected to hold any Mediaset shares at any time before the Merger Effective Date, so that paragraph (v) above will in all likelihood only apply with regard to the Mediaset España shares which are held by Mediaset on the date on which the Merger Deed is executed.
(B)
DutchCo shares to serve the exchange
On the Merger Effective Date DutchCo will issue such amount of ordinary shares, with a nominal value of Euro 0.01 each, as necessary to serve the share exchange (the ordinary shares so issued are referred to as the “
DutchCo Ordinary Shares
”).
14
Based upon the Exchange Ratios, as indicated above, if the participation of Mediaset in Mediaset España remained unaltered, and provided that the number of treasury shares held at the date of the Common Cross-Border Merger Plan by Mediaset (No. 44,071,568) and by Mediaset España (No. 14,269,073) was maintained on the Merger Effective Date and therefore such shares were cancelled upon effectiveness of the Merger, DutchCo would issue No. 1,472,925,998 DutchCo Ordinary Shares, with a nominal value of Euro 0.01 per share, resulting in a total nominal value of Euro 14,729,259.98.
The exact amount of the share capital increase will depend on (i) the treasury shares of Mediaset and Mediaset España held at the Merger Effective Date and (ii) the shareholding of either of the Absorbed Companies in the other Absorbed Company, at the Merger Effective Date.
(C)
DutchCo treasury shares
The 90,000 DutchCo shares, with a nominal value of Euro 1.00 each, currently held by Mediaset, and any additional DutchCo shares issued to or otherwise acquired by Mediaset after the date of the Common Cross-Border Merger Plan that are held by Mediaset at the Merger Effective Date, in part will be cancelled, in accordance with section 2:325, paragraph 3, of the DCC, and in part will be split (and will have a nominal value of Euro 0.01 each) and will become DutchCo Ordinary Shares held as treasury shares.
According to Dutch law, the current articles of association of DutchCo and the proposed version of the articles of association of MFE (attached to the Common Cross-Border Merger Plan as Schedule 1 and Schedule 2, respectively), during the time that shares in DutchCo are held by DutchCo itself, these shares shall not be entitled to any distribution or voting rights. DutchCo treasury shares may be allocated to serve (i) the incentive plans indicated in
Section 3.2.6
below and Section 8.1 of the Common Cross-Border Merger Plan, (ii) trading and hedging operations, or (iii) the exchange ratio in relation to the merger of Videotime S.p.A. —an Italian joint stock company (
società per azioni
) 99.2% owned by Mediaset (“
Videotime
”)— in Mediaset (effective as of 1 March 2018), or (iv) may be offered and allocated for trading on the market after the Merger in accordance with applicable laws and regulations or used for any other corporate purpose in compliance with the applicable laws and regulations.
On 1 March 2018 the merger by absorption of Videotime in Mediaset (the “
Videotime Merger
”) became effective. As a result of the Videotime Merger, Videotime shareholders (other than Mediaset) have become entitled to receive 0.294 Mediaset shares for each Videotime share held (the “
Videotime Exchange Ratio
”).
Several former shareholders of Videotime have not yet requested and, thus, received Mediaset shares pursuant to the Videotime Exchange Ratio; therefore, at the Merger Effective Date, DutchCo will have to hold the necessary amount of treasury shares to serve such shareholders. It is envisaged that MFE will have to hold at least No. 113,174 treasury shares to service former shareholders of Videotime.
In light of the foregoing, MFE is currently expected to hold, as at the Merger Effective Date, No. 5,000,000 treasury shares.
15
(D)
Fractional entitlements to DutchCo Ordinary Shares
In view of Exchange Ratio II, fractional entitlements to DutchCo Ordinary Shares will arise on the Merger Effective Date among those Mediaset España shareholders who hold, on such date, a number of shares in Mediaset España such as to enable them to receive a non-whole number of DutchCo Ordinary Shares. In that event:
(i)
No fractional DutchCo Ordinary Shares shall be allotted to any holders of shares of Mediaset España. Those shareholders who hold a number of Mediaset España shares such as to enable them to receive, in accordance with the Exchange Ratio II, a non- whole number of DutchCo Ordinary Shares, shall receive such whole number of DutchCo Ordinary Shares which is immediately below said non-whole number.
(ii)
Mediaset España shares (or any fractions thereof) in excess of those required, pursuant to Exchange Ratio II, to receive a whole number of DutchCo Ordinary Shares (i.e. Mediaset España shares or any fractions thereof representing fractional entitlements to DutchCo Ordinary Shares) shall be transferred on behalf of the Mediaset España shareholders, through their depositaries, to Banco Santander, S.A., that has been appointed by Mediaset España as agent for these purposes (the “
Fractions Agent
”).
(iii)
The Fractions Agent, acting at its own risk and for its own account, shall pay in cash to these shareholders, in consideration for each of the Mediaset España shares (or any fractions thereof) so transferred, their market value.
(iv)
The Fractions Agent will, in turn, exchange the Mediaset España shares (and any fractions thereof) arising from the aggregation of such fractions so purchased and exchange them, in its own name and on its own behalf, for the relevant whole number of DutchCo Ordinary Shares resulting from the Exchange Ratio II, with any remainder fractional entitlements to DutchCo Ordinary Shares corresponding to the Mediaset España shares (or fractions thereof) held by the Fractions Agent being disregarded.
(E)
Exchange procedure
The procedure for the exchange of Mediaset and Mediaset España shares for DutchCo Ordinary Shares will be as follows:
(i)
The exchange of Mediaset and Mediaset España shares for DutchCo Ordinary Shares will take place upon the Merger being completed, when the Absorbed Companies’ shares shall have been cancelled by operation of law and, provided they were neither treasury shares nor shares held by the other Absorbed Company, will thereafter represent only the right to receive such number of DutchCo Ordinary Shares as results from the applicable Exchange Ratio (plus the proceeds from the fractions payable by the Fractions Agent, where applicable).
(ii)
The DutchCo Ordinary Shares to be allotted upon completion of the Merger will be issued in dematerialized form with effect as of the Merger Effective Date and will be delivered to the beneficiaries through the applicable centralized clearing systems organized by Monte Titoli, S.p.A. and Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A. (“
Iberclear
”) and the relevant
16
depositaries with which the shares of Mediaset and Mediaset España are held or deposited.
(iii)
The ADRs representing DutchCo Ordinary Shares to be allotted upon completion of the Merger to the Mediaset ADRs holders will be issued in dematerialized form by the depositaries with effect as of the Merger Effective Date and delivered to the beneficiaries.
(iv)
DutchCo will bear all costs in relation to the exchange of Mediaset and Mediaset España shares for DutchCo Ordinary Shares other than any costs charged to the holders of shares of Mediaset and Mediaset España by their respective custodians.
Further information on the procedure for allocation of the DutchCo Ordinary Shares shall be communicated by Mediaset in a press release to be published on the website of Mediaset (www.mediaset.it), and by Mediaset España in a notice published on the website of Mediaset España (www.telecinco.es).
Please refer to
Section 3.3.2
in connection with the allotment of Special Voting Shares (as defined below) to Mediaset and Mediaset España shareholders.
3.2.5
Special advantages granted to the experts examining the Common Cross-Border Merger Plan, the members of the boards of directors of the Companies or their statutory auditors
In accordance with article 91.1.g) of the Directive and article 31 (5) of the LME, Section 6 of the Common Cross-Border Merger Plan clarifies that no special advantages shall be granted or have been established for the benefit of (i) the members of any of the boards of directors or of the management of the Merging Companies; (ii) the experts appointed by or at the request of the Merging Companies for purposes of drafting the mandatory expert’s reports; (iii) the statutory auditors or the members of supervisory or control bodies of the Merging Companies; or (iv) any other person on the occasion of the Merger.
As regards item (ii), the independent experts will exclusively receive adequate remuneration for the services actually rendered.
3.2.6
Rights conferred by DutchCo to holders of Absorbed Companies’ shares to which special rights are attached and holders of securities other than Absorbed Companies’ shares, or measures proposed concerning them
For the purposes of article 91.1.f) of the Directive and article 31 (4) of the LME, the boards of directors of the Companies describe in Section 8 of the Common Cross-Border Merger Plan the measures agreed in connection with the 2015-2017 and the 2018-2020 medium-long term incentive plans adopted by Mediaset, as well as in connection with the 2017-2019, the 2018- 2010 and the 2019-2021 long term incentive plans adopted by Mediaset España, all as currently in force.
(A)
Mediaset— impacts of the incentive plans
Mediaset has adopted (i) the 2015-2017 medium-long term incentive plan (the “
2015-2017 Plan
”) and (ii) the 2018-2020 medium-long term incentive plan (the “
2018-2020 Plan
”), each
17
of which is divided into three-year cycles, for the benefit of the executives (both of Mediaset and of its subsidiaries) who are in charge of functions that are significant for achieving the Group’s strategic results.
By way of implementation of the second three-year cycle (2016-2017-2018) of the 2015-2017 Plan, the beneficiaries of such plan will receive, during the course of 2019 and before the Merger Effective Date, Mediaset shares pursuant to the terms and conditions set forth under the plan and in the regulation thereof. Such shares will be exchanged for DutchCo Ordinary Shares pursuant to the Exchange Ratio I.
Taking into consideration the effect of the Merger on the implementation of the 2015-2017 Plan and the 2018-2020 Plan, the board of directors of Mediaset, upon release of a favourable opinion by the Remuneration Committee, pursuant to the relevant regulations, resolved to suspend the implementation of the third three-year cycle of the 2015-2017 Plan, and the 2018-2020 Plan.
It is envisaged that the New Board of Directors of DutchCo (as defined in
Section 3.3.7(B)
below
)
, upon release of an opinion by its compensation and nominating committee, pursuant to the relevant regulations, (i) with respect to the 2015-2017 Plan (and to third three-year cycle of the same), will make appropriate adjustments in order to maintain substantially unchanged the respective economic content (to the extent possible), according to the rules commonly accepted in the financial markets, and (ii) with respect to the 2018-2020 Plan, will resolve, acting in the best interest of the group, whether to make appropriate adjustments in order to maintain substantially unchanged the respective economic content (to the extent possible) or to cancel the plan, thus determining the procedure for early settlement.
It is envisaged that the New Board of Directors of DutchCo (as defined in
Section 3.3.7(B)
below) will adopt the relevant resolutions within the end of the semester following the Merger Effective Date.
The incentive plans adopted by Mediaset will not be transferred to NewCo Italia in the context of the Mediaset Reorganization and therefore will remain in Mediaset and will be transferred to MFE following the Merger.
(B)
Mediaset España— impacts of the incentive plans
Mediaset España has adopted (i) the 2017-2019 long term incentive plan, (ii) the 2018-2020 long-term incentive plan and (iii) the 2019-2021 long term incentive plan (collectively, the “
ME Plans
”), for the benefit of the executives (both of Mediaset España and of its subsidiaries) who are in charge of functions that are significant for achieving the group’s strategic results.
The board of directors of Mediaset España, upon release of a favourable opinion by the Appointment and Remuneration Committee, has resolved to suspend the implementation of the ME Plans. This resolution, which is expressly contemplated in the regulations applicable to the ME Plans, has been adopted in light of the effects that the Merger could have on the ME Plans.
It is envisaged that the New Board of Directors of DutchCo, acting in the best interest of the group, upon release of an opinion by its compensation and nominating committee, will resolve that:
18
·
the 2017 long term incentive plan will be amended in order to maintain substantially unchanged the respective economic content (to the extent possible), according to the rules commonly accepted in the financial markets.
·
the 2018 and 2019 long term incentive plans will be subject to appropriate adjustments in order to maintain substantially unchanged the respective economic contents (to the extent possible) or to implement an early settlement of the plans.
It is envisaged that the New Board of Directors of DutchCo (as defined in
Section 3.3.7(B)
below) will adopt the relevant resolutions within the end of the semester following the Merger Effective Date.
Other than (i) the beneficiaries of the incentive plans adopted by Mediaset and Mediaset España as set out above, and (ii) former shareholders of Videotime who have not yet requested and, thus, received Mediaset shares following the Videotime Merger, there are no persons who, in any other capacity than as Mediaset or Mediaset España shareholders, have special rights towards Mediaset or Mediaset España such as rights to participate in profit distributions or rights to acquire newly issued shares in the capital of Mediaset or Mediaset España. Therefore no other special rights are due and no compensation shall be paid to anyone at the expense of DutchCo.
For the sake of clarity, the above remains accurate also for purposes of article 31 (3) of the LME, since there are no industry contributions or ancillary obligations in any of the Absorbed Companies on which the Merger could have an impact. Therefore, there will be no compensation to any shareholders for this concept.
Shareholders of Mediaset and Mediaset España who will exercise their withdrawal rights in connection with the Merger will have no rights to dividends which will be potentially distributed after the Merger Effective Date.
3.2.7
Date of legal and accounting effects
Section 7.1 of the Common Cross-Border Merger Plan provides that, subject to the satisfaction or waiver (as the case may be) of the conditions precedent and the completion of the pre-Merger formalities and steps, the Merger will become effective on the Merger Effective Date, i.e. at 00.00 am CET on the day following the day on which the Merger Deed is executed in the Netherlands. Please refer to
Section 3.1.1.
Further, in compliance with article 91.1 .e) of the Directive and article 31 (7) of the LME, Section 7.2 of the Common Cross-Border Merger Plan sets out the date from which the operations of the Absorbed Companies shall be treated for accounting purposes as being those of the Absorbing Company. Specifically, it is stated that according to Dutch applicable accounting regulations, the assets and liabilities and other legal relationships of Mediaset and Mediaset España will be reflected in DutchCo’s accounts and other financial reports as of the first day of the financial year in which the Merger Effective Date has occurred, which shall thus be considered the Merger’s date of accounting effects.
According to Italian applicable accounting regulations, the accounting effects of the Merger in Italy as regards Mediaset will be backdated as of the first day of the DutchCo’s financial year in which the Merger Effective Date has occurred.
19
According to Spanish applicable accounting regulations (
Plan General de Contabilidad
), the accounting effects of the Merger in Spain as regards Mediaset España will be backdated as of the first day of the DutchCo’s financial year in which the Mediaset España General Meeting has approved the Merger.
Therefore, should the Merger Effective Date occur by the end of 2019, the accounting effects of the Merger in Spain, Italy and The Netherlands would be backdated to 1 July 2019; should the Merger Effective Date occur in 2020 instead, the accounting effects of the Merger in Italy and in the Netherlands would be backdated to 1 January 2020, while the accounting effects of the Merger in Spain would be backdated to 1 July 2019.
3.2.8
Date from which the DutchCo Ordinary Shares entitle their holders to participate in DutchCo’s profits
As required by article 91.1.d) of the Directive and article 31 (6) of the LME, Section 9 of the Common Cross-Border Merger Plan establishes the date as of which the holders of the new DutchCo Ordinary Shares will be entitled to participate in DutchCo’s profits.
The DutchCo Ordinary Shares issued to the shareholders of Mediaset and Mediaset España in application of the Exchange Ratios will be entitled, as of the Merger Effective Date, to participate in the profits of DutchCo under the same terms and conditions as the existing DutchCo Ordinary Shares.
For the avoidance of doubt, no particular rights to dividends will be granted in connection with the Merger.
Refer to Section 5.2 as regards the envisaged distribution of a dividend by MFE, pursuant to Dutch law, to all MFE shareholders following the Merger.
3.2.9
Eventual impact of the Merger on employment, on gender distribution in the Companies’ management bodies and on corporate social responsibility
Following the mandate of article 31 (11) of the LME, the Common Cross-Border Merger Plan sets out in Section 11 a description of the expected effects that the Merger may have on employment. In essence, the Merger is not expected to have any material impact on the employees of Mediaset and Mediaset España, since the current business organizations and human and material resources of Mediaset and Mediaset España, including the policies and procedures that have been in force as regards personnel management, will be respectively assumed by NewCo Italia and GA Mediaset as of completion of the Preliminary Reorganizations, by operation of law.
In other words, by the time the Merger Deed is executed, Mediaset and Mediaset España will keep no employees. The same applies to DutchCo, since it currently does not have any employees, and it is not currently envisaged that it will have any by the time of execution of the Merger Deed.
The Merger, together with the Segregation, will be notified by Mediaset España to the relevant labor authorities and the General Treasury of the Social Security (
Tesorería General de la Seguridad Social
).
20
See
Section 3.2.6
above as regards effects of the Merger on the long term incentive plans adopted by Mediaset España.
MFE may approve new stock incentive plans for directors and/or employees of MFE. Newly issued DutchCo Ordinary Shares and/or treasury shares of MFE may be used to serve these plans.
The Merger is not expected to have any impact on the Companies’ corporate social responsibility.
Finally, as regards gender distribution in the board of directors of MFE upon completion of the Merger, it is envisaged that MFE will act in compliance with the targets as referred to in section 2:166 DCC (i.e. a balanced composition of at least 30% male and female members).
3.2.10
Merger balance sheets and information on the valuation of the assets and liabilities of the Absorbed Companies
Section 13 of the Common-Cross Border Merger Plan states that the balance sheet of the Mediaset España audited annual financial statements as at 31 December 2018 approved by the shareholders’ meeting of Mediaset España on 10 April 2019 (the “
Mediaset España Balance Sheet
”) will be the merger balance sheet for purposes of article 36 of the LME.
Additionally, the Mediaset España Balance Sheet, together with the rest of the documents comprising the Mediaset España financial statements as of 31 December 2018, has been used for purposes of establishing the conditions of the Merger pursuant to article 31 (10) of the LME. By the same token, from an Italian and a Dutch law standpoint, the conditions of the Merger have been established on the basis of the annual financial statements of Mediaset as at 31 December 2018 approved by the shareholders’ meeting of Mediaset on 18 April 2019 (the “
Mediaset Balance Sheet
”) and on the basis of the DutchCo financial statements as at 31 December 2018 approved by the shareholders’ meeting of DutchCo on 17 April 2019 (the “
DutchCo Balance Sheet
” and, together with the Mediaset Balance Sheet and the Mediaset España Balance Sheet, the “
Merger Balance Sheets
”).
Notwithstanding the above, any material changes in the assets or liabilities arising between the date of the Common Cross-Border Merger Plan (the date hereof) and the date(s) of the shareholders meetings of the Merging Companies that have to decide on the Merger, shall be reported by the board of directors to the relevant general shareholders meeting and to the boards of directors of the Merging Companies in accordance with the provisions of article 39.3 of the LME and article 2501-
quinquies
, paragraph 3, of the Italian civil code.
Furthermore (and, as regards Mediaset España, for purposes of article 31 (9) of the LME), the assets and liabilities of Mediaset and Mediaset España will be recognized by DutchCo in its individual accounts for their net accounting value according to applicable accounting consolidation rules and within the limits of the carrying amounts detailed in the consolidated financial statements of Mediaset prior to the execution of the Transaction.
Following the Merger, MFE will prepare its consolidated financial statements and its company only financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.
21
3.3
Analysis of additional legal aspects of the Common Cross-Border Merger Plan
Likewise, the Common Cross-Border Merger Plan addresses other legal aspects in addition to the mandatory mentions that it has been considered appropriate to include in this report.
3.3.1
Listing of DutchCo Ordinary Shares
As already anticipated in
Section 1
of this Report, the Mediaset shares are currently listed on the Mercato Telematico Azionario (organized and managed by Borsa Italiana S.p.A.), and the Mediaset España shares are currently listed on the Spanish Stock Exchanges (organized and managed by their respective managing companies) and traded through the SIBE (organized and managed by Sociedad de Bolsas, S.A.U.). However, by virtue of the Merger, the Mediaset and Mediaset España shares will be extinguished by operation of law and will no longer be listed on the mentioned markets. Instead, the DutchCo Ordinary Shares are envisaged to be admitted to listing and trading on the Mercato Telematico Azionario upon completion of the Merger and, immediately thereafter, on the Spanish Stock Exchanges for their trading through the SIBE.
Therefore, the completion of the Merger is subject to,
inter alia
, admission to listing and trading of the DutchCo Ordinary Shares on the Mercato Telematico Azionario (as explained in
Section 3.1.2(B)(i)
above). In order for the DutchCo Ordinary Shares to be admitted to listing and trading on the Mercato Telematico Azionario, the Common Cross-Border Merger Plan prescribes that DutchCo shall:
(i)
prepare a listing prospectus and submit it to the AFM for its approval and for its subsequent passport to the Italian National Commission for Companies and Stock Exchange (
Commissione Nazionale per le Società e la Borsa
—the “
Consob
”) in accordance with applicable laws and regulations; and
(ii)
submit in due time to Borsa Italiana S.p.A. the relevant applications for admission to listing and trading, so as to be granted such admission before the Merger Effective Date.
Further, the Common Cross-Border Merger Plan also envisages the admission to listing of the DutchCo Ordinary Shares on the Spanish Stock Exchanges for their trading through the SIBE immediately after completion (thus it is not conceived as a condition precedent). For this purpose, DutchCo shall also submit the relevant applications for admission to listing and trading to the managing companies of the Spanish Stock Exchanges and to the Spanish national securities market commission (
Comisión Nacional del Mercado de Valores
—the “
CNMV
”). Also, the listing prospectus approved by the AFM will be passported into Spain in accordance with applicable laws and regulations.
3.3.2
Special Voting Shares
As pointed out in
Section 2
, one of the goals of the Transaction (and particularly of the Merger) is to foster a stable and loyal shareholder base that will help achieve the company’s strategic goals and allow to reinforce the Group’s stability. This is the reason why the DutchCo articles of association (see Schedule 2 to the Common Cross-Border Merger Plan) provide for a special- voting structure in accordance with Dutch law applicable as of the date when the Merger becomes effective (the “
Special Voting Structure
”). The Special Voting Structure pivots around the notion of special voting shares, which are shares to which multiple voting rights are
22
attached and which are granted to long-term shareholders in order to reward their loyalty and involvement.
Although comprehensive documentation on the Special Voting Structure will be made available separately to the public through the websites of both Mediaset (www.mediaset.it) and Mediaset España (www.telecinco.es), a brief explanation of how such structure will work is provided below:
(A)
Entitlement to 3 voting rights. Allotment of Special Voting Shares A
(i)
Initial allotment
The thirtieth calendar day after the Merger Effective Date, those Mediaset and Mediaset España shareholders who have so requested prior to, respectively, the Mediaset Extraordinary Meeting and the Mediaset España General Meeting will be entitled to 3 voting rights for each DutchCo Ordinary Share held. For this purpose, MFE will issue special voting shares A attaching 2 voting rights each, having a nominal value of Euro 0.02 (“
Special Voting Shares A
”). On the day falling the thirtieth calendar day after the Merger Effective Date (the “
Initial Allocation Date A
”), such Special Voting Shares A will be allotted to those eligible Mediaset and Mediaset España shareholders.
The election procedure and the requirements that the Absorbed Companies’ shareholders shall meet to request Special Voting Shares A will be explained in detail in the “
Terms and Conditions for the initial allocation of special voting shares A
” attached as Schedule 3 (Mediaset) and Schedule 4 (Mediaset España), respectively, to the Common Cross-Border Merger Plan.
(ii)
Subsequent allotment
As an alternative to the Initial Allotment procedure, as described under (i), after three years of uninterrupted ownership as well as uninterrupted registration of DutchCo Ordinary Shares in a special loyalty register, shareholders of MFE will be entitled to 3 voting rights for each DutchCo Ordinary Share held. For this purpose, MFE will issue Special Voting Shares A. On the day falling three years after the registration of the DutchCo Ordinary Shares in a special loyalty register (the “
Subsequent Allocation Date A
”), such Special Voting Shares A will be allotted to those eligible MFE shareholders.
(B)
Entitlement to 5 voting rights. Allotment of Special Voting Shares B
After two years of uninterrupted ownership of Special Voting Shares A —as well as uninterrupted registration in a special loyalty register of DutchCo Ordinary Shares for which Special Voting Shares A have been allotted under
Sections 3.3.2(A)(A)(i)
or
(A)(ii)
—, shareholders of MFE will be entitled to 5 voting rights for each DutchCo Ordinary Share held. For this purpose, each Special Voting Share A held will be converted into one special voting share B attaching 4 voting rights, having a nominal value of Euro 0.04 (“
Special Voting Shares B
”). On the day falling two years after the date of allotment of Special Voting Shares A — whether it be the Initial Allocation Date A or the Subsequent Allocation Date A, as the case
23
may be—, such Special Voting Shares B will be acquired by those eligible MFE shareholders by way of conversion of the Special Voting Shares A already held.
(C)
Entitlement to 10 voting rights. Allotment of Special Voting Shares C.
After three years of uninterrupted ownership of Special Voting Shares B —as well as uninterrupted registration in a special loyalty register of DutchCo Ordinary Shares for which Special Voting Shares B have been allotted under (B)—, shareholders of MFE will be entitled to 10 voting rights for each DutchCo Ordinary Share held. For this purpose, each Special Voting Share B held will be converted into one special voting share C attaching 9 voting rights, having a nominal value of Euro 0.09 (“
Special Voting Shares C
”). On the day falling three years after the date of allotment of Special Voting Shares B, such Special Voting Shares C will be acquired by those eligible MFE shareholders by way of conversion of the Special Voting Shares B already held.
The Special Voting Shares A, the Special Voting Shares B and the Special Voting Shares C are jointly referred to as the “
Special Voting Shares
”.
As a clarifying remark: the Special Voting Shares (i) will not be tradable on the Mercato Telematico Azionario and on the Spanish Stock Exchanges, (ii) will have only minimal economic entitlements, and (iii) will not be part of any of the Exchange Ratios. Further details on the Special Voting Shares, and generally on the Special Voting Structure (such as the requirements related to the uninterrupted holding of DutchCo Ordinary Shares in the special loyalty register), are explained comprehensively in MFE’s proposed articles of association attached to the Common Cross-Border Merger Plan, as well as in the “
Terms and Conditions for Special Voting Shares
” attached as Schedule 5 to the Common Cross-Border Merger Plan.
Schedule 1
to this Report contains a description of (i) the procedure for the allotment of Special Voting Shares, (ii) the requirements of shareholders for such allotment, (iii) the characteristics of the Special Voting Shares and (iv) the procedure for the transfer of Special Voting Shares and their cancellation from the special loyalty register. Further details on the Special Voting Shares, and generally on the Special Voting Structure (such as the requirements related to the uninterrupted holding of DutchCo Ordinary Shares in the special loyalty register), are explained comprehensively in MFE’s proposed articles of association attached to the Common Cross- Border Merger Plan, as well as in the abovementioned “
Terms and Conditions for Special Voting Shares
”.
3.3.3
Withdrawal right
Due to the cross-border nature of the Merger, the shareholders of both Mediaset and Mediaset España will have a withdrawal right. The main features of such withdrawal right, as well as the procedure to exercise such withdrawal right, are laid down in Section 15 of the Common Cross- Border Merger Plan and explained below:
(A)
Withdrawal right for Mediaset shareholders
Following Italian provisions, Mediaset shareholders who do not participate in the adoption of the resolution on the Merger will be entitled to exercise a withdrawal right, with effectiveness
24
of such exercise being conditional on the Merger becoming effective. The Mediaset shareholders so entitled and who actually exercise their withdrawal right are hereinafter referred to as the “
Mediaset Withdrawing Shareholders
”. The exercise of the withdrawal right shall be governed by the following rules:
(i)
Eligible Mediaset shareholders may exercise their withdrawal right, in relation to some or all of their shares, by sending a notice via registered mail to the official seat of Mediaset no later than 15 days following registration with the Companies’ Register of Milan of the minutes of the Mediaset Extraordinary Meeting approving the Merger. Notice of the registration will be published in a daily newspaper and on the Mediaset corporate website.
(ii)
The redemption price payable to the Mediaset Withdrawing Shareholders will be equal to the arithmetic average of the daily closing prices of Mediaset shares during the six- month period prior to the date of publication of the notice for convening the Mediaset Extraordinary Meeting (envisaged to be held on 4 September 2019). Mediaset will provide shareholders with information relating to the redemption price in accordance with the applicable laws and regulations.
(iii)
Once the fifteen-day exercise period indicated in paragraph (i) above has expired and before the Merger becomes effective, the shares with respect to which the withdrawal right has been exercised will be offered by Mediaset to its existing shareholders, and those that remain unsold may subsequently be offered to third parties. After that, potential outstanding and unsold shares will be acquired by MFE at the redemption price. The above offer and sale procedure, as well as any payment of the redemption price to Mediaset Withdrawing Shareholders, will be conditional upon completion of the Merger.
(iv)
After the Merger Effective Date, the settlement of the Mediaset shares purchased pursuant to the procedure set out above will occur, whereby such Mediaset shares will be exchanged for DutchCo Ordinary Shares in accordance with Exchange Ratio I, and Mediaset Withdrawing Shareholders will receive the redemption price accordingly.
(v)
Mediaset shares in relation to which the withdrawal right is exercised shall not be sold or otherwise disposed until they are either transferred in accordance with the above paragraphs or it has been verified that the conditions precedent to the Merger will not be satisfied or waived, as applicable
(vi)
If the Merger is not consummated, the Mediaset shares in relation to which the withdrawal right has been exercised will continue to be held by the corresponding Withdrawing Shareholders. In such case, no payment will be made to such shareholders and Mediaset’s shares will continue to be listed on the Mercato Telematico Azionario.
(B)
Withdrawal rights for Mediaset España shareholders
Pursuant to article 62 of the LME, each Mediaset España shareholder who votes against the Merger in the Mediaset España General Meeting will be entitled to exercise a withdrawal right. The Mediaset España shareholders so entitled and who actually exercise their withdrawal rights are hereinafter referred to as the “
Mediaset España Withdrawing Shareholders
”. The exercise of the withdrawal right shall be governed by the following rules:
25
(i)
In accordance with article 348 of the
texto refundido de la Ley de Sociedades de Capital, aprobado por el Real Decreto Legislativo 1/2010, de 2 de julio
(the “
LSC
”), Mediaset España shareholders may exercise their withdrawal right, in relation to some or all of their shares, within one month of the publication in the Official Gazette of the Commercial Register (the “
BORME
”) of the approval of the Merger by the Mediaset España General Meeting, by means of a written notice to the relevant depositaries with which the Mediaset España Withdrawing Shareholders have their shares deposited.
(ii)
Given the exceptional character of the withdrawal rights, the Mediaset España shares of the Mediaset España Withdrawing Shareholders will be immobilized —from the date of exercise of the withdrawal right until the payment of the redemption price and settlement of the transaction (or, until it has been verified that the conditions precedent to the Merger will not have been satisfied or waived)— by the depositaries with which the relevant withdrawn shares are deposited. The document by virtue of which the Mediaset España Withdrawing Shareholders exercise the right of withdrawal must contain an instruction to the relevant depositary to immobilize the withdrawn shares in order for the withdrawal right to be deemed validly exercised.
(iii)
In accordance with article 353.2 of the LSC, in connection with applicable securities market regulations, the redemption price payable to the Mediaset España Withdrawing Shareholders is Euro 6.5444 per Mediaset España share, which corresponds to the average quoted price of Mediaset España shares during the three-month period prior to (and excluding) the date of the approval of the Common Cross-Border Merger Plan and announcement of the Transaction, deducting the dividend in the gross amount of Euro 0.31557917 per share of Mediaset España paid on 30 April 2019 from the average weighted price for the trading sessions comprised between 7 March and 25 April (both inclusive), where the shares of Mediaset España were traded
cum dividend
.
(iv)
Mediaset España has designated Banco Santander, S.A. as the agent entity for these purposes (the “
Agent
”). The Agent will:
(a)
receive the requests for the exercise of the withdrawal right processed through the corresponding depositaries,
(b)
check each of these requests for exercise of the withdrawal right with the minutes of the Mediaset España General Meeting approving the Merger, in order to verify the entitlement of the Mediaset España Withdrawing Shareholders to exercise his or her withdrawal right and whether the withdrawal right is being exercised with respect to a number of shares which does not exceed such number of shares that the Mediaset España Withdrawing Shareholder is entitled to withdraw, and
(c)
notify Mediaset España the total number of duly withdrawn shares.
(v)
The Mediaset España Withdrawing Shareholders shall receive the redemption price through the relevant depositaries immediately before the Merger Effective Date. If it has been verified that the conditions precedent to the Merger will not be satisfied or waived, as applicable, and provided the redemption price has not been paid to the Mediaset España Withdrawing Shareholders yet, the Mediaset España shares in relation to which the withdrawal rights have been exercised will continue to be held by the corresponding Mediaset España Withdrawing Shareholders, will cease to be
26
immobilized and will continue to be listed on the Spanish Stock Exchanges. Consequently, in this case, no payment of redemption price will be made to Mediaset España Withdrawing Shareholders.
(vi)
As referred to in
Section 3.1 .2(B)(iii)
above, once the withdrawn have been acquired by Mediaset España, these shares then held as treasury shares could be subsequently transferred to third parties (shareholders or not) pursuant to any purchases or prior commitments to purchase by such third parties, as deemed appropriate by the board of directors of Mediaset España if it is determined to be beneficial to the corporate interest of Mediaset España and the Transaction.
(C)
Withdrawal rights for DutchCo shareholders
The Merger will not trigger any withdrawal rights for the sole shareholder of DutchCo.
3.3.4
Opposition right
Mediaset, Mediaset España and Dutch creditors, for their part, may oppose the Merger in the terms set out below:
(A)
Opposition right for Mediaset creditors
Mediaset creditors whose claims precede the registration of the Common Cross-Border Merger Plan with the Companies’ Register of Milan shall be entitled to oppose the Merger pursuant to article 2503 of the Italian civil code within 60 days from the date on which the resolution of the Mediaset Extraordinary Meeting has been registered with the Companies’ Register of Milan, unless Mediaset has deposited the necessary amounts to satisfy its opposing creditors with a bank. Should an opposition to the Merger be made, the competent court, provided that the risk of prejudice to creditors is deemed ungrounded or adequate guarantees have been given by the company to satisfy the opposing creditors, may nonetheless authorize the Merger despite the opposition, pursuant to article 2503 of the Italian civil code in conjunction with article 2445 of the Italian civil code.
(B)
Opposition right for Mediaset España creditors
In accordance with article 44 of the LME, Mediaset España creditors whose unsecured credits have arisen before the publication of the Common Cross-Border Merger Plan on the Mediaset España website and are not due and payable before such date shall be entitled to oppose the Merger, within a month after the publication of the resolution of the Mediaset España General Meeting approving the Merger. Any creditors whose credits are sufficiently secured shall not be entitled to oppose the Merger.
If any creditors whose credits meet the above criteria oppose the Merger, Mediaset España shall, before completing the Merger, provide sufficient security to the opposing creditors, or alternatively make sure that a credit institution provides joint and several guarantee to the company, for the aggregate amount of the credits held by the opposing creditors.
27
(C)
Opposition right for DutchCo creditors
DutchCo creditors shall have the right to oppose the Merger by filing a formal objection to the Common Cross-Border Merger Plan with the local court of Amsterdam, the Netherlands, pursuant to section 2:316 of the DCC, within a period of one month starting from the day following the day of public announcement in a newspaper with national circulation in the Netherlands of the filing of the Common Cross-Border Merger Plan with the Dutch Commercial Register. In such case, DutchCo may need to provide security to any opposing creditor if DutchCo’s financial condition after the Merger will provide less security for payments of amounts owed to the relevant opposing creditor. If a creditor’s opposition is filed on time (i.e. before the end of the month period) the Merger Deed may not be executed unless the court ruling to release the opposition has immediate effect or the opposition is withdrawn.
3.3.5
Tax implications
From a tax perspective, the Merger will have the tax implications foreseen in Section 18 of the Common Cross-Border Merger Plan, which are replicated below for each of the Absorbed Companies and their shareholders:
(A)
Italian tax law aspects
(i)
Direct tax regime applicable to the Merger
From a direct taxation perspective, Italian law preaches the tax neutrality of the Merger. In particular, since DutchCo will be resident in Italy for tax purposes, the Merger will be subject to the Italian tax rules ordinarily applicable to domestic and intra-EU mergers, which establish (cf. articles 172 and 178 of the Italian Presidential Decree No. 917 of 22 December 1986 —the “
ITC
”) that mergers between Italian tax resident companies and mergers where an Italian resident company incorporates a company resident in another EU state are tax neutral transactions for income tax purposes both for the companies involved in the merger(4) and their shareholders(5). Accordingly:
(a)
The Merger will not trigger the realization nor the distribution of taxable capital gains or deductible capital losses on the assets of the Merging Companies, including those related to inventories and goodwill.
(b)
The assets and liabilities which are transferred to the Absorbing Company by Mediaset by means of the Merger will keep the same tax basis that they had in the hands of the latter prior to effectiveness of the Merger. However, DutchCo, as the entity resulting from the Merger, will be allowed to elect for a step up of the tax basis of tangible and intangible assets (including any goodwill, if accounted) received through the Merger,
(4)
Without prejudice to the tax regime applicable to the foreign absorbed company (i.e. Mediaset España) in the other EU country.
(5)
In case of cash adjustments (
conguagli in denaro
), Mediaset’s shareholders and the Mediaset España’s Italian shareholders will proportionally realize their participations. In such a case, the positive difference between the cash adjustment received and the tax basis of the participation realized is treated for tax purposes as: (i) a dividend distribution for individual and non-resident shareholders; or (ii) a capital gain for Italian corporate shareholders.
28
up to the book value attributed to such assets in the post-Merger balance sheet, by paying a substitutive tax at a rate ranging from 12% to 16%. As the Merger will be a reverse merger, tangible and intangible assets whose tax value may be stepped-up are those owned by DutchCo prior to the Merger.
(c)
The assets and liabilities which are transferred by Mediaset España to DutchCo will have a tax basis equal to their fair market value as per article 166-
bis
of the ITC.
Also, tax losses accrued (and not used) by Mediaset and DutchCo before the relevant joining of the Mediaset fiscal unit, as well as interest expenses and surpluses of ACE (
allowance for corporate equity
) not transferred to the fiscal unit, may be carried forward with the Merger and offset against the taxable income realized by DutchCo, provided that the so-called “equity test” and the so-called “vitality test” set forth by Italian law are met. If DutchCo and/or Mediaset do not meet the equity test and/or the vitality test, DutchCo may file an
ad hoc
ruling with the Italian tax authorities aimed at not applying the above limitations.
Tax losses accrued by Mediaset España before the Merger (and during its Spanish tax residence) shall not be carried forward by DutchCo.
(ii)
Indirect tax regime applicable to the Merger
The Merger is not subject to VAT, while the registration tax will be payable for a nominal amount of Euro 200.
(iii)
Implications of the Merger on the existing fiscal unit
A tax ruling will be filed with the competent Italian tax authorities in order to obtain a confirmation that the Merger does not trigger the early interruption of the existing Mediaset fiscal unit and that, consequently, the fiscal unit will continue in the hands of DutchCo, as consolidating entity, without re-attribution of the tax losses carried forward at level of the fiscal unit to the companies which originated such losses.
(iv)
Taxation of dividends and capital gains
The tax regime applicable to dividends distributed by DutchCo and capital gains realized on DutchCo’s shares will depend upon the nature and the tax residency of the shareholders and on the nature (qualifying or not qualifying) of the participations owned in DutchCo and can be summarized as follows:
(a)
Taxation of dividends distributed by DutchCo
i.
Italian tax resident individual shareholders
The tax regime applicable to dividends received by individuals not holding the participation in connection with a business activity depends on the tax periods in which
29
distributed earnings have been accrued and on the qualifying or not qualifying nature of the participation owned(6). In particular, dividends received by:
·
shareholders owning a non-qualified participation are subject to a 26% final withholding tax(7)-(8);
·
shareholders owning a qualified participation(9):
·
are included for 40% of their amount in the taxable income of the relevant shareholder if paid out of profits realized until the fiscal year ongoing on 31 December 2007;
·
are included for 49.72% of their amount in the taxable income of the relevant shareholder if paid out of profits realized from the fiscal year following the one ongoing on 31 December 2007 until the fiscal year in course on 31 December 2016;
·
are included for 58.14% of their amount in the taxable income of the relevant shareholder if paid out of profits realized in the fiscal year following the one ongoing on 31 December 2016; and
·
are subject to a 26% final withholding tax if paid out of profits realized in the fiscal year following the one ongoing on 31 December 2017(10)-(11).
Dividends received by individual shareholders who hold the shares in the context of their business activities are included in the taxable personal income (subject to progressive tax rates up to a 43% rate) to the extent of (i) 58.14%, for profits realized from the fiscal year following the one ongoing on 31 December 2016; (ii) 49.72%, for profits realized from the fiscal year following the one ongoing on 31 December 2007 up to the fiscal year in course on 31 December 2016; (iii) 40%, for profits realized until the fiscal year ongoing on 31 December 2007(12).
(6)
With respect to listed companies, a participation is “qualified” if the shareholder holds either more than 2% of the voting rights, or more than 5% of the share capital, in the relevant company.
(7)
In lieu
of the final withholding tax, the gross amount of dividend paid to Italian tax resident individual shareholders of Italian listed companies whose shares are registered in a centralized deposit system managed by Monte Titoli S.p.A. are generally subject to a 26% final substitute tax.
(8)
Dividends received by individual shareholders owning the shares within an asset portfolio for which they have opted for the
s.c.
“
Risparmio Gestito
” are not subject to any withholding or substitutive tax and contribute to determine the annual net accrued result of the portfolio, which is subject to an ad-hoc 26% substitutive tax.
(9)
Please note that dividends distributed after 31 December 2022 are subject to a 26% final withholding tax, (or substitutive tax), irrespective of the period in which they were accrued and the qualifying or non-qualified nature of the participation owned by the relevant shareholder.
(10)
If DutchCo’s earnings reserves are accrued in different tax periods, dividends are considered to be firstly paid with earnings accrued earlier.
(11)
Dividends received by individual shareholders who owning the shares within an asset portfolio for which they have opted for the s.c. “Risparmio Gestito” are not subject to any withholding or substitutive tax and contribute to determine the annual net accrued result of the portfolio, which is subject to an ad-hoc 26% substitutive tax
(12)
If DuchtCo’s earnings reserves are accrued in different tax periods, dividends are considered to be firstly paid with earnings accrued earlier.
30
ii.
Italian tax resident corporate shareholders
An amount equal to 5% of the dividends paid by DutchCo will be subject to Italian corporate income tax (the “
IRES
”) at the ordinary 24% rate (with an effective tax rate equal to 1.2%) in the hands of any shareholder which is an Italian tax resident corporate entity (e.g. limited liability companies or joint stock companies)
(13).
Dividends paid by DutchCo to IAS/IFRS adopter shareholders accounting DutchCo’s shares as trading securities, are entirely considered for the determination of the relevant IRES taxable base.
Dividends received by commercial partnerships, (i.e. “
società in nome collettivo
” and “
società in accomandita semplice
”), are considered for the determination of the relevant taxable base, (allocated to the relevant partners on a look-through basis) to the extent of: (i) 58.14%, for profits realized from the fiscal year following the one ongoing on 31 December 2016;
(ii)
49.72%, for profits realized from the fiscal year following the one ongoing on 31 December 2007 up to the fiscal year in course on 31 December 2016; and
(iii)
40%, for profits realized until the fiscal year ongoing on 31 December 2007(14).
Dividends are in principle not subject to Regional Income Tax (
IRAP
), unless the percipient is a bank or other financial entity.
iii.
Non-Italian tax resident individual shareholders
Dividends paid to non-Italian tax resident individual shareholders are generally subject to a final withholding tax at a rate of 26%. If the recipient can give evidence (by providing adequate documentation issued by the tax authorities of its country of residence) that it has paid a final tax abroad on the same dividends, the recipient may be refunded up to 11/26 of the withholding tax applied in Italy. Such withholding tax may be reduced according to the double tax treaty entered into between Italy and the country of residence of the foreign shareholder, if applicable.
iv.
Non-Italian tax resident corporate shareholders
As a general rule, dividends paid to non-Italian tax resident limited companies are subject to a 26% final withholding tax, which may be reduced to 1.2% provided that the recipient company
(a)
is resident for tax purposes in another EU or EEA Member State that allows an adequate exchange of information with Italy,
(b)
is subject to corporate income tax in that other State; and
(c)
is the beneficial owner of the dividends.
Moreover, according to Italian domestic law provisions implementing the EU Parent- Subsidiary Directive, no withholding tax applies to the extent that the recipient company:
(13)
For banks and financial intermediaries IRES applies at a 27.5% rate and, therefore, the effective tax rate on dividends is 1.375%.
(14)
If DuchtCo’s earnings reserves are accrued in different tax periods, dividends are considered to be firstly paid with earnings accrued earlier.
31
·
is resident for tax purposes in another EU Member State and subject, without being exempt, to corporate income tax in that State;
·
holds at least the 10% of corporate capital of DutchCo for an uninterrupted period of at least one year; and
·
is the beneficial owner of dividend payments.
In the other cases, the ordinary 26% withholding tax may be reduced according to the Double Tax Treaty entered into between Italy and the country of residence, if any.
(b)
Taxation of capital gains
i.
Italian tax resident individual shareholders
Capital gains realized by Italian tax resident individual shareholders upon disposal of the DutchCo shares will be subject to a substitute tax at a rate of 26%, regardless of whether their participation is qualified or not(15).
ii.
Italian tax resident corporate shareholders
If conditions set out in article 87 of ITC are met, capital gains realized by Italian tax resident corporate shareholders will be subject to
IRES
only for the 5% of the relevant amount, with an effective tax rate equal to the 1.2% (the “
participation exemption regime
” or “
PEX
). If PEX requirements are met, any capital loss realized by Italian tax resident corporate shareholders will be not deductible for tax IRES purposes.
Capital gains realised by commercial partnerships, (i.e., “
società in nome collettivo
” and “
società in accomandita semplice
”), with reference to participations having the PEX requirements are considered for the determination of the relevant taxable base, (allocated to the relevant partners on a look-through basis), for 49.72% of the relevant amount. If PEX requirements are met, any capital loss realized by Italian tax resident commercial partnerships will be not deductible for 50.28% of the relevant amount.
If the PEX requirements are not met, capital gains (and losses) on DutchCo’s shares will be entirely considered for the determination of taxable base of commercial corporate shareholders.
In principle, such capital gain or loss are not relevant for IRAP purposes.
iii.
Non-Italian tax resident shareholders (individuals and corporate)
Capital gains realized by non-Italian tax resident shareholders holding a “non-qualified shareholding” in a listed company (such as DutchCo) are exempt in Italy.
If the DutchCo shares were no longer listed in a regulated market at the time of the relevant disposal (even as a consequence of a delisting), any capital gains on a non-qualified shareholding will not be subject to taxation in Italy if realized by: (i)
(15)
Capital gains realized by individual shareholders who opt for the
s.c. “Risparmio Gestito
” contribute to determine the annual net accrued result of the portfolio, which is subject to an
ad-hoc
26% substitutive tax.
32
shareholders who are resident in a country allowing for an adequate exchange of information with Italy for tax purposes; (ii) entities or international bodies set up in compliance with international treaties entered into force in Italy; (iii) institutional investors, whether or not subject to tax, established in a country allowing for an adequate exchange of information with Italy for tax purposes; and (iv) central banks or organizations also managing official State reserves.
Capital gains realized by non-Italian tax resident shareholders holding a qualified shareholding in DutchCo will be subject to a final 26% substitute tax, unless a Double Tax Treaty prevents Italy from taxing the capital gain.
(B)
Spanish tax law aspects
(i)
Direct tax regime applicable to the Segregation
Given that the Segregation is carried out for sound business reasons and that the special regime of tax neutrality applicable to mergers, divisions, partial divisions, transfer of assets and exchanges of shares is not expressly waived up:
(i)
The transfer of assets and liabilities to GA Mediaset will not give rise to any corporate income taxation on capital gains and the difference between the market value of the assets and liabilities transferred by Mediaset España and their tax basis would be rolled- over to GA Mediaset.
(ii)
The shares of GA Mediaset which are acquired by Mediaset España as a consequence of the Segregation will keep the tax basis of the assets and liabilities transferred to GA Mediaset.
(iii)
No TIVUL(local tax on the urban lands’ increased value) will be triggered upon the transfer of real estate properties from the transferring company to GA Mediaset.
(iv)
GA Mediaset will take over the losses and other tax credits of the transferring company which has not been exhausted for tax purposes; in the event of tax losses carry forward, with some possible limitations set forth in the law(16).
Accordingly, the Segregation will not give rise to any taxable gains or deductible losses on the assets transferred by Mediaset España to GA Mediaset, including any goodwill.
GA Mediaset must notify such transaction to the Spanish Tax Authorities within three months of the registration of the public deed in which the Segregation is formalized.
(ii)
Indirect tax regime applicable to the Segregation:
Regardless of the application of the special regime, the Segregation is not subject to VAT, does not trigger Capital Duty and is exempt from Transfer Tax and Stamp Duty.
(16)
Specifically: (a) the amount of tax losses carry forward is reduced by the positive difference between the value of shareholders’ contributions corresponding to the stake held in the transferring company and its tax basis, and (b) GA Mediaset will not be able to offset any tax losses which had caused an impairment deductible for tax purposes in the hands of Mediaset España or in a different company of the group even if that different company is not resident in Spain for tax purposes, provided that such impairment was registered before January 1, 2013.
33
(iii)
Direct tax regime applicable to the Merger:
(a)
Tax implications for Mediaset group
Spanish law foresees a special tax neutrality regime applicable to cross-border mergers where the absorbed company is tax resident in Spain and the absorbing company is tax resident in another EU member state, provided that the assets and liabilities transferred by the Spanish company are allocated to a branch (a permanent establishment) located in Spain and registered with the Commercial Registry. Given that the Mediaset España assets (i.e. the GA Mediaset shares) will be allocated to the Spanish Branch, and given that the Merger is carried out for sound business reasons and that the aforementioned special regime of tax neutrality is not expressly waived up:
(i)
The Merger will not constitute any realization or distribution of capital gains or capital losses relating to assets of the Merging Companies.
(ii)
The assets and liabilities which are transferred to the Absorbing Company and affected to the Spanish Branch by means of the Merger will keep the same tax basis that they have in the hands of Mediaset España prior to effectiveness of the Merger.
Although the Merger would imply the termination of any CIT group in Spain of which Mediaset España could be the parent company or the representative of the parent company, provided that all the entities belonging to the former group form part of the new one, the termination of the group will be neutral and the implications linked to the termination(17) will only be triggered when the new group is terminated.
The Merger must be notified to the Spanish Tax Authorities within three months of the registration of the Merger Deed.
(b)
Tax implications for minority shareholders
The tax neutrality regime will also apply to EU resident shareholders of Mediaset España who receive shares of DutchCo. However, the Merger will generate capital gains or losses in Spain for Mediaset España shareholders that are resident outside an EU member state or are acting through a permanent establishment outside the EU. Under the Spanish Non-Resident Income Tax Law, gains realized by shareholders resident in a country with which Spain has entered into a double taxation agreement which contains an exchange of information clause are exempt of taxation in Spain. Other non-resident shareholders (i.e. those tax resident neither in a EU member state nor in a country with which Spain has entered into a double taxation agreement which contains an exchange of information clause) will be subject to Spanish non-resident income tax at a 19% rate on the gain deriving from the difference between the market value of
(17)
As a general rule, intragroup results obtained by companies taxed under the CIT consolidation regime are eliminated from the group CIT taxable base and deferred until the tax year in which assets acquired within the group are transferred to a third party, or until the entity triggering the capital gain is transferred out of the group. When a tax group is terminated (i) any previous eliminations from the group CIT taxable base should be positively adjusted to the taxable base of the parties to the previous intra-group transactions, and (ii) each company should take-over the losses and other tax credits of the group in proportion to their contribution to the generation of the tax credit. The same applies to entities leaving the CIT group.
34
securities representing the capital of DutchCo received in exchange for securities representing the capital of Mediaset España and their tax basis.
(iv)
Indirect tax regime applicable to the Merger:
Regardless of the application of the special regime, the Merger is not subject to VAT, does not trigger Capital Duty and is exempt from Transfer Tax and Stamp Duty.
(v)
Taxation of dividends and capital gains
(a)
Distribution of dividends by DutchCo
i.
Corporate shareholders resident in Spain
Under the participation exemption regime currently in force dividends are exempt from CIT provided that (i) the shareholder holds, directly or directly and indirectly, a minimum stake of at least 5% of the share capital or voting rights of the distributing entity (or with an acquisition value of at least EUR 20 million) which has been uninterruptedly held for a period of one year prior to the distribution, or completed afterwards; and (ii) the distributing company is subject to and not exempt from a tax of a similar nature to Spanish CIT at a nominal rate of at least 10% during the period in which the profits have been obtained.
If these requirements are not met, dividends are included in the CIT taxable base and taxed, generally, at a 25% tax rate.
Any Italian withholding tax levied by the distributing company upon the dividend distribution is creditable by the Spanish shareholder against its CIT liability up to the amount to be withheld in accordance with the Convention for the avoidance of double taxation entered into between Spain and Italy (15%) provided that it does not exceed the tax that would have been paid in Spain on the dividends distributed should they be Spanish-source dividends.
ii.
Individuals resident in Spain
Dividends are included in the savings base of the PIT and be taxed under a scale of progressive tax rates: 19% for the first EUR 6,000 of taxable income; 21% for income between EUR 6,000 and 50,000; and 23% onwards.
Any Italian withholding tax levied by the distributing upon the dividend distribution is creditable by the shareholder against its PIT liability up to the amount withheld in accordance with the Convention for the avoidance of double taxation entered into between Spain and Italy (15%) provide it does not exceed the result of applying the average effective tax rate to foreign-source taxable income. For these purposes, the effective average tax rate is that. corresponding to the net savings taxable base.
35
(b)
Distribution of dividends by GA Mediaset
Under the participation exemption regime currently in force, dividends distributed from GA Mediaset to the Spanish Branch are exempt from taxation. Profits distributed by the Spanish Branch to DutchCo are not subject to Spanish Non-Resident Income Tax.
(c)
Transfer of the Mediaset España Subsidiary shares
If GA Mediaset shares assigned to the Spanish Branch are moved outside the Spanish territory through the liquidation of the Spanish Branch, the gain resulting from the difference between the market value and the inherited tax basis of those shares is subject to Spanish Non-Resident Income Tax at a 25% tax rate.
If the GA Mediaset shares assigned to the Spanish Branch are transferred, the gain realized may be subject to NRIT at a 25% tax rate (without entitlement to the Spanish participation exemption regime in force) on the difference between the fair value of the business at the time it was contributed to GA Mediaset and the tax basis of shares in GA Mediaset (i.e. the historical tax basis of the business for the contributing entity). The amount of the capital gain that exceeds that difference should be eligible for the Spanish participation exemption currently in force, pursuant to article 21 of the CIT.
Pursuant to article 88.3 of the Spanish CIT Law, in order to mitigate double taxation, GA Mediaset would be entitled to make a negative adjustment in its CIT taxable base equal to the amount of the capital gain that has been subject to taxation in the hands of the contributing company (i.e. the Spanish Branch in case of transfer of shares). In order to mitigate the double taxation that may occur under the tax neutrality regime, the Spanish Branch may benefit from the following exemptions:
(i)
CIT exemption applied to those dividends distributed against the income obtained by GA Mediaset from the transfer of assets received as a result of the contribution. This exemption will apply regardless of the stake held and the holding period.
(ii)
CIT exemption applied to the capital gain arising from the transfer of GA Mediaset shares, provided that the income derived from the transfer of assets contributed has been taxed in GA Mediaset.
If double taxation has not been eliminated through these adjustments, GA Mediaset should be entitled to revert the adjustments made under the regime of the tax neutrality at the time of its dissolution or, prior to it, if it is able to prove that gains obtained by its former shareholder (i.e. Spanish Branch) in the transfer of the securities received in the contribution have been subject to taxation. In the latter case, the adjustment will not exceed the amount that was taxed in the hands of the shareholder.
(C)
Dutch tax law aspects
(i)
Direct tax regime applicable to the Merger:
DutchCo is incorporated under the laws of the Netherlands and is therefore in principle a Dutch tax resident for Dutch tax purposes and subject to Dutch corporate income tax (the “
Dutch CIT
”). However, because its place of effective management is located in Italy, DutchCo should
36
be considered to be an exclusive resident of Italy on the basis of the tax treaty in place between Italy and the Netherlands. Since DutchCo is resident in Italy for tax treaty purposes, the Merger will be subject to the Italian tax rules ordinarily applicable to domestic and intra-EU mergers. The Merger is thus not subject to Dutch CIT.
(ii)
Indirect tax regime applicable to the Merger:
The Merger is not subject to Dutch VAT.
3.3.6
Dutch corporate regulations and articles of association of MFE
Aside from the Special Voting Structure, the proposed articles of association of MFE referred to in
Section 3.2.2
above and attached as Schedule 2 to the Common Cross-Border Merger Plan contain further regulations that derive from Dutch corporate rules. Since Dutch provisions in this regard are a key driver for the Transaction, a brief overview of the Dutch legal provisions applicable to MFE will be provided (although not in an exhaustive manner) in a document that will be made available on the websites of Mediaset España (www.telecinco.es) and Mediaset (www.mediaset.it) in a format of “Questions and Answers” relating to the Merger, which will be prepared by Mediaset España in accordance with article 520.3 of the LSC and by Mediaset in accordance with article 127-
ter
, paragraph 2, of the Italian Legislative Decree No. 58 of 1998.
(A)
Rights to which Mediaset España shareholders will be entitled as a consequence of the Merger
Current rights of Mediaset España shareholders (who will become shareholders of MFE) will change following the Merger Effective Date as a consequence of the Dutch nationality of MFE and the proposed version of the articles of association of MFE. There are differences between the current rights enjoyed by the Mediaset España shareholders and the rights to which they will be entitled as holders of DutchCo Ordinary Shares, and the protections guaranteed by Spanish law to the current shareholders of Mediaset España may not be available (or, in any case, may differ from those available) under Dutch law.
In this regard, for illustrative purposes, but without limitation, the following significant differences should be noted: (i) the shareholders’ meetings of MFE will be held in Amsterdam or Haarlemmermeer (Schiphol Airport), the Netherlands; (ii) shareholders of MFE will be subject to a higher threshold for the exercise of their right to convene the meeting (10%) and only after being authorized to do so by the court in preliminary relief proceedings, compared to the current rights applicable to the Mediaset España shareholders (3%); (iii) pursuant to Dutch law, no discipline is contemplated which specifically regulates the solicitation of proxies, while pursuant to Spanish law one or more shareholders of Mediaset España (or Mediaset España or any other authorised subject) can solicit proxies by shareholders, subject to express rules and regulations; (iv) shareholders of MFE will not have a right of withdrawal similar to that of the shareholders of Mediaset España in the circumstances foreseen under Spanish law; and (v) there is no equivalent provision to the proportional representation rights for the appointment of directors under Dutch law but a binding nomination list system applied.
37
In addition to the above, the proposed version of the articles of association of MFE provides for certain specific dispositions, and namely:
(i)
the prohibition for shareholders —whether on their own or together with persons acting in concert— to hold, at any time, directly or indirectly, a participation in MFE representing a percentage of DutchCo Ordinary Shares and/or of voting rights which:
·
is in excess of the percentage permitted by any provision of law (including laws safeguarding media pluralism and antitrust law) which is applicable to (a) MFE and/or (b) any of its group companies and/or (c) shareholders of MFE and/or (d) Mediaset and/or Mediaset España, as legal predecessors of MFE; and/or
·
is in violation of a decision, issued by any authority, which is applicable to (a) MFE, and/or (b) any of its group companies and/or (c) shareholders of MFE, and/or (d) Mediaset and/or Mediaset España, as legal predecessors of MFE
(the “
Qualified Shareholding Obligation”
);
(ii)
the obligation, on part of any shareholder of MFE (or any affiliate thereof), to always act in compliance with any contractual arrangements relating to the DutchCo Ordinary Shares held by such shareholder which is effective between such shareholder (or affiliate thereof) and MFE (including, for the avoidance of doubt, any contractual arrangements inherited by MFE from Mediaset and/or Mediaset España —and originally relating to shares issued by the same— as legal predecessors) (the “
Contractual Obligation”
);
(iii)
the possibility that the New Board of Directors of DutchCo (as defined below) resolve to suspend the voting rights (as well as the rights to participate at the general meetings of MFE) attached to DutchCo Ordinary Shares —or to Special Voting Shares, if received— held by shareholders (or affiliates thereof) acting in violation of the Qualified Shareholding Obligation and/or the Contractual Obligation.
For further information on the rights and obligations of shareholders subsequent to the Merger, please refer to the proposed version of the articles of association of MFE attached to the Common Cross-Border Merger Plan as Schedule 2. Furthermore, the “
Comparative table of the rights to which shareholders of Mediaset, Mediaset España and MFE are entitled
” that will be made available on the website of Mediaset España (www.telecinco.es) through the “Questions and Answers” relating to the Merger, offer further detail.
As to the tax impacts on shareholders, please refer to
Section 3.3.5
.
(B)
Dutch corporate governance code
The Dutch corporate governance code contains best practice principles for listed companies. The principles may be regarded as reflecting the general views on good corporate governance and create a set of standards governing the conduct of the respective corporate bodies of a listed company.
The application of the Dutch corporate governance code is based on the so-called “comply-or-explain” principle. Accordingly, listed companies are required to disclose, in their annual board report, whether or not they are complying with the various best practice principles of the Dutch
38
corporate governance code. If a company deviates from a best practice principle in the Dutch corporate governance code, the reason for such deviation must be properly explained in the annual board report.
The Board of Directors of Mediaset España acknowledges the importance of good corporate governance. The Board of Directors of Mediaset España agrees with the general approach and with the majority of the provisions of the Dutch corporate governance code. However, considering DutchCo’s interests and the interest of its shareholders, it is expected that the Senior Non-Executive Director — unlike what is provided for under the Dutch corporate governance code — will not be an independent director.
(C)
Main provisions on mandatory tender offers under Dutch law and the proposed version of the articles of association of MFE
The Dutch Act on Financial Supervision contains provisions under which, in summary, a shareholder who has predominant control over a listed public company, is obliged to launch a public takeover bid for all the other shares. The purpose is to ensure that all shareholders benefit from the control premium. According to the Act on Financial Supervision, “predominant control” means that a shareholder can exercise 30% or more of the voting rights in a general meeting of shareholders. The articles of association may also provide for other (and additional) thresholds, which can, however, not replace the statutory threshold.
In order to better safeguard the position of minority shareholders, article 43 of the new articles of association of MFE will include mandatory bid provisions providing that acquisition of predominant control includes the acquisition of the right to exercise either directly or indirectly 25% or 30% of the voting rights in MFE as from the announcement date of the Merger (i.e. 7 June 2019) (calculated on the basis of the Exchange Ratios and the shareholdings held on such date). Following such acquisition of predominant control, an obligation to launch a public takeover bid is triggered. These provisions do not replace the statutory mandatory offer provisions of the Act on Financial Supervision, that as described above, will be triggered at a threshold of 30% of the voting rights, but which will only be applicable after completion of the Merger and listing of the ordinary shares of MFE.
The provisions of the Act on Financial Supervision (
Wet op het financial toez icht
) and the Dutch Public Takeover Bid Decree (
Besluit openbare biedingen Wft
) will also apply to the public takeover bid that is made following the mandatory offer provisions in the articles of association.
Exempted from the obligation to launch a public takeover bid is —in line with the statutory mandatory offer rules of the Act on Financial Supervision— such a shareholder who decreases its interest below the applicable threshold within 30 calendar days, as well as a party that made a public takeover bid and as a result can exercise more than fifty percent of the voting rights in the general meeting of shareholders of the company.
In addition, a person who, either on its own or together with persons acting in concert, already holds predominant control of at least 30% at 7 June 2019 (calculated on the basis of the Exchange Ratios and the shareholdings held on such date) will be exempted from making a public takeover bid. Also, a person who, either on its own or together with persons acting in concert, already holds predominant control of at least 25% but below 30% at 7 June (calculated
39
on the basis of the Exchange Ratios and the shareholdings held on such date) will be exempted from making a public takeover bid, save that such person will be obliged to make a public takeover bid if the 30% threshold is crossed after 7 June 2019. On the other hand, any person who does not hold predominant control of at least 25% at 7 June 2019 (calculated on the basis of the Exchange Ratios and the shareholdings held on such date) and crosses the 25% threshold after 7 June 2019 will be obliged to make a public takeover bid.
Furthermore, article 43 of the new articles of association of MFE stipulates that anyone holding ordinary shares in violation of the Qualified Shareholding Obligation, and/or the Contractual Obligation and at the same time exceeds a predominant control threshold, must take action to lose such predominant control within 5 days upon written request from the company. Failing to do so will authorize the board of directors to dispose of the excess shares in order to have the relevant person to lose predominant control.
Finally, any shareholder who is obliged to make a mandatory offer must notify the company immediately.
(D)
Auditors of MFE
MFE will adopt a system of governance which does not foresee a board of statutory auditors and therefore no board of statutory auditors will be appointed (without prejudice to the appointment of the audit committee within the New Board of Directors of DutchCo).
In accordance with the proposed version of the articles of association of MFE, an external auditor will have to be appointed by the general meeting of shareholders of MFE in order to examine the annual financial statements prepared by the board of directors, report to the board of directors with respect to the annual financial statements and express an opinion. In this connection, the general meeting of shareholders of DutchCo, held on 15 April 2019 ratified the appointment of Deloitte for financial year 2018; Deloitte will become the auditor of the Group on the Merger Effective Date. The main terms and conditions of the engagement, including the term of office, shall be determined by the New Board of Directors of DutchCo.
For further information on the new corporate governance structure following the Merger, please refer to the proposed version of the articles of association of MFE, attached to the Common Cross-Border Merger Plan as Schedule 3. Furthermore, additional information will be made available on Mediaset España corporate (www.telecinco.es).
3.3.7
Other legal aspects of the Common Cross-Border Merger Plan
Due to the fact that the Merger is governed not only by Spanish law, but also by Italian and Dutch law, and also for purposes of providing a comprehensive picture of the Transaction (and how it has been conceived and prepared), the Common Cross-Border Merger Plan contains some other legal mentions, which are broken down below:
(A)
The Mediaset España Merger Committee
As is apparent from Section 19 of the Common Cross-Border Merger Plan, the board of directors of Mediaset España entrusted the analysis of the envisaged Transaction, the corresponding decision-making process and the negotiation and preparation of the Common
40
Cross-Border Merger Plan to a merger committee composed by four members of the Mediaset España board of directors: three independent directors and a fourth director qualifying as “other external” (the “
Merger Committee
”). Thus, this Report is drafted and approved at the proposal of the Merger Committee.
Along the same lines, and following the best corporate governance practices pursuant to articles 228 and 229 of the LSC, the proprietary and the executive directors of Mediaset España refrained from participating in the discussions, negotiation and voting on the Common Cross- Border Merger Plan, which has therefore been approved with the votes cast by the “other external” and independent directors of the board. Therefore only the signatures of those members of the Board of Mediaset España appear in the Common Cross-Border Merger Plan.
(B)
Corporate bodies of MFE
Section 5 of the Common Cross-Border Merger Plan sets out the current composition of the board of directors of DutchCo and explains that as of the Merger Effective Date membership of such board is envisaged to change. The composition of new board of MFE (the “
New Board of Directors of DutchCo
”) will be approved by DutchCo’s sole shareholder when deciding on the Merger (and therefore before completion of the Merger).
DutchCo will have a one-tier board, consisting of executive and non-executive directors. The directors shall hold office for a period not exceeding four years and could be re-appointed.
The New Board of Directors of DutchCo shall consist of a minimum of 7 to a maximum of 15 directors.
On the Merger Effective Date —or in the period immediately afterwards— it is expected that the New Board of Directors of DutchCo shall establish an audit committee and a compensation and nominating committee within its members. The New Board of Directors of DutchCo shall have the power to establish other committees, determining the related tasks and powers, it being understood that, in any event, the board of directors shall remain fully responsible for the decisions taken by these committees.
MFE shall adopt a policy regarding the remuneration of the members of its board of directors. With due observance of such remuneration policy, the board of directors is authorized to decide on the remuneration of directors in relation to the performance of their duties. MFE shall not grant personal loans or guarantees to its directors except in the normal course of business and after approval by the board of directors.
The identity of the envisaged members of the New Board of Directors of DutchCo will be disclosed in due time in compliance with the provisions of article 39.1 of the LME, and, in particular, will be posted in the website of Mediaset España (www.telecinco.es) as indicated in
Section 3.4.2(B)
.
(C)
Effects of the Transaction on shareholders’ agreements
On the basis of the information available to the public, as of the date of this Report, no shareholders agreements have been executed in relation to Mediaset or Mediaset España.
41
(D)
Information on the procedures for the involvement of employees in defining their co-determination rights in DutchCo
No special negotiation body will have to be set up and no other action whatsoever will have to be taken with regard to employee participation in the context of the contemplated Merger, as explained in Section 12 of the Common Cross-Border Merger Plan.
(E)
Information on goodwill and on distributable reserves
Finally, in accordance with applicable Dutch regulations, Section 14 of the Common Cross-Border Merger Plan refers to the absence of any impact of the Merger on goodwill, since the amount of goodwill recorded in the books of Mediaset and Mediaset España will be equally represented in the books of DutchCo because the Merger is accounted on the basis of the net book value.
Section 14 of the Common Cross-Border Merger Plan also refers to the distributable reserves of DutchCo, which shall increase by virtue of the Merger in the amount equal to the difference between the value of: (i) the assets, liabilities and other legal relationships of Mediaset and Mediaset España acquired and assumed by DutchCo on the occasion of the Merger, and (ii) the sum of the nominal value of all DutchCo Ordinary Shares (equal to Euro 0.01 for each DutchCo Ordinary Share in issue immediately after effectiveness of the Merger) and the reserves DutchCo must maintain pursuant to Dutch law as of the Merger Effective Date.
3.4
Main corporate and capital market milestones of the Transaction in Spain
3.4.1
Approval of the Common Cross-Border Merger Plan, the Segregation Plan and related documents by the boards of directors
Pursuant to article 91 of the Directive (and articles 30
et seq.
of the LME as far as Mediaset España is concerned), the starting point of the corporate process of the Merger is the preparation and approval by the boards of directors of the Merging Companies of the Common Cross-Border Merger Plan. Similarly, in accordance with article 74 of the LME, the starting point of the Segregation is the preparation and approval by the boards of directors of the Segregating Company and the Receiving Company of the Segregation Plan.
As already mentioned (and evidenced by the release of this Report), such milestones have already taken place on the date hereof.
Aside from the Common Cross-Border Merger Plan, the boards of directors of the Merging Companies have also resolved, among others, on the following matters:
(i)
The board of directors of Mediaset has approved (i) the Mediaset Reorganization (ii) the Common Cross-Border Merger Plan, and (iii) the Mediaset directors’ report on the Common Cross-Border Merger Plan. Additionally, the board of directors of Mediaset has fixed the redemption price payable to the Mediaset Withdrawing Shareholders in accordance with applicable law.
(ii)
The board of directors of Mediaset España has approved (i) the Segregation Plan, as well as (ii) the Mediaset directors’ report on the Segregation, (iii) this Report, (iv) discontinuation of the shares buy-back program, and (v) the application for
42
authorization before the SEAD for the transfer of the audiovisual media licenses held by Mediaset España. Additionally, the board of directors of Mediaset España has fixed (vii) the redemption price payable to the Mediaset España Withdrawing Shareholders in accordance with applicable law.
(iii)
The DutchCo board of directors has approved the Common Cross-Border Merger Plan and its report on the Common Cross-Border Merger Plan.
Additionally, the boards of directors of the Absorbed Companies have resolved to convene their respective general shareholders’ meetings. The notice convening Mediaset Extraordinary Meeting will be published on 8 June 2019 and the notice convening Mediaset España General Meeting will be published before 4 July 2019, as explained in
Section 3.4.2(B)
below.
3.4.2
Approval of the Merger and the Segregation by the general shareholders’ meetings
In accordance with article 93 of the Directive (and article 40 of the LME as far as Mediaset España is concerned), after approval of the Common Cross-Border Merger Plan by the boards of directors, the Merger itself shall be submitted to approval, in the same terms as those set out in the Common Cross-Border Merger Plan, by the general shareholders’ meetings of the Merging Companies. Likewise the Segregation shall be submitted to approval by the Mediaset España General Meeting and the sole shareholder of the Receiving Company.
For the purposes of such approvals by the general shareholders’ meetings, the following milestones will have to be taken into account:
(A)
Information to be made available to the public
As soon as practicable after approval of the Common Cross-Border Merger Plan and the Segregation Plan, the Companies will make the following information available to the public:
(i)
Mediaset will post the following documents on its website (www.mediaset.it), and will also make them available at its official seat:
(a)
the Common Cross-Border Merger Plan (including its Annexes);
(b)
the Mediaset directors’ report on the Common Cross-Border Merger Plan;
(c)
Mediaset España directors’ report on the Common Cross-Border Merger Plan;
(d)
DutchCo directors’ report on the Common Cross-Border Merger Plan;
(e)
the approved annual financial statements of Mediaset for the 2016, 2017 and 2018 financial years (including their audit reports), the approved annual financial statements of Mediaset España for 2016, 2017 and 2018 financial years (including their audit reports) along with the approved financial statements of DutchCo for the financial years since its incorporation (including the audit report); and
(f)
the reports prepared by Grant Thornton., Deloitte and PwC with regard to the Common Cross-Border Merger Plan.
(ii)
Mediaset España will post the following documents on its website (www.telecinco.es):
43
(a)
the Common Cross-Border Merger Plan (including its Annexes);
(b)
the Segregation Plan;
(c)
this Report,
(d)
the Mediaset directors’ report on the Common Cross-Border Merger Plan
(e)
the DutchCo directors’ report on the Common Cross-Border Merger Plan;
(f)
the reports prepared by Grant Thornton, Deloitte and PwC with regard to the Common Cross-Border Merger Plan;
(g)
the report prepared by Grant Thornton with regard to the Segregation Plan;
(h)
the approved annual financial statements of Mediaset for the 2016, 2017 and 2018 financial years (including their audit reports), the approved annual financial statements of Mediaset España for 2016, 2017 and 2018 financial years (including their audit reports) along with the approved financial statements of DutchCo for the financial years since its incorporation (including the audit report); and
(i)
the Merger Balance Sheets;
(j)
the current articles of association of Mediaset, Mediaset España and DutchCo;
(k)
the proposed articles of association of DutchCo for when the Merger becomes effective; and
(l)
the relevant information regarding the current directors of Mediaset, Mediaset España, DutchCo and GA Mediaset, as well as the composition of the New Board of Directors of DutchCo.
Mediaset España will also file with the Commercial Register of Madrid two certificates stating that documents referred to (a) and (b) above, respectively, have been posted on its website (www.telecinco.es).
(B)
Publication of the notice convening the general shareholders’ meetings
Mediaset’s notice convening the Mediaset Extraordinary Meeting will be presumably published on the Mediaset website and in a US nationwide newspaper on 8 June 2019 (including a reference to the redemption price for Mediaset Withdrawing Shareholders).
The publication of the notice convening the Mediaset España General Meeting will take place once the Commercial Register of Madrid has published in the BORME the fact that the Common Cross-Border Merger Plan and the Segregation Plan have been posted on the Mediaset España website (see
Section 3.4.2(B)
above) and, in any event, before 4 July 2019.
(C)
Registration for the initial allocation of Special Voting Shares
The period to request the assignment of Special Voting Shares in accordance with the initial allocation procedure described in paragraph 3.3 .2(A)(i) of
Section 3.3.2
will commence for the shareholders of each Absorbed Company on 15 July. Such period will end seven business days before the date on the general shareholders’ meetings are held. For further information in this
44
regard, please refer to the “
Terms and Conditions for the initial allocation procedure of special voting shares A
”.
(D)
Filing of the application for authorization for the transfer of the audiovisual media licenses
Shortly after making the information on the Transaction available to the public pursuant to
Section 3.4.2(A)
above, Mediaset España will file an application with the SEAD requesting the authorization for the transfer of the audiovisual media licenses held by Mediaset España to GA Mediaset within the framework of the Segregation. The deadline for the granting of the authorization is three months from the filing of the application for authorization.
(E)
General shareholders’ meetings’ resolutions
It is envisaged that the Mediaset Extraordinary Meeting and the Mediaset España General Meeting are held on the same date, at least two months after the publication of the convening notices, in accordance with article 98 of the LME as far as Mediaset España is concerned.
A regulatory announcement of the resolutions adopted by the Mediaset España General Meeting will be filed following such meeting, and on the day thereafter the announcement of the Segregation and the Merger approval (or rejection) will be published in the BORME and in a widely circulated newspaper in the Madrid province and in a US nationwide newspaper.
3.4.3
Exercise of withdrawal and opposition rights
Starting on the day after the publication of the announcement regarding the approval of the Transaction, Mediaset España shareholders who voted against the Merger and Mediaset España creditors whose unsecured credits have arisen before the publication of the Common Cross-Border Merger Plan (see
Section 3 .4.2(A)(ii)
above) may respectively exercise, for a one-month period, their withdrawal and opposition rights pursuant to the terms described in
Sections 3.3.3 and 3.3.4
above.
3.4.4
Effectiveness of the Segregation
Provided the authorization of the SEAD for the transfer of the audiovisual media licenses and that the one-month period for the exercise of the withdrawal and opposition rights has elapsed, the Segregation will be formalized through the granting of the corresponding public deed before a Spanish notary public. It is expected that the Segregation will be completed only a few days before the Merger Effective Date (See section 3.1 .2(A)(i)).
Immediately after completion of the Segregation, a regulatory announcement will be made and the public deed of the Segregation will be filed with the Commercial Register of Madrid. The Segregation will become legally effective upon registration of such deed.
3.4.5
Effectiveness of the Merger
Upon satisfaction of the conditions precedent and completion of all pre-Merger formalities, the Merger Deed will be granted before a civil law notary of the Netherlands.
45
The Merger will become legally effective at 00.00 am CET on the day following the day on which the Merger Deed is granted.
4.
ECONOMIC ASPECTS OF THE MERGER
4.1
Merger Balance Sheets and financial statements
As already set out in
Section 3.2.10
above, Section 13 of the Common Cross-Border Merger Plan specifies that the Mediaset España Balance Sheet shall be considered the merger balance sheet for purposes of article 97.1 .c) of the Directive and article 36 of the LME. Similarly, the merger balance sheets of Mediaset and DutchCo shall also be those referred to in
Section 3.2.10
above, namely the Mediaset Balance Sheet and the DutchCo Balance Sheet.
4.2
Consolidated pro-forma financial data of Mediaset group
Attached as
Schedule 2
to this Report, for informative purposes, are the pro-forma income statement, statement of financial position and cash flow statement data of the group of companies headed by Mediaset (Mediaset Group) as at 31 December 2018, as well as some notes to these statements, as formulated by the board of directors of Mediaset.
4.3
Accounting treatment applicable to the Transaction
DutchCo, Mediaset (both for consolidated and individual accounts) and Mediaset España (only for consolidated purpose) prepare their financial statements in accordance with the IAS/IFRS.
Following the Merger, MFE will prepare its consolidated financial statements and its company only financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.
Under IFRS, the Merger consists of a reorganization of existing legal entities which does not give rise to any change of control, being DutchCo’s share capital currently entirely owned by Mediaset and being the majority of Mediaset España’s share capital currently owned by Mediaset; therefore, the Merger is outside the scope of application of IFRS 3 — Business Combinations.
Any difference between the fair value of the newly-issued shares in DutchCo and the carrying value of the non-controlling interests attributable to the minority shareholders of Mediaset España (at the Merger date) will be recorded in an equity reserve as an equity Merger.
Accordingly (and as regards Mediaset España, for purposes of Article 31.9ª LME), the assets and liabilities of Mediaset and Mediaset España will be recognized by DutchCo in its individual accounts for their net accounting value according to applicable accounting consolidation rules and within the limits of the carrying amounts detailed in the consolidated financial statements of Mediaset prior to the Merger.
As anticipated, pursuant to Section 2:321 of the Dutch Civil Code, the accounting effects of the Merger will be recorded in DutchCo’s annual accounts backdated at the first day of the year in which the Merger will have become effective.
46
(A)
The Mediaset Reorganization
From an Italian standpoint, the principle of pooling of interest applies to transactions between companies forming part of the same group as occurs in the envisaged contribution in-kind (i.e. the Mediaset Reorganization). According to this principle the contributing company (i.e. Mediaset) shall measure its equity investment in the newly incorporated Italian wholly-owned direct subsidiary at the net carrying amount at which the contributed items are recognized, in accordance to the accounting principles (i.e. IAS/IFRS) applied in the preparation of its individual annual accounts, at the transaction date. The acquirer company that will prepare its individual financial statement in accordance with IAS/IFRS, shall recognize those items at the same amount.
(B)
The Segregation
From a Spanish standpoint, 21
st
Valuation Rule of the Spanish General Accounting Plan applies to transactions between companies forming part of the same group(18), as occurs in the envisaged non-monetary contribution (i.e. the Segregation). Consequently, the Mediaset España Segregation will be registered as indicated below:
·
The contributing company (i.e. Mediaset España) shall measure its investment at the carrying amount at which the contributed items are recognized in the consolidated annual accounts at the transaction date, in accordance with the rules applied for consolidated annual accounts.
·
GA Mediaset shall recognize those items at the same amount.
·
The consolidated annual accounts used for this purpose shall be those of the largest Spanish group or subgroup into which the items are integrated. In the event that preparation of those consolidated annual accounts is not required, pursuant to any of the exemptions provided for in the consolidation standards, the amounts recognized in the individual annual accounts of the contributing company prior to the transaction shall be used.
4.4
Justification of the Exchange Ratios
4.4.1
Introduction
As anticipated in
Section 3.2.2
of this Report, due to the tripartite structure of the Merger, two Exchange Ratios have been calculated: the Exchange Ratio I (for the exchange of Mediaset shares for DutchCo Ordinary Shares at a 1:1 rate) and the Exchange Ratio II (for the exchange of Mediaset España shares for DutchCo Ordinary Shares at a 1:2.33 rate).
(18)
Pursuant to 13
th
standard for the preparation of annual accounts: “
for the purposes of presentation of a company’s annual accounts, another company shall be considered to form part of the group when there is a relationship of direct or indirect control between the two companies similar to that foreseen in article 42 of the Commercial Code for groups of companies, or when the companies are controlled by any means, by one or more individuals or legal entities in conjunction or which are solely managed in accordance with statutory clauses or agreements
”.
47
The Exchange Ratios have been determined as required by article 25 of the LME as far as Spanish law is concerned. To that end, the Mediaset España Merger Committee has used the valuation methodologies described below, and the board of directors has ratified such approach. Also, following standard market practice in these types of transactions, the Merger Committee has considered it appropriate to engage J.P. Morgan Securities plc (“
JPM
”) as financial advisor, just as Mediaset has decided to hire Citigroup Global Markets Ltd. (“
Citibank
”) for the same purposes.
4.4.2
Documentation used for purposes of the valuation of Mediaset and Mediaset España
For the purposes of the valuation and determination of the Exchange Ratios, the Merger Committee, with the assistance of its financial advisors, reviewed the following documentation:
(i)
the 2018 individual and consolidated financial statements of Mediaset and Mediaset España;
(ii)
the consolidated interim financial report of Mediaset and Mediaset España as at 31 March 2019;
(iii)
The Set of Projections (as defined below in
Section 4.4.3(B))
;
(iv)
net debt data and other balance sheet items as at 31 December 2018 used to calculate the equity value from the enterprise value (referred to as “bridge-to-equity”);
(v)
target prices contained in an extensive number of equity research reports;
(vi)
information on the number of Mediaset and Mediaset España shares as of the date of this Report;
(vii)
evolution of Mediaset and Mediaset España share prices on their respective stock exchanges (i.e. the Mercato Telematico Azionario and the Spanish Stock Exchanges).
Other publicly available information was also taken into account, including the following:
·
research reports, financial statements and reports, analyses related to companies operating in the media and broadcasting sectors;
·
share price evolution, downloaded from professional service providers and public sources, for the companies previously mentioned;
·
certain other publicly available information on Mediaset and Mediaset España deemed relevant for the purpose of the application of the selected valuation methodologies.
4.4.3
Methodologies used for the valuation of Mediaset and Mediaset España
In order to determine the economic value of the ordinary shares of Mediaset and Mediaset España for purposes of establishing the Exchange Ratios, the Merger Committee of Mediaset España has followed generally accepted valuation methodologies, with particular regard to those most commonly used at national and international levels in similar transactions, giving priority to the principle of consistency and comparability of the valuation criteria, applied compatibly with the distinctive elements of each of Mediaset and Mediaset España.
48
In particular, best practice requires that companies operating in a similar business and involved in a merger are valued on the basis of consistent criteria, in order for the results of the relative valuation analysis to be fully comparable.
The definition of any exchange ratio is the quantification of the relative value (rather than absolute value) of the individual companies taking part in the transaction, considering that the ultimate objective is not to calculate an economic value in absolute terms for each company involved in a transaction, but rather to determine homogeneous and comparable values in relative terms.
The valuation has been carried out considering Mediaset and Mediaset España as separate entities on a stand-alone basis and also taking into account that Mediaset currently owns shares representing approximately 51.63% of Mediaset España’s share capital, reflecting financial and economic assumptions based upon the information available as of 5 June 2019, which may change or be affected by market conditions as well as exogenous and/or endogenous events affecting the current and future performance and/or the economic and financial prospects of Mediaset and Mediaset España.
In addition, the valuations of the Merging Companies have been carried out not taking into account any potential economic and financial impacts of the Merger, including cost efficiencies and savings.
In the light of all the above and for the purpose of the analysis, the board of directors of Mediaset España is not presenting absolute values attributed to Mediaset and Mediaset España but only the Exchange Ratios resulting from the estimate of relative values with respect to Mediaset (including DutchCo) and Mediaset España.
(A)
Market references / historical stock prices
Given that both Absorbed Companies are listed entities with relevant free float of liquid shares that are traded in the corresponding Italian and Spanish Stock Exchanges, it has been deemed appropriate to adopt the historical stock market price of the companies’ shares as one of the key references to determine the Exchange Ratio II. Such approach is a standard practice in these types of transactions, as it is generally accepted —unless special circumstances concur (which is not the case)— that the historical stock market price reflects the economic value that a stock market attributes to a company.
The timeframe on which to calculate the price must balance any short-term volatility driven by events of exceptional nature, short-term fluctuations and speculative tension (therefore a longer time horizon is preferable), and the need to reflect the most recent market and company conditions, where recent prices should be taken into consideration. Thus, the volume-weighted average stock market prices (the “
VWAP
”) of the Absorbed Companies’ shares for the one-month, three-month and six-month periods prior to 5 June 2019 (included) and compared on a like for like basis. The VWAPs for Mediaset España have been adjusted to take into account the payment of the Euro 0.31557917 per share dividend paid on 30 April 2019 (ex-dividend date as at 26 April 2019).
The table below sets out the main trading information used by the Merger Committee as a market references considered:
49
|
|
|
VWAP Mediaset
|
|
VWAP Mediaset
España
|
|
Implied Exchange
Ratio II
|
|
|
1-month period
|
|
6.66 euros per share
|
|
2.74 euros per share
|
|
2.43x
|
|
|
3-month period
|
|
6.54 euros per share
|
|
2.79 euros per share
|
|
2.34x
|
|
|
6-month period
|
|
6.21 euros per share
|
|
2.73 euros per share
|
|
2.28x
|
|
Source: Factset, Bolsa de Madrid and Borsa Italiana as of 5 June 2019
It shall be noted that on 24 January 2019 Mediaset España announced to undertake a program of share buyback of up to Euro 200 million. As of the date of this Report, a total 14,419,910 shares were purchased by Mediaset España under the program, for an aggregate amount of Euros 95,532,864.96 million. As such, it cannot be excluded that the recent and current trading of Mediaset España stock may have been affected by such buy-back program.
(B)
Discounted Cash Flows (“
DCF
”)
Additionally to the market references methodology, the DCF has also been considered as a key valuation methodology that estimates the underlying intrinsic value of both businesses (“
Enterprise Value
”). DCF methodology takes into account the specific features of the Merging Companies, reflects a dynamic conception of the company’s activity and is based on the idea that the business value is determined by its capacity to generate cash flows in the future. In addition, this method reflects, inter alia, the business potential in the medium and long term, in terms of profitability, growth, risk level, capital structure and expected level of investments.
The basis for the DCF has been the set of projections validated by both management teams that combine the market (financial analysts covering both stocks that published post-2018YE results) and internal long-term perspective of their respective businesses (the “
Set of Projections
”). The Set of Projections for both companies follow a consistent approach:
·
2019-2021 period: the broad universe of financial analysts (excluding only outliers) covering both stocks have been considered to build the base case.
·
2022-2024: Taking the year 2021 as the basis, extrapolations for both Set of Projections adopt same approach on forecast methodology.
In order to obtain the standalone equity value for each Company, the Enterprise Value ranges obtained for both companies through the DCF method have been adjusted by 2018 year-end reported and audited balance sheet information (financial liabilities and derivatives, cash and cash equivalents, associates and minorities). The cash dividend paid by Mediaset España (Euros 100 million) has adjusted its reference net debt position and the net dividend received by Mediaset (Euros 53 million) has also been reflected in Mediaset’s net debt position. Additionally, treasury shares held by both companies as of 7 June amounting to 44,071,568 shares for Mediaset and 14,269,073 shares for Mediaset España have been adjusted on the total number of shares considered for establishing the Exchange Ratios for the Merger (and cash deployed in the acquisition of these treasury shares over the course of the year 2019 adjusted in the reference net debt position of both companies).
The DCF methodology has been carried out on the basis of the following estimates:
50
(i)
Estimation of the free cash flows of both Absorbed Companies based on the Set of Projections
Free cash flows are an estimate of the business cash generation before financial income and expenses, but after applying the corporate income tax rate and considering material investments (capex) and changes in working capital.
(ii)
Estimation of the present value of the projected free cash flows
This estimation is made using a discount rate which takes into account the implicit risk of both businesses and countries where both Absorbed Companies operate as well as the time value of the money.
(iii)
Estimation of the terminal value of both businesses
Terminal value of both businesses is determined under an assumption of perpetual growth at a certain growth rate at the end of the annual projection period for free cash flows.
The Enterprise Value has been calculated based on the estimates of the present value of projected free cash flows (i.e. item (ii) above) and the terminal value (i.e. item (iii) above). The standalone reference equity value has been calculated through the adjustments mentioned beforehand in this Section (including, but not limited to, net debt, minorities, investments in associates and in other companies, pension liabilities, the buyback executed by Mediaset España post 31 December 2018 and until 5 June 2019, and dividends paid, namely the Euro 0.31557917 dividend per share paid by Mediaset España on 30 April 2019).
The implied per share equity value was calculated by dividing such equity values by the number of Mediaset and Mediaset España ordinary shares outstanding (i.e. net of the respective number of treasury shares held as of 5 June 2019).
For additional information on the approach and the relevant forecasts used for the purposes of this valuation methodology, see
Section 4.4.4
.
(C)
Other value references
Notwithstanding the above, two other value references have been considered, albeit not as the key driver to establish the Enterprise Value of Mediaset España in the context of establishing Exchange Ratio II, but rather as additional value references to guarantee that the results yielded by using methods (A) and (B) above are reasonable and fair.
In particular, the Enterprise Value of Mediaset and Mediaset España (and by extension Exchange Ratio II) have been confronted with the following methods:
(i)
Analyst target price
The target prices provided by the financial analysts’ universe that cover both stocks have also been considered as an additional value reference. This method gives a useful indication for determining the value of companies whose shares are listed on a stock exchange, completing the framework of the references for the valuation. These market references may be considered as the views of the investor community on both stocks.
51
For each of Mediaset and Mediaset España only research reports published by research analysts after the publication of 2018 results and prior to 24 May 2019 (including these published after 1
st
quarter 2019 results) were considered.
(ii)
Market multiples of comparable companies
This valuation methodology is built upon the implicit multiples at which other relevant companies in this industry are trading. The main valuation multiples that have been considered are FV/EBITDA, FV/OpFCF and P/E.
(D)
Application of the selected methodologies
Without prejudice to the considerations, assumptions and limitations described in this Report, the following table sets forth a summary of the results achieved through the application of the various valuation methodologies described above for the purpose of determining the Exchange Ratio II, that is the number of the DutchCo Ordinary Shares to be issued for each Mediaset España share.
Summary of the main valuation methods and trading references considered
|
Methodology
|
|
Range of Mediaset España
Exchange Ratios (Exchange Ratio
II)
|
|
(i) discounted cash flow
|
|
2.27x-2.50x
|
|
(ii) historical stock prices 6 month VWAP
|
|
2.28x
|
|
(iii) historical stock prices 3 month VWAP
|
|
2.34x
|
|
(iv) historical stock prices 1 month VWAP
|
|
2.43x
|
4.4.4
Difficulties and limits faced in evaluating the Exchange Ratios
The main difficulties and limitations of the value references considered when evaluating the Exchange Ratios have been the following:
(i)
Mediaset issued (a) mid-term financial targets (2020) in January 2017 (limited to EBIT compared to 2016) and (b) mid-term (2020-2021) guidelines in March 2019. Whilst Mediaset updates regularly the market on the guidance
vis-à-vis
targets and progress on previously communicated strategy, there is no full business plan for Mediaset and Mediaset España available for the purpose of determination of the Exchange Ratios.. No due diligence exercise outside of the publicly available information has been performed other than a confirmatory
bring-down
call. Accordingly, as agreed by Mediaset’s and Mediaset España’s respective managements, such valuation analysis is based on the Set of Projections resulting from the application of the following approach:
52
·
For the period 2019-2021: projections derived from an extensive number of equity research reports representing all the research reports about Mediaset and Mediaset España published by research analysts after the publication of the 2018 year end results and prior to 17 May 2019 (including those published after 1st quarter 2019 results) and reporting projections for the whole 2019-2021 period, with the exclusion from such panel of two equity research reports representing the outliers in terms of EBIT 2020 projections.
·
For the period 2022-2024: extrapolations in line with the long-term expectations that the Italian and Spanish managements have on the businesses. In particular, the two managements have indicated a target long-term top-line growth for the last year Set of Projections (2024), whereas mostly of the other cash-flow items have been assumed to be in line with 2021 projections, in terms of percentage on sales, for the whole extrapolations period.
·
The approach described above was the same for both Mediaset and Mediaset España and has been agreed and validated by the respective managements of Mediaset and Mediaset España, who confirmed that the Set of Projections and extrapolations are broadly in line with their current long-term expectations, respectively, on the respective businesses. However, such forecasts are subject by nature to substantial uncertainty.
(ii)
In consideration of the mechanics and timetable envisaged for the exercise of the withdrawal rights and the creditor opposition rights, and since it is not possible to quantify their future impact in terms of cash outlay, the effects of the (potential) exercise of such rights by Mediaset shareholders who do not vote in favor of the Merger and Mediaset España shareholders who vote against the Merger in their respective shareholders’ meeting have not been taken into account also considering that its impact has been estimated not material in the context of the overall evaluations leading to the determination of the Exchange Ratios.
(iii)
The market prices of Mediaset and Mediaset España shares have been and are subject to volatility and fluctuations also as a result of the general trend in the capital markets; moreover it assumes that the market is sufficiently liquid and efficient. Therefore, it cannot be ruled out that, while the Exchange Ratios remain congruous based upon the methodologies used for their determination, the market value of the DutchCo Ordinary Shares to be assigned in exchange at the Merger Effective Date may result in a lower or higher market value as of the date on which the Exchange Ratios were set.
(iv)
In relation to the share buyback program announced by Mediaset España, although the trading of Mediaset España shares might have been affected by the execution of such share buyback program, it is not possible to quantify the related impact and isolate it from other events that might have influenced the trading.
(v)
Different methodologies have been applied, both analytical and market-based, which have required the use of different data, parameters and assumptions. In applying such methodologies, the boards of directors of Mediaset and Mediaset España considered the characteristics and limitations inherent in each of them, in accordance with professional valuation practice followed at national and international level.
53
(vi)
Precedent transactions and historical Spanish takeover
premia
have been considered but not deemed relevant on the grounds that both Mediaset and Mediaset España shareholders would get MFE shares, hence they would participate in the value potentially created by the Merger via the shares they would get as consideration. Moreover, Mediaset is already the controlling shareholder of Mediaset España, hence no control premium would apply for a change of ownership.
(vii)
A litigation between Mediaset and Vivendi S.A. is ongoing following the non- completion of a transaction involving Mediaset Premium. Should the outcome of the litigation be favourable to Mediaset, Mediaset may be recognized some monetary damage repair. Prudentially, this Report do not consider any proceeds from the litigation for the purpose of determining the Exchange Ratio. In general, given the uncertainty of any ongoing or potential litigations’ outcomes and their timings, prudentially the Boards of Directors of Mediaset and Mediaset España did not consider any impact from any ongoing or potential litigations for both companies.
(viii)
Mediaset and Mediaset España tax losses carry forward and tax credits have been taken into consideration in the DCF valuation methodology.
(ix)
Finally, when applying market references as valuation methodology, some complexity has been faced in establishing the potential impact that the buy-back program announced by Mediaset España may have had in the trading activity and the impact on market references of the relative performance of both stocks.
4.4.5
Fairness opinions
(A)
J.P. Morgan Securities plc., acting as financial advisor to Mediaset España, has provided to the board of directors of Mediaset España an opinion, as of 7 June 2019, on the basis of and subject to the factors, assumptions, limitations and procedures specified therein, on the fairness from a financial point of view, to the holders of ordinary shares in the capital of Mediaset España (other than Mediaset and its affiliates), of the Exchange Ratio II in the proposed Merger. A copy of the opinion is attached as
Schedule 3
to this report. The opinion does not constitute a recommendation as to how any director or shareholder should vote or act with respect to the Merger or any other matter and does not give rights to any third parties other than the relevant client.
(B)
Similarly, Citibank, acting as financial advisor to Mediaset, has provided to the board of directors of Mediaset and to the board of directors of DutchCo an opinion, as of 7 June 2019, on the basis of and subject to the factors, assumptions, limitations and procedures specified therein, on the fairness from a financial point of view, to the holders of shares in the capital of Mediaset, of the Exchange Ratio II (which —as indicated above— is predicated on Exchange Ratio I) in the proposed Merger. A copy of the opinion is attached as Schedule A to Mediaset’s board of directors report. The opinion does not constitute a recommendation as to how any director or shareholder should vote or act with respect to the Merger or any other matter and does not give rights to any third parties other than the relevant clients.
54
5.
ADDITIONAL TRANSACTION FEATURES: REMUNERATION TO SHAREHOLDERS
5.1
Future dividend policy
As far as the MFE future dividend policy, in line with the current dividend policy, the following factors will be taken into consideration: group profits, free cash flow generation, any financial or other economic commitments and potential strategic investments. Unless contingent circumstances (including the above) suggest adopting a different policy, the remuneration of the shareholders, through ordinary dividends or other technical forms, will not be lower than 50% of the net consolidated profits in any year.
5.2
Dividend distribution immediately after the Merger
It is envisaged that, after the Merger Effective Date, MFE will make a distribution of a dividend, pursuant to Dutch law, for a total gross amount of Euro 100 million to all shareholders of MFE.
5.3
DutchCo Ordinary Share buy-back program to be implemented after the Merger
In addition, after the completion of the Merger, MFE will launch a buy-back program for a maximum aggregate amount of Euro 280 million (less the aggregate amount necessary to purchase the withdrawn shares, if any). MFE will buy back shares at a maximum price per share of Euro 3.4.
In the context of the Transaction, on 5 June 2019 Mediaset España discontinued the share buy-back program announced on 24 January 2019.
*** *** ***
This Report has been drafted by the board of directors of Mediaset España in accordance with article 95 of the Directive and article 33 of the LME.
Madrid, 7 June 2019
55
SCHEDULE 1
FURTHER INFORMATION ON THE SPECIAL VOTING SHARES
Allotment of Special Voting Shares
Initial allotment of Special Voting Shares A
Holders of Mediaset and Mediaset España shares who wish to receive Special Voting Shares A on the Initial Allocation Date A are required to follow the procedure described, respectively, in the “
Terms and Conditions for the initial allocation of special voting shares A — Mediaset
” and the “
Terms and Conditions for the initial allocation of special voting shares A — Mediaset España
”, attached as Schedule 3 and Schedule 4, respectively, to the Common Cross-Border Merger Plan, as well as in the “
Terms and Conditions for Special Voting Shares
” attached as Schedule 5 to the Common Cross-Border Merger Plan.
For this purpose, Mediaset and Mediaset España shareholders will have to:
(i)
transmit an election form (the “
Initial Election Form
”), which will be made available on the corporate websites of Mediaset
(www.mediaset.it) and Mediaset España (www.telecinco.es), duly filled in and signed, to their respective depository intermediary in order for the latter to procure that the Initial Election Form is received by Mediaset or by Mediaset España, as the case may be, during the period starting from 15 July 2019 to 26 August 2019 (i.e. the seventh business day prior to the Mediaset Extraordinary Meeting); and
(ii)
continuously own their Mediaset or Mediaset España shares (as well as the DutchCo Ordinary Shares received upon completion of the Merger in accordance with the Exchange Ratio I or the Exchange Ratio II, as the case may be), in relation to which allotment of Special Voting Shares A will have been requested, during the period between the day when the Initial Election Form is transmitted to their respective depository intermediary and the Initial Allocation Date A.
In filling in the Initial Election Form, shareholders shall indicate the number of Mediaset or Mediaset España shares held in relation to which they wish to receive a corresponding number of Special Voting Shares A.
Once the Initial Election Form has been duly filled in and signed by requesting shareholders, it shall be received by Mediaset or by Mediaset España, through the respective depositary intermediary —where the relevant shares are registered—, within and no later than 26 August 2019.
The ownership of Mediaset or Mediaset España shares as of the date of transmission of the Initial Election Form to the depository intermediary will be attested by the depositary intermediary itself.
By signing the Initial Election Form, the requesting shareholder will also grant a power of attorney to an agent (the “
Agent
”) whereby he will irrevocably instruct and authorize the Agent to act on his behalf and to represent him in connection with the issuance, allocation, acquisition, conversion, sale, repurchase and transfer of Special Voting Shares in accordance with and pursuant to the “
Terms and Conditions for Special Voting Shares
”. The Agent will be entitled
56
to represent MFE as well to execute and sign all the relevant documentation relating to Special Voting Shares on behalf of MFE. In accordance with the “
Terms and Conditions for Special Voting Shares
”, MFE will be entitled to entrust the Agent with such powers and duties (in whole or in part).
Mediaset and Mediaset España shares —which, upon completion of the Merger, will be exchanged for DutchCo Ordinary Shares pursuant to the Exchange Ratio I and the Exchange Ratio II, respectively— in relation to which allotment of Special Voting Shares A at the Initial Allocation Date A has been requested, will be automatically registered in a separate register held by DutchCo pursuant to the “
Terms and Conditions for Special Voting Shares
” (the “
Loyalty Register
”).
As from the date on which DutchCo Ordinary Shares will have been registered in the Loyalty Register in the name of one and the same shareholder or his loyalty transferee (as defined in the “
Terms and Conditions for Special Voting Shares
”), such DutchCo Ordinary Shares will become initial electing ordinary shares (the “
Initial Electing Ordinary Shares
”). After an uninterrupted period of thirty days since the Merger Effective Date, such shares will entitle the relevant holder to be granted with a corresponding number of Special Voting Shares A, and will thus become qualifying ordinary shares A (the “
Qualifying Ordinary Shares A
”). On the same date, the relevant holder will receive one Special Voting Share A per each Qualifying Ordinary Share A held.
Mediaset and Mediaset España shareholders who exercise their withdrawal right in connection with the resolution to be adopted, respectively, by the Mediaset Extraordinary Meeting and Mediaset España General Meeting shall not be entitled to receive DutchCo Ordinary Shares nor, consequently, Special Voting Shares.
Subsequent allotment of Special Voting Shares A
Following the completion of the Merger, shareholders of MFE who wish to receive Special Voting Shares A will have to request MFE to have their DutchCo Ordinary Shares registered (in whole or in part) in the Loyalty Register by submitting, through their respective depository intermediaries, an election form (the “
Election Form
”), which will be made available on the corporate websites of Mediaset (www.mediaset.it) and of Mediaset España (www.telecinco.es), duly filled in and signed.
The ownership of DutchCo Ordinary Shares as of the date of transmission of the Election Form to the depository intermediary will be attested by the depositary intermediary itself.
By signing the Election Form, the requesting shareholder will also grant a power of attorney to the Agent whereby he will irrevocably instruct and authorize the Agent to act on his behalf and to represent him in connection with the issuance, allocation, acquisition, conversion, sale, repurchase and transfer of Special Voting Shares in accordance with and pursuant to the “
Terms and Conditions for Special Voting Shares
”. The Agent will be entitled to represent MFE as well as to execute and sign all the relevant documentation relating to Special Voting Shares on behalf of MFE. In accordance with the “
Terms and Conditions for Special Voting Shares
”, MFE will be entitled to entrust the Agent with such powers and duties (in whole or in part).
As from the date on which DutchCo Ordinary Shares will have been registered in the Loyalty Register in the name of one and the same shareholder or his loyalty transferee (as defined in the
57
“
Terms and Conditions for Special Voting Shares
”), such DutchCo Ordinary Shares will become electing ordinary shares (the “
Electing Ordinary Shares
”). After 3 years of uninterrupted ownership —as well as of uninterrupted registration in the Loyalty Register— of Electing Ordinary Shares, such shares will become Qualifying Ordinary Shares A and the relevant holder will receive one Special Voting Share A per each Qualifying Ordinary Share A held.
Allotment of Special Voting Shares B by way of conversion of Special Voting Shares A
After two years of uninterrupted ownership —as well as uninterrupted registration in the Loyalty Register— of Qualifying Ordinary Shares A, shareholders of DutchCo will be entitled to 5 voting rights for each Qualifying Ordinary Share A held. On the same date, Qualifying Ordinary Shares A will become qualifying ordinary shares B (the “
Qualifying Ordinary Shares B
”) and the relevant eligible shareholder will receive 1 (one) Special Voting Share B by way of conversion of each of the Special Voting Shares A already held.
Allotment of Special Voting Shares C by way of conversion of Special Voting Shares B
After three years of uninterrupted ownership —as well as uninterrupted registration in the Loyalty Register— of Qualifying Ordinary Shares B, shareholders of DutchCo will be entitled to 10 voting rights for each Qualifying Ordinary Share B held. On the same date, Qualifying Ordinary Shares B will become qualifying ordinary shares C (the “
Qualifying Ordinary Shares C
” and, jointly with Qualifying Ordinary Shares A and the Qualifying Ordinary Shares B, the “
Qualifying Ordinary Shares
”) and the relevant eligible shareholder will receive 1 (one) Special Voting Share C by way of conversion of each of the Special Voting Shares B already held.
Requirements of shareholders for the allotment of Special Voting Shares
Pursuant to article 42.1 of the proposed version of the articles of association of MFE as well as to the “
Terms and Conditions for Special Voting Shares
”, each allotment of Special Voting Shares will be conditional upon requesting shareholders meeting the Qualified Shareholding Obligation and the Contractual Obligation (both as defined under
Section 3.3.6(A)).
The New Board of Directors of DutchCo (as defined in
Section 3.3.7(B))
will refuse
(a)
the registration of one or more DutchCo Ordinary Shares in the Loyalty Register; and/or
(b)
the allocation of Special Voting Shares A; and/or
(c)
the conversion of Special Voting Shares A into Special Voting Shares B; and/or
(d)
the conversion of Special Voting Shares B into Special Voting Shares C, as the case may be, if the requesting shareholder (i) does not meet the Qualified Shareholding Obligation or will no longer meet the Qualified Shareholding Obligation as a result of the allocation of Special Voting Shares A, and/or the conversion of Special Voting Shares A into Special Voting Shares B, and/or the conversion of Special Voting Shares B into Special Voting Shares C, as the case may be, and/or (ii) does not meet the Contractual Obligation.
In case of violation of the Qualified Shareholding Obligation, the refusal from the New Board of Directors of DutchCo will be limited to the number of DutchCo Ordinary Shares and/or of
58
Special Voting Shares which will be held in violation of the Qualified Shareholding Obligation. For further information, please refer to the “
Terms and Conditions for Special Voting Shares
”.
Characteristics of the Special Voting Shares
Special Voting Shares will not be tradable on the Mercato Telematico Azionario and on the Spanish Stock Exchanges.
In connection with the issuance of Special Voting Shares, shareholders of MFE will not be required to pay the respective nominal value to MFE. In accordance with article 13.4 of the proposed version of the articles of association of MFE, in fact, MFE will maintain a reserve in shareholders’ equity (the “
Special Capital Reserve
”) in order to pay up the nominal value of the Special Voting Shares to be allocated to holders of Qualifying Ordinary Shares.
However, article 13.5 of the proposed version of the articles of association of MFE allows the holder of Special Voting Shares —the issuance of which has been charged on the Special Capital Reserve— to substitute such charge at any time by making an actual payment to MFE of a sum equal to the nominal value of the Special Voting Shares held (the “
Special Shares Paid-up in Cash
”). Pursuant to the applicable dispositions of the proposed version of the articles of association of MFE, Special Shares Paid-up in Cash will be the only Special Voting Shares to entitle the relevant holders to an economic entitlement.
In particular, pursuant to article 28.2 of the proposed version of the articles of association of MFE, Special Shares Paid-up in Cash will give entitlement to a dividend equal to 1% of the nominal value actually paid. Such dividends, however, will be paid only insofar as the profits have not been appropriated in full to increase and/or form reserves.
Furthermore, pursuant to article 41.4 of the proposed version of the articles of association of MFE, any residual amounts available after payment of all creditors of MFE in liquidation will be allocated as follows: firstly, the nominal value paid by holders of Special Shares Paid-up in Cash will be reimbursed; secondly, any outstanding amount will be proportionally reimbursed to holders of DutchCo Ordinary Shares.
Pursuant to article 14.2 of the “
Terms and Conditions for Special Voting Shares
”, the “
Terms and Conditions for Special Voting Shares
” may be amended pursuant to a resolution by the New Board of Directors of DutchCo (as defined in
Section 3.3.7(B)
), only insofar as non-material and/or merely technical amendments are at stake. Material and/or not merely technical amendments will be subject to the approval of the general meeting of shareholders of MFE and of the combined meeting of holders of Special Voting Shares, except for amendments required to ensure compliance with applicable laws or listing regulations.
Transfer of Initial Electing Ordinary Shares, Electing Ordinary Shares, Qualifying Ordinary Shares and Special Voting Shares: cancellation from the Loyalty Register
Whilst DutchCo Ordinary Shares are freely transferrable, Special Voting Shares may not be transferred to third parties (except for limited circumstances).
In order to transfer Initial Electing Ordinary Shares, Electing Ordinary Shares or Qualifying Ordinary Shares, the relevant shareholder will have to request the de-registration from the Loyalty Register of its Initial Electing Ordinary Shares, Electing Ordinary Shares or Qualifying
59
Ordinary Shares, as the case may be; after such de-registration, the relevant DutchCo Ordinary Shares will cease to be Initial Electing Ordinary Shares, Electing Ordinary Shares or Qualifying Ordinary Shares and shall be freely transferable.
Pursuant to the “
Terms and Conditions for Special Voting Shares
”, in case of transfer of (i) Initial Electing Ordinary Shares prior to the Initial Allocation Date A, or (ii) Electing Ordinary Shares prior to the Subsequent Allocation Date A (in both cases, with the exception of transfers to loyalty transferees, as defined in the “
Terms and Conditions for Special Voting Shares
”), as well as upon occurrence —prior to the same relevant dates— of a change of control over a shareholder, such shareholder will not be entitled to receive Special Voting Shares A.
Pursuant to the “
Terms and Conditions for Special Voting Shares
”, in case of transfer of Qualifying Ordinary Shares (with the exception of transfers to loyalty transferees, as defined in the “
Terms and Conditions for Special Voting Shares
”), as well as upon occurrence of a change of control over a shareholder, the voting rights attached to the Special Voting Shares shall be suspended with immediate effect and the Special Voting Shares shall be transferred to MFE without consideration (
om niet
).
For the sake of completeness, with respect to the initial allocation procedure of Special Voting Shares A, it shall be noted that the holder of Mediaset or Mediaset España shares —in relation to which allotment of Special Voting Shares A at the Initial Allocation Date A is requested— can transfer such shares to his loyalty transferee (as defined in the “
Terms and Conditions for Special Voting Shares
”) without such transfer resulting in the loss of the entitlement to receive Special Voting Shares A. On the contrary, the holder of Mediaset or Mediaset España shares —in relation to which allotment of Special Voting Shares A at the Initial Allocation Date A is requested— shall no longer be entitled to receive Special Voting Shares A upon the occurrence, over such shareholder, of a change of control. For further details, please refer to the “
Terms and Conditions for the initial allocation procedure of special voting shares A
” and to the “
Terms and Conditions for Special Voting Shares
”.
60
SCHEDULE 2
CONSOLIDATED PRO-FORMA FINANCIAL DATA OF THE MEDIASET GROUP
This Schedule presents the relevant pro-forma income statement, statement of financial position and cash flow statement data of the Group of companies headed by Mediaset as at 31 December 2018 (the “
Pro Forma Consolidated Financial Data
”), as well as some notes to these statements.
The Pro Forma Consolidated Financial Data have been prepared in accordance with Communication No. DEM/1052803 of 5 July 2001 of the Consob, in order to retroactively reflect the significant effects of the Merger and related transactions on the historical data of the Group. More specifically, the Pro Forma Consolidated Financial Data have been prepared to retroactively reflect the effects produced by the Merger as if it had taken place, in terms of effects on the balance sheet, on 31 December 2018 and, with reference only to the economic and cash flow effects, on 1 January 2018.
For a correct interpretation of the information provided by the Pro Forma Consolidated Financial Data, it is necessary to consider that:
(i)
since these are representations based on assumptions, if the Merger had actually been carried out on the dates used as reference for the preparation of the Pro Forma Consolidated Financial Data, rather than on the actual date, the historical data would not necessarily have been the same as the pro forma data;
(ii)
the pro forma adjustments represent the most significant effects on the balance sheet and income statement, as well as financial, directly related to the Merger;
(iii)
the Pro Forma Consolidated Financial Data have been prepared for the sole purpose of providing a representation of the identifiable and objectively measurable effects of the Merger, as if the Merger had taken place on the date indicated above in this paragraph; therefore, the Pro Forma Consolidated Financial Data represent a hypothetical situation and, therefore, do not represent the actual financial situation or results of the Group;
(iv)
the Pro Forma Consolidated Financial Data do not reflect forward-looking data and are in no way intended to represent a forecast of the future financial, economic and asset situation of the Group after the Merger; and
(v)
given the different purposes of the Pro Forma Consolidated Financial Data compared to the historical data included in the annual financial report and given the different methods of calculation of the pro forma adjustments made to the Group’s consolidated financial statements, the pro forma consolidated income statement, the statement of financial position and the cash flow statement should be examined and interpreted separately, without seeking accounting links between the income statement and the cash flow statement, and the balance sheet.
The Pro Forma Consolidated Financial Data have not been examined by the independent auditors.
The Pro Forma Consolidated Financial Data shown below include:
·
the relevant historical data
(
Income Statement, Statement of Financial Position, Cash Flow Statement
) taken from the consolidated financial statements of the Group as at 31
61
December 2018, prepared in accordance with the IFRS and audited by Deloitte & Touche S.p.A., which issued its unqualified report on 27 March 2019;
·
the pro-forma adjustments
applied to the historical data to reflect the effects of relevant transactions related to the Merger; and
·
the Group’s
Pro Forma Consolidated Financial Data
as at 31 December 2018.
The valuation criteria adopted for the preparation of the pro-forma adjustments and for the preparation of the Pro-Forma Consolidated Financial Data are the same as those applied in the consolidated financial statements of the Group as at 31 December 2018, to which reference should be made.
The Pro Forma Consolidated Financial Data below should be read in the light of the description of the assumptions and methods used to prepare them and the other information contained in this Annex.
Unless otherwise indicated, the figures are shown in millions of euro.
|
(Euro million)
|
|
Consolidated
Financial
Statement
Group
(Historic)
|
|
Total Pro-
forma
Adjustment
|
|
Consolidated
Financial
Statement
Merging
Company
(Pro-forma)
|
|
|
STATEMENT OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Consolidated Revenues
|
|
3,401.5
|
|
—
|
|
3,401.5
|
|
|
EBIT
|
|
73.7
|
|
—
|
|
73.7
|
|
|
EBT
|
|
67.0
|
|
—
|
|
67.0
|
|
|
Net Profit
|
|
597.7
|
|
—
|
|
597.7
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
Equity shareholders of the parent company
|
|
471.3
|
|
96.9
|
|
568.1
|
|
|
-
from continuing operations
|
|
(48.7
|
)
|
96.9
|
|
48.2
|
|
|
-
from discontinued operations
|
|
520.0
|
|
|
|
520.0
|
|
|
Minority Interest
|
|
126.4
|
|
-96.9
|
|
29.5
|
|
|
-
from continuing operations
|
|
96.5
|
|
-96.9
|
|
-0.4
|
|
|
-
from discontinued operations
|
|
30.0
|
|
|
|
30.0
|
|
|
STATEMENT OF FINANCIAL POSITION
|
|
|
|
|
|
|
|
|
|
|
5,252.1
|
|
—
|
|
5,252.1
|
|
|
Assets
|
|
2,412.4
|
|
437.6
|
|
2,850.0
|
|
|
Group Shareholders Equity Minority Interest
|
|
443.7
|
|
-437.6
|
|
6.1
|
|
|
Total Shareholders’ Equity Liabilities
|
|
2,856.1
|
|
—
|
|
2,856.1
|
|
|
Total Shareholders’ Equity and Liabilities
|
|
2,396.0
|
|
—
|
|
2,396.0
|
|
|
|
|
5,252.1
|
|
—
|
|
5,252.1
|
|
|
CASH FLOW STATEMENT
|
|
|
|
|
|
|
|
|
Net cash flow from operating activities (A)
|
|
|
|
|
|
|
|
|
Net cash flow from investing activities (B)
|
|
1,241.7
|
|
—
|
|
1.241.7
|
|
|
Net cash flow from financing activities (C)
|
|
-738.6
|
|
—
|
|
-738.6
|
|
|
Change in Cash and Cash Equivalents (D=A+B+C)
|
|
-286.0
|
|
—
|
|
-286.0
|
|
|
|
|
217.1
|
|
—
|
|
217.1
|
|
62
Basic assumptions of the Pro Forma Consolidated Financial Data
The Merger, as a reorganisation of existing companies, does not give rise to any transfer of control of these companies, and essentially involves the acquisition of the shares held by the minority shareholders of Mediaset España in exchange for the issue of new shares in DutchCo, currently a wholly-owned subsidiary of Mediaset. The Merger will also involve the incorporation of Mediaset into DutchCo at the same time.
As indicated in the Report, the Merger constitutes a “business combination involving entities or businesses under common control” and, as such, is excluded from the mandatory scope of application of IFRS 3 - Business Combinations. Accordingly, the Pro Forma Consolidated Financial Data have been prepared by applying the principle of continuity of values, which gives rise to the recognition in the balance sheet of assets and liabilities equal to those resulting from the Group’s consolidated financial statements prior to the Merger.
Therefore, historical consolidated data of the Group already include the consolidated data of the Mediaset España group, as they are consolidated on a line-by-line basis: more specifically, since Mediaset held an interest equal to 51.63% of the share capital of Mediaset España at 31 December 2018, the portion of profit and shareholders’ equity relating to the Mediaset España group to which minority shareholders are entitled was allocated to the minority interests in the profit and shareholders’ equity prepared at that date.
63
Pro-forma adjustments
Taking into account the above, the
pro-forma adjustments
consist in highlighting the allocation to the Group after the Merger of the minority interests in Mediaset España prior to the Merger.
More specifically, following the elimination of the minority shareholders of Mediaset España, as at 31 December 2018, the post-Merger Group would have been allocated a minority interest in the result for 2018 of Euro 96.9 million and a minority interest in equity of Euro 437.6 million.
At the level of the consolidated cash flow statement, the Merger does not entail any pro-forma adjustment.
Other effects
It should also be noted that the pro-forma adjustments do not include:
·
direct costs associated with the Merger, as they are not considered significant; and
·
the effects deriving from the changes resulting from the Merger to the share-based incentive plans, as these changes will be implemented with the aim of substantially maintaining the fair value of the equity instruments unchanged without entailing accounting effects.
Finally, it should be noted that the Merger does not have a tax impact, as described in
Section 3.3.5
above.
Pro-forma financial data per share
Below are the historical data per share of Mediaset Group as at 31 December 2018 and the pro- forma data per share after the Merger as at 31 December 2018.
|
EPS
(EUR per share)
|
|
Historic data
|
|
Pro-forma
data
|
|
|
Net consolidated Income
|
|
|
|
|
|
|
EPS Base
|
|
0.41
|
|
0.39
|
|
|
|
|
|
|
|
|
|
Net Consolidated Income from Continuing Operations
|
|
|
|
|
|
|
EPS Base
|
|
-0.04
|
|
0.03
|
|
|
|
|
|
|
|
|
|
No. ordinary shares excluding treasury shares (EPS Base)
|
|
1,137,142,325
|
|
1,472,925,998
|
|
64
The historical and pro-forma data of the net results per share have been calculated on the basis of the profit for the year attributable to the shareholders of the parent company and the total number of shares in circulation of the parent company, respectively, as at 31 December 2018 and following the Merger.
65
SCHEDULE 3
FAIRNESS OPINION OF JPM
66
7
th
June, 2019
The Board of Directors
Mediaset España Comunicación, S.A.
Ctra. de Fuencarral a Alcobendas, n° 4
28049 - Madrid
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point of view, to the holders (other than the Counterparty –as defined below– and its affiliates) of the ordinary shares with a nominal value of €0.50 per share (the “Company Shares”) in the share capital of Mediaset España Comunicación, S.A. (the “Company”) of the Exchange Ratio (as defined below) in the proposed merger (the “Transaction”) of the Company with Mediaset S.p.A. (the “Counterparty”) and Mediaset Investment, N.V. (the “DutchCo”), a wholly-owned subsidiary of the Counterparty.
Pursuant to the cross-border common merger plan dated 7
th
June, 2019 (the “Common Merger Plan”) relating to the simultaneous tripartite cross-border merger of the Company and the Counterparty with and into DutchCo, the Company and the Counterparty will be absorbed by DutchCo. Under the terms of the Common Merger Plan, (i) each Company Share, other than Company Shares held in treasury or owned by the Counterparty, will be exchanged for 2.33 ordinary shares in the share capital of DutchCo (the “Exchange Ratio”) with a nominal value of €0.01 per share (the “DutchCo Shares”) and (ii) each ordinary share with a nominal value of €0.52 per in the share capital of the Counterparty (the “Counterparty Shares”) will be exchanged for 1.00 DutchCo Share (the “Counterparty Exchange Ratio”). It is noted that as at the date hereof, the Counterparty holds 51.63% of the Company Shares.
Please be advised that while certain provisions of the Transaction are summarised above, the terms of the Transaction are more fully described in the Common Merger Plan. As a result, the description of the Transaction and certain other information contained herein are qualified in its entirety by reference to the more detailed information appearing or incorporated by reference in the Common Merger Plan.
In arriving at our opinion, we have (i) reviewed the Common Merger Plan and the report on the cross-border merger issued by the Board of Directors on 7
th
June, 2019 (the “Board of Directors Report”); (ii) reviewed certain publicly available business and financial information concerning the Counterparty and the Company, the industries in which they operate and certain other companies engaged in
J.P. Morgan Securities plc
25 Bank Street, Canary
Wharf, London, E14 5JP
Tel: +44 (0)20 7742 4000
·
Fax: +44 (0)20 3493 0684
Registered in England & Wales No. 2711006.
Registered Office
25 Bank Street, Canary
Wha
rf, London, E14
5JP.
Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regualtion Authorty.
businesses comparable to them; (iii) compared the financial and operating performance of the Counterparty and the Company with publicly available information concerning certain other companies we deemed relevant and reviewed the current and historical market prices of the Counterparty Shares and the Company Shares and certain publicly traded securities of such other companies; (iv) reviewed the audited individual and consolidated financial statements of the Company and the Counterparty and their respective subsidiaries for the fiscal years ended December 31, 2018 and 2017, as well as the unaudited consolidated interim financial statements of the Company and the Counterparty and their respective subsidiaries as of March 31, 2019; (v) reviewed certain internal unaudited financial analyses as well as projections, assumptions, fiscal analysis and forecasts relating to the businesses of the Company and the Counterparty (including the set of projections for the 2019-2024 period described in sections 4.4.2(iii) and 4.4.3(B) of the Board of Directors Report, as validated by the respective management of the Company and the Counterparty and projections on fiscal matters), as well as the estimated amount and timing of the cost savings and related expenses and synergies expected to result from the Transaction (the “Synergies”), in each case prepared, and/or provided to us, by the management of the Company and the Counterparty; and (vi) performed such other financial studies and analyses and considered such other information as we deemed appropriate for the purposes of this opinion.
In addition, we have held discussions with certain members of the management of the Company with respect to certain aspects of the Transaction, its strategic rationale and potential benefits and the past and current business operations of the Company and the Counterparty, the financial condition and future prospects and operations of the Counterparty, the Company and DutchCo, the effects of the Transaction on the financial condition and future prospects of the Company, the Counterparty and DutchCo, and certain other matters we believed necessary or appropriate to our inquiry.
In giving our opinion, we have relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with us by the Company or otherwise reviewed by or for us. We have not independently verified any such information or its accuracy or completeness and, pursuant to our engagement letter with the Company, we did not assume any obligation to undertake any such independent verification. We have not conducted or been provided with any valuation or appraisal of any assets or liabilities, nor have we evaluated the solvency of the Counterparty, DutchCo or the Company under any laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses, projections, assumptions and forecasts provided to us or derived therefrom, including the Synergies, we have assumed that they have been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management of the Company as to the expected future results of operations and financial condition of the Counterparty, DutchCo and the
2
Company to which such analyses, projections, assumptions or forecasts relate. We express no view as to such analyses, projections or forecasts (including the Synergies) or the assumptions on which they were based, and the Company has confirmed that we may rely upon such analyses, projections, assumptions and forecasts (including the Synergies) in the delivery of this opinion. We have also assumed that the Transaction and the other transactions contemplated by the Common Merger Plan will have the tax consequences described in the Common Merger Plan and in discussions with, and materials furnished to us by, representatives and advisors of the Company, and will be consummated as described in the Common Merger Plan without any waiver or amendment of any of its terms or conditions. We are not legal, regulatory or tax experts and have relied on the assessments made by advisors to the Company with respect to such issues. We have further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Counterparty, DutchCo or the Company or on the contemplated benefits of the Transaction. In giving our opinion, we have relied on the Company’s commercial assessments of the Transaction. The decision as to whether or not the Company enters into a Transaction (and the terms on which it does so) is one that can only be taken by the Company and its shareholders.
Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of the date hereof. It should be understood that subsequent developments may affect this opinion and that we do not have any obligation to update, revise, or reaffirm this opinion.
Our opinion is limited to the fairness, from a financial point of view, to the holders of the Company Shares (other than the Counterparty
and its affiliates) of the Exchange Ratio in the proposed Transaction. For the avoidance of doubt, in arriving at our opinion we have considered the terms of the Transaction as a whole (including the Counterparty Exchange Ratio). We express no opinion as to any other term or aspect of the Transaction, or any consideration to be paid to the holders of any other class of securities, creditors or other constituencies of the Company or as to the underlying decision by the Company to engage in the Transaction. Furthermore, we express no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the Transaction, or any class of such persons relative to the Exchange Ratio applicable to the holders of the Company Shares in the Transaction or with respect to the fairness of any such compensation. We are expressing no opinion herein as to the price at which the Company Shares or the DutchCo Shares will trade at any future time. As a result, other factors after the date hereof may affect the value of the business of the Company, the Counterparty and/or DutchCo before or after consummation of the Transaction, including but not limited to (i) the total or partial disposition of the share capital of the Company, the Counterparty and/or DutchCo by their respective shareholders within a short period of time before or after the
3
effective date of the Transaction, (ii) changes in prevailing interest rates and other factors which generally influence the price of securities, (iii) adverse changes in the current capital markets, (iv) the occurrence of adverse changes in the financial condition, business, assets, regulatory framework, results of operations or prospects of the Company, the Counterparty and/or DutchCo, (v) any necessary actions by or restrictions of governmental agencies or regulatory authorities, and (vi) timely execution of all necessary agreements to complete the Transaction on terms and conditions that are acceptable to all parties at interest. No opinion is expressed as to whether any alternative transaction might be more beneficial to the Company.
We note that we were not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of the Company or other alternative transaction.
We have acted as financial advisor to the Company with respect to the proposed Transaction and will receive a fee from the Company for our services, a substantial portion of which will become payable only if the proposed Transaction is consummated. In addition, the Company has agreed to indemnify us for certain liabilities that may arise out of our engagement. Please be advised that during the two years preceding the date of this letter, neither we nor our affiliates have had any other significant financial advisory or other significant commercial or investment banking relationships with the Company, the Counterparty or DutchCo. In the ordinary course of our businesses, we and our affiliates may actively trade the debt and equity securities of the Company, DutchCo or the Counterparty for our own account or for the accounts of customers and, accordingly, we may at any time hold long or short positions in such securities. In addition, we and our affiliates hold, on a proprietary basis, less than 2% of the outstanding common stock of the Counterparty.
On the basis of and subject to the foregoing, it is our opinion as of the date hereof that the Exchange Ratio in the proposed Transaction is fair, from a financial point of view, to the holders of the Company Shares (other than the Counterparty and its affiliates).
This opinion is rendered in English. If this opinion is translated into any language other than English, this English version shall always prevail.
This letter is provided to the Board of Directors of the Company in connection with and for the purposes of its evaluation of the Transaction. This opinion is not addressed to and may not be relied upon by any third party including, without limitation, employees, creditors or shareholders of the Company or the Counterparty. Therefore, this opinion does not confer rights or remedies on any person other that the Board of Directors of the Company. This opinion does not constitute a recommendation as to how any director or shareholder should vote or act with respect to the Transaction or any other matter. This opinion may not be
4
disclosed, referred to, or communicated (in whole or in part) to any third party for any purpose whatsoever except with our prior written approval, provided that (i) a complete copy of this letter may be disclosed to the Company’s shareholders alongside the Board of Directors Report, and (ii) references to this opinion, which are not a complete copy of this letter, may also be included in the Common Merger Plan and/or the Board of Directors Report, subject to our prior written approval and subject to our prior written confirmation of the form and context of such references.
Very truly yours,
J.P. MORGAN SECURITIES PLC
5
IMPORTANT INFORMATION FOR INVESTORS AND SHAREHOLDERS
This document is for informational purposes only and is not intended to and does not constitute an offer or invitation to exchange or sell or solicitation of an offer to subscribe for or buy, or an invitation to exchange, purchase or subscribe for, any securities, any part of the business or assets described herein, or any other interests or the solicitation of any vote or approval in any jurisdiction in connection with the proposed transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made. This document is not a prospectus, product disclosure statement or other offering document for the purposes of Directive 2003/71/EC of the European Parliament and the Council of 4 November 2003, as amended, in particular, by Directive 2010/73/EC of the European Parliament and the Council of 24 November 2010, as amended and as implemented in each member State of the European Economic Area and under Italian, Spanish and Dutch law.
This document does not represent an offer to the public in Italy, pursuant to Section 1, letter (t) of Legislative Decree no. 58 of February 24, 1998, as amended and supplemented, nor in Spain, pursuant to article 35.1 of the restated text of the Securities Market Act approved by Royal Legislative Decree 4/2015, dated 23 October. The release, publication or distribution of this document in certain jurisdictions may be restricted by law, and therefore persons in such jurisdictions into which this document is released, published or distributed should inform themselves about and observe such restrictions.
Nothing in this document constitutes an offer of securities for sale in the United States within the meaning of the Securities Act or in any other jurisdiction where it is unlawful to do so, or a solicitation of votes for the general meeting of shareholders described herein. The securities referred to in this document have not been, and will not be, registered under the Securities Act or the securities laws of any state in the United States, and any representation to the contrary is a violation of law. The securities referred to in this document may not be offered or sold within the United States or to, or for the account or benefit of, U.S. Persons, both as defined in Regulation S under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state or local securities laws.
* * *
US investors disclaimer
This Transaction is made for the securities of a foreign company. The Transaction is subject to disclosure requirements of a foreign country that are different from those of the United States. Financial statements included in the documents, if any, have been prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of United States companies.
It may be difficult for you to enforce your rights and any claim you may have arising under the federal securities laws since the issuer is located in a foreign country, and some or all of its officers and directors may be residents of a foreign country. You may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court’s judgment.
You should be aware that the issuer may purchase securities otherwise than in the Transaction, such as in open market or privately negotiated purchases.
* * *
Forward Looking Statements
This document contains certain forward-looking statements relating to Mediaset, Mediaset España and the proposed business combination between them. All statements included in this document concerning activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and involve known and unknown risks, uncertainties and other factors, including, but not limited to, the following: volatility and deterioration of capital and financial markets, changes in general economic conditions, economic growth and other changes in business conditions, changes in government regulation, uncertainties as to whether the proposed business combination will be consummated, uncertainties as to the timing of the proposed business combination, uncertainties as to how many shareholders will participate in the proposed business combination, the risk that the announcement of the proposed business combination may make it more difficult for Mediaset or Mediaset España to establish or maintain relationships with its employees, suppliers and other business partners, the risk that the businesses of Mediaset or Mediaset España will be adversely impacted during the pendency of the proposed business combination; the risk that the operations of Mediaset or Mediaset España will not be integrated successfully, and other economic, business and competitive factors affecting the businesses of Mediaset and Mediaset España generally, including those set forth in the annual reports for the year ended 31 December 2018 of Mediaset and Mediaset España.
Therefore, Mediaset and Mediaset España and their affiliates, directors, advisors, employees and representatives, expressly disclaim any liability whatsoever for such forward-looking statements.
These forward-looking statements speak only as of the date of this document and neither Mediaset nor Mediaset España undertake obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise, except as required by law.
Exhibit 99.13
MEDIASET SPA
EXPERT REPORT PURSUANT TO ARTICLE 2501-
SEXIES
OF
THE CIVIL CODE AND ARTICLE 9 OF
LEGISLATIVE DECREE No. 108 OF 30 MAY 2008
JUNE 2019
Courtesy translation for illustrative purposes only
EXPERT REPORT PURSUANT TO ARTICLE 2501-
SEXIES
OF THE CIVIL CODE AND ARTICLE 9 OF LEGISLATIVE DECREE No. 108 OF 30 MAY 2008
To the shareholders of
Mediaset SpA
1.
PURPOSE AND SCOPE OF THE ENGAGEMENT
Following an application submitted by Mediaset SpA (“Mediaset”), PricewaterhouseCoopers SpA (“PwC” or the “Expert”) has been appointed by the Court of Milan, by order No. 7996/2018 of 15 June 2018, to prepare, as the expert designated pursuant to Article 2501-
sexies
of the Italian Civil Code and Article 9 of Legislative Decree No. 108 of 30 May 2008, a report on the fairness of the exchange ratios in connection with the tripartite cross-border merger (the “Merger”) of Mediaset and Mediaset España Comunicación SA (“Mediaset España”) into Mediaset Investment NV (“DutchCo” and, jointly with Mediaset and Mediaset España, the “Companies” or the “Merging Companies”).
For the purposes of our engagement, we received from the Board of Directors of Mediaset, inter alia, the following documents:
·
The common cross-border merger plan approved on 7 June 2019 by the Board of Directors of Mediaset, prepared pursuant to Article 2501-
ter
of the Italian Civil Code and Article 6 of Legislative Decree No. 108/2008 (the “Merger Plan”);
·
The explanatory report prepared by the Board of Directors of Mediaset (the “Board of Directors” or the “Directors”) and approved on 7 June 2019, which pursuant to Article 2501-
quinquies
of the Italian Civil Code and Article 8 of Legislative Decree No. 108/2008, provides a description of the legal and economic rationale for the Merger Plan and, specifically, the share exchange ratios as well as the methods used to determine those ratios (the “Report of the Directors” or the “Report”);
·
The merger balance sheets of the Merging Companies pursuant to Article 2501-
quater
of the Italian Civil Code.
The Merger Plan shall be submitted for approval to the shareholders meeting of Mediaset and Mediaset España and to the sole owner of DutchCo (jointly, the “Shareholders’ Meetings”).
Grant Thornton S.L.P. has been appointed to prepare a similar report in the interests of Mediaset España, pursuant to Article 34 of Spanish Law No. 3/2009 of 3 April 2009 on structural modifications to business companies (the “LME”), and Deloitte Accountants B.V. has been appointed to prepare a similar report in the interests of DutchCo, pursuant to Sections 2:328, paragraph l, and 2:333g of the Dutch Civil Code.
2.
DESCRIPTION OF THE TRANSACTION
2.1
Introduction
DutchCo, Mediaset and Mediaset España are part of the Mediaset group (the “Group”). In particular, (i) DutchCo is a wholly-owned direct subsidiary of Mediaset and (ii) Mediaset España is a direct subsidiary of Mediaset, which currently owns shares representing approximately 51.63% of Mediaset España’s share capital and 53.98% of the voting rights, taking into account the treasury shares currently held by Mediaset España.
The Directors state that, subject to the completion of the pre-merger formalities and the satisfaction (or the waiver, as the case may be) of the conditions precedent, the Merger shall be executed in accordance with Section 2:318 of the Dutch Civil Code and, as such, will become effective at 00:00 am CET (Central European Time) on the day following the day on which the deed of merger (the “Merger Deed”) is executed before a civil law notary officiating in the Netherlands (the “Merger Effective Date”). The Dutch Commercial Register will subsequently inform the Companies’ Register of Milan and the Commercial Register of Madrid about the Merger Effective Date. Upon effectiveness of the Merger, DutchCo will be renamed “MFE — MEDIAFOREUROPE N.V.” (“MFE”).
The Report also states that the Merger is a cross-border merger within the meaning of the provisions of Directive (EU) 2017/1132 of the European Parliament and Council of 14 June 2017 on certain
aspects of company law, whereby the regulations on cross-border mergers of limited liability companies are in force i) for Dutch law purposes under Title 2.7 of the Dutch Civil Code, (ii) for Italian law purposes under Legislative Decree No. 108/2008, and (iii) for Spanish law purposes under Chapter II of Title II of the LME.
As reported by the Directors, the Merger is part of a single and broader transaction (the “Transaction”) which also envisages the following reorganizations, aimed at maintaining all the operations and business activities of Mediaset and Mediaset España, respectively, in Italy and Spain, to be completed prior to the effectiveness of the Merger:
(i)
The incorporation of an Italian wholly-owned direct subsidiary of Mediaset (NewCo Italia);
(ii)
The transfer by Mediaset to NewCo Italia, by means of a contribution in-kind regulated by the Italian Civil Code, of substantially all of its business and certain shareholdings (the “Mediaset Reorganization”); and
(iii)
The segregation (
segregación
) by Mediaset España, in accordance with Title III of the LME, of all its assets and liabilities, including its shareholdings in other companies, to Grupo Audiovisual Mediaset España Comunicación, S.A. (“GA Mediaset”) — a Spanish wholly-owned direct subsidiary of Mediaset España — in exchange for the allotment to Mediaset España of all the new shares in GA Mediaset that will be issued on the occasion of its share capital increase triggered by the segregation (the “Mediaset España Segregation” and, together with the Mediaset Reorganization, the “Preliminary Reorganizations”).
Therefore, before completion of the Merger, Mediaset and Mediaset España will not perform any activities on their own (save for certain financial activities that will remain in Mediaset and will be transferred to MFE as a result of the Merger). Upon effectiveness of the Merger, MFE — as surviving company and new parent company of the Group — will be a holding company.
2
The Directors state that the Preliminary Reorganizations — the completion of which is a condition precedent to the Merger, as described in paragraph 1.2 of the Report — will not have any impact on the Exchange Ratios (as defined and described below).
By virtue of the Merger, Mediaset and Mediaset España will cease to exist as standalone entities and DutchCo will acquire all assets and assume all liabilities as well as other legal relationships of Mediaset and Mediaset España.
Mediaset shares are currently listed on the Mercato Telematico Azionario and Mediaset España shares are currently listed on the Spanish stock exchanges of Barcelona, Bilbao, Madrid and Valencia, which
are organized and managed by their respective managing companies of the stock exchanges (
sociedades rectoras de las bolsas de valores
) (the “Spanish Stock Exchanges”) and are traded through the automated quotation system of the Spanish Stock Exchanges, organized and managed by Sociedad de Bolsas, S.A.U.
The Report states that completion of the Merger is subject to, inter alia, the admission to listing of the ordinary shares of DutchCo (the “DutchCo Ordinary Shares”) on the Mercato Telematico Azionario. Additionally, DutchCo will request admission to listing of the DutchCo Ordinary Shares on the Spanish Stock Exchanges.
The Directors envisage that listing and trading of the DutchCo Ordinary Shares on the Mercato Telematico Azionario and on the Spanish Stock Exchanges will occur on or about the Merger Effective Date.
The Report therefore states that, following completion of the Transaction, all existing business activities, shareholdings and any other assets, as well as liabilities pertaining to the business of Mediaset and Mediaset España, will be consolidated into (or controlled by, as the case may be) one single legal entity (MFE), the ordinary shares of which will be admitted to listing and trading on the Mercato Telematico Azionario as well as on the Spanish Stock Exchanges.
2.2 Purpose of the Merger
The Directors report that, from a strategic, operational and industrial perspective, the Transaction is aimed at creating a pan-European media and entertainment group, with a leading position in its local markets and greater scale to compete and potential to expand further in specific countries across Europe. Combined sustainable capital structure and strong cash flow generation profile provide MFE, as reported by the Directors, with the required firepower to play a pivotal role in the context of a possible future consolidation scenario in the European video media industry.
The incorporation of a new holding company in the Netherlands, as represented in the Report, represents the proper and neutral ground for such a complex project (as proven by other companies that have adopted the same structure) and constitutes an important step in the development of a fully integrated media powerhouse, which would become a leader in linear and non-linear entertainment, leveraging tech and data to compete on an equal footing in the evolving media space.
On 29 May 2019, Mediaset announced the acquisition of a 9.6% stake in the German broadcaster ProSiebenSat.
1
Media, corresponding to 9.9% of the voting rights, excluding treasury shares. Mediaset and Mediaset España have been developing a strong relationship with ProSiebenSat.
1
Media in the
3
European Media Alliance (EMA) in the last five years. The goal of this alliance is to develop economies of scale which are crucial for the future of European TV.
In the context of the current constantly developing competitive landscape, internationalization, economies of scale and ability to offer tech enabled products and quality content are becoming the key critical factors in the profitable execution of modern media company strategies.
In particular, the Mediaset and Mediaset España boards of directors believe that this first step enables strategic and operational benefits, which can only be unlocked efficiently through a combined entity that is run by a single management team with a clear definition of its strategic priorities and value levers. In detail, the benefits indicated by the Directors in the Report are:
·
Scale to compete. Integrated and diversified media company with access to a combined audience of 107mm viewers to better compete with global players. Economies of scale will be generated in key crucial areas such as: (i) audience/reach, (ii) content creation and distribution, (iii) audience data, (iv) AdTech platforms, (v) OTT (AVOD) platforms, and (vi) talent acquisition and attraction;
·
New business opportunities. Scale and international footprint will create opportunities that cannot be seized today due to the local focus and dimension and ample resources to invest in core business areas, such as creation of a production content house, data collection, Addressable TV, Digital audio, DOOH, Mobile proximity;
·
Stronger proprietary channel and content portfolio. MFE will have the best content and viewing experience across all platforms (linear and non-linear). It will offer engaging content for viewers thanks to stronger in-house production resources and increased ability to supply content to 3rd parties;
·
Leaner and more efficient organization. Pan-European consolidation requires a re-engineering of the operational and organization model that will allow cost efficiencies and savings, mainly driven by technological developments. Agile decision making with a leaner organization to adapt to a changing business environment and capture combined growth opportunities.
·
Driving the change. Scale coupled with a pan-European footprint will benefit all stakeholders by increasing bargaining power with suppliers and establishing a first-mover advantage in a consolidating media landscape.
The Directors also report that Mediaset and Mediaset España have gone through a very detailed exercise aimed at identifying specific levers out of 6 buckets (content, broadcasting & digital, IT/tech, procurement, G&A expenses, sales house), where a different size and operational model can generate significant cost efficiencies, savings and opportunities. In this respect, the Board of Directors of Mediaset believes that the Transaction would create cost efficiencies and savings of about Euro 100- 110 million (before taxes) in the next 4 years (from 2020 to 2023), representing around Euro 800 million on a net present value basis.
2.3 Exchange Ratios
The Report states that, at the Merger Effective Date:
4
(i)
each Mediaset shareholder, including the depositary bank under the Mediaset American Depositary Receipts (ADRs) program, shall be granted 1 (one) DutchCo Ordinary Share (with a nominal value of Euro 0.01) for each share held in Mediaset (with a nominal value of Euro 0.52) (the “Exchange Ratio I”);
(ii)
each holder of ADRs representing Mediaset shares shall be granted such number of DutchCo ADRs representing DutchCo Ordinary Shares as results from the Exchange Ratio I; and
(iii)
each Mediaset España shareholder (other than Mediaset, as the shares held by Mediaset in Mediaset España will be cancelled by operation of law pursuant to Section 2:325(4) of the Dutch Civil Code) shall be granted 2.33 (two/thirtythree DutchCo Ordinary Shares for each share held in Mediaset España (having a nominal value of Euro 0.50) (the “Exchange Ratio II” and, together with the Exchange Ratio I, the “Exchange Ratios”).
In connection with the Merger and for the purpose of determining the Exchange Ratios, the Board of Directors of Mediaset and the Board of Directors of Mediaset España were advised by their respective financial advisors. In particular, the Board of Directors of Mediaset was assisted by Citigroup Global Markets Ltd and the Board of Directors of Mediaset España was assisted by J.P. Morgan Securities Plc. With specific reference to Mediaset, on 7 June 2019 Citigroup Global Markets Ltd (the “Advisor”)
delivered a fairness opinion on Exchange Ratio II of the Merger taking into consideration the Exchange Ratio I (the “Fairness Opinion”). According to the conclusions of the Fairness Opinion, the proposed Exchange Ratios are fair from the financial viewpoint, on the basis of and subject to the factors, limitations and assumptions and procedures specified therein.
The Directors point out that no fractional DutchCo Ordinary Shares shall be allotted to any holders of shares of Mediaset España. Those shareholders who hold a number of Mediaset España shares such as to enable them to receive, in accordance with the Exchange Ratio II, a non-whole number of DutchCo Ordinary Shares, shall receive such whole number of DutchCo Ordinary Shares which is immediately below said non-whole number. Mediaset España shares (or any fractions thereof) in excess of those required, pursuant to the Exchange Ratio II, to receive a whole number of DutchCo Ordinary Shares (i.e., Mediaset España shares or any fractions thereof representing fractional entitlements to DutchCo Ordinary Shares) shall be transferred on behalf of the Mediaset España shareholders, through their depositaries, to an agent appointed for these purposes by Mediaset España.
The Report clarifies that any treasury shares held by Mediaset and Mediaset España at the Merger Effective Date will not be exchanged and will be cancelled pursuant to Article 2504-
ter
of the Italian Civil Code and pursuant to Article 26 of the LME, respectively, as well as pursuant to Section 2:325(4) of the Dutch Civil Code. Likewise, any shares in either of the absorbed companies (i.e., Mediaset and Mediaset España) held by the other absorbed company will not be exchanged, but will be cancelled on the Merger Effective Date pursuant to Article 2504-
ter
of the Italian Civil Code and pursuant to Article 26 of the LME, as well as pursuant to Section 2:325(4) of the Dutch Civil Code.
The Directors specify that Mediaset España neither holds any Mediaset shares on the date hereof nor is expected to hold any Mediaset shares at any time before the Merger Effective Date, so that the paragraph above will predictably apply only with regard to the Mediaset España shares which are held by Mediaset on the date on which the Merger Deed is executed.
No consideration in addition to the DutchCo Ordinary Shares delivered in application of the Exchange Ratios, either in cash or otherwise, will be paid by DutchCo, Mediaset and Mediaset España to the
5
Mediaset and Mediaset España shareholders in connection with the Merger, without prejudice to the withdrawal rights described in paragraph 2.4.
2.4 Withdrawal rights of Mediaset and Mediaset España shareholders
The Report states that Mediaset shareholders who do not participate in the adoption of the resolution on the Merger will be entitled to exercise their withdrawal rights within 15 days following registration
with the Companies’ Register of Milan of the minutes of the Mediaset Extraordinary Meeting approving the Merger. The redemption price payable to Mediaset shareholders who exercise their withdrawal rights will be equal to Euro 2.770 per Mediaset share. In detail, the Directors report that the redemption price was determined, pursuant to Article 2437-
ter
, paragraph 3, of the Italian Civil Code, by referring to the arithmetic average of the daily closing prices of Mediaset shares during the six-month period prior to the date of publication of the notice for convening the Mediaset Extraordinary Meeting by reference to the arithmetic average of the daily closing prices of Mediaset shares during the six-month period prior to the date of publication of the notice for convening the Mediaset Extraordinary Meeting (8 June 2019).
The Directors specify that, if the Merger is not consummated, the shares in relation to which the withdrawal rights have been exercised will continue to be held by the shareholders who exercised such rights; no payment will be made to such shareholders and Mediaset shares will continue to be listed on the Mercato Telematico Azionario.
The Report also states that Mediaset España shareholders who vote against the Merger will be entitled to exercise their withdrawal rights within one month of the publication in the Official Gazette of the Commercial Register (Boletín Oficial del Registro Mercantil — the BORME) of the approval of the Merger by the Mediaset España general meeting. The redemption price payable to Mediaset España shareholders who exercise their withdrawal rights is equal to Euro 6.5444 per Mediaset España share, which corresponds to the average quoted price of Mediaset España shares during the three-month period prior to (and excluding) the date of approval of the Merger Plan, deducting the dividend in the gross amount of Euro 0.31557917 per Mediaset España share paid on 30 April 2019 from the daily volume weighted average price for the trading session comprised between 8 March and 25 April 2019 (both inclusive), where the Mediaset España shares were traded
cum dividend
.
If it has been verified that the conditions precedent to the Merger will not be satisfied or waived, as applicable, and provided the redemption price has not been paid to the Mediaset España Withdrawing Shareholders yet, the Mediaset España shares in relation to which the withdrawal rights have been exercised will continue to be held by the corresponding Mediaset España Withdrawing Shareholders,
will cease to be immobilized and will continue to be listed on the Spanish Stock Exchanges. Consequently, in this case, no payment of redemption price will be made to ME Withdrawing Shareholders
The Directors also report that the Merger will not trigger any withdrawal rights for the sole shareholder of DutchCo.
6
3.
NATURE AND SCOPE OF THIS REPORT
To provide Mediaset shareholders with suitable information on the Exchange Ratios, this Report
illustrates the methods applied by the Directors to determine such ratios and any difficulties encountered by them in the valuation; it also includes our opinion on the appropriateness, in the circumstances, of such methods, in terms of their reasonableness and not lack of arbitrary, as well as on their correct application.
In examining the valuation methods adopted by the Directors, supported by the advice of the Advisor appointed by them, we did not, for the purposes of this engagement, carry out a business valuation of the Companies. Such a valuation was carried out by the Directors with the support of the Advisor.
4.
DOCUMENTS USED
For the performance of our work we obtained from Mediaset the documents and information we
considered useful in the circumstances. Inter alia, we obtained and analysed the following:
(i)
the Merger Plan approved on 7 June 2019 by the Board of Directors of Mediaset;
(ii)
the explanatory report prepared by the Board of Directors of Mediaset and approved on 7 June 2019, which pursuant to Article 2501-
quinquies
of the Italian Civil Code provides a description of and the legal and economic rationale for the Merger Plan and, specifically, the share exchange ratios as well as the methods used to determine those ratios;
(iii)
an extract from the minutes of the meeting of the Board of Directors of Mediaset of 7 June 2019, held to approve the Merger Plan and to define the Exchange Ratios;
(iv)
the financial statements of Mediaset as of 31 December 2018 (approved by Mediaset shareholders in general meeting on 18 April 2019), the financial statements of Mediaset España as of 31 December 2018 (approved by Mediaset España shareholders in general meeting on 10 April 2019), and the financial statements of DutchCo as of 31 December 2018 (approved by DutchCo shareholders in general meeting on 17 April 2019), audited by the respective auditors who issued unqualified opinions thereon. The aforementioned financial statements represent the merger balance sheets based on the applicable legislation;
(v)
the consolidated financial statements as of 31 December 2018 of Mediaset and Mediaset España;
(vi)
the “Interim Financial Report as at 31 March 2019” of Mediaset;
(vii)
the “First Quarter 2019 Results” of Mediaset España;
(viii)
the articles of association of the entity resulting from the Merger;
(ix)
a copy of the Fairness Opinion prepared by Citigroup Global Markets Ltd as the Advisor to Mediaset, published on 18 June 2019;
7
(x)
projections derived from an extensive number of research reports by financial analysts for the period 2019-2021, with the addition of extrapolations for the period 2022-2024, validated by the respective management of Mediaset and Mediaset España;
(xi)
details of the net financial position of Mediaset and Mediaset España as of 31 December 2018;
(xii)
details of equity interests in associated companies and joint ventures and other shareholdings held by Mediaset and Mediaset España as of 31 December 2018;
(xiii)
an analysis of deferred tax assets on tax losses of Mediaset and Mediaset España as of 31 December 2018 and forecast utilization;
(xiv)
an analysis of the estimated fiscal benefits of Mediaset España, specifically in relation to tax credits for film and TV fiction productions, and on amortization calculated for tax purposes of goodwill and of the “Multiplex Cuatro”;
(xv)
the target prices for Mediaset and Mediaset España shares, as reported in an extensive number of research reports by financial analysts;
(xvi)
detail of the calculations performed by the Directors in connection with the application of the stock prices, research analyst target prices and discounted cash flow analyses;
(xvii)
the presentation of 7 May 2019 to the Board of Directors of Mediaset on the acquisition of an interest in ProSiebenSat.1 Media;
(xviii)
information on the number of issued Mediaset and Mediaset España shares, including treasury shares, as of 7 June 2019.
We also considered other publicly available information, including the following:
·
reports of financial analysts and media and broadcasting industry analyses;
·
trend of share prices over different time horizons, derived from professional platforms, for Mediaset and Mediaset España;
·
press releases referred to the Transaction.
Moreover, we obtained a specific and express representation, by a letter dated 18 June 2019 signed by Mediaset’s legal representative, to the effect thatnor events or circumstances, have occurred that would require significant adjustments to the figures and information we considered in performing our analyses and/or that could have a significant impact on the valuations performed for determining the Exchange Ratios.
8
5.
VALUATION METHODS ADOPTED BY THE BOARD OF DIRECTORS TO DETERMINE THE EXCHANGE RATIOS
5.1
Valuation approach and methods applied by the Directors
Due to the tripartite structure of the Merger, the Directors report that they calculated two Exchange Ratios: Exchange Ratio I (for the exchange of Mediaset shares for DutchCo Ordinary Shares) and Exchange Ratio II (for the exchange of Mediaset España shares for DutchCo Ordinary Shares).
On the basis of the assumption that, in accordance with Exchange Ratio I, Mediaset shareholders will receive one (1) DutchCo Ordinary Share for each Mediaset share owned, the Board of Directors of Mediaset analysed, in the context of the Merger, the relative valuations of Mediaset and Mediaset España aimed at determining the Exchange Ratio II between Mediaset España shares and DutchCo Ordinary Shares or, equivalently (given the Exchange Ratio I), between Mediaset España shares and Mediaset shares.
In order to determine the economic value of the ordinary shares of Mediaset and Mediaset España and, therefore, the Exchange Ratios, the Board of Directors of Mediaset followed generally accepted valuation methodologies, with particular regard to those most commonly used at national and international levels in similar transactions, prioritizing to the principle of consistency and comparability of the valuation criteria, applied compatibly with the distinctive elements of each of the Merging Companies.
In particular, according to the Directors, best practice requires that companies operating in a similar business and involved in a merger are valued on the basis of consistent criteria, in order for the results of the relative valuation analysis to be fully comparable.
The Report states that the definition of any exchange ratio is the quantification of the relative value (rather than absolute value) of the individual companies taking part in the transaction, considering that the ultimate objective is not to calculate an economic value in absolute terms for each company involved in a transaction, but rather to determine homogeneous and comparable values in relative terms. Therefore, the Directors deemed it appropriate to solely express ranges for the Exchange Ratios, derived from the homogeneous application of each valuation methodology adopted; therefore, they believe that the estimated relative values should not be taken as a reference in contexts different from the Merger.
The valuation was carried out by the Directors considering Mediaset and Mediaset España as separate entities on a stand-alone basis and also taking into account that Mediaset currently owns shares representing approximately 51.63% of Mediaset España’s share capital, reflecting financial and economic assumptions based upon the information available as of 6 June 2019, which may change or be affected by market conditions as well as exogenous and/or endogenous events affecting the current and future performance and/or the economic and financial outlook of Mediaset and Mediaset España.
In addition, the determination of the Exchange Ratios of Mediaset and Mediaset España shares was carried out by the Directors not taking into account any potential economic and financial impacts of the Merger, including cost efficiencies and savings.
The valuation methodologies used by the Directors to calculate the Exchange Ratios were the following: (i) historical stock prices; (ii) research analyst target prices; (iii) discounted free cash flow.
9
The Report specifies that such methodologies, however, should not be analysed individually, but should rather be considered an integral part of a single and comprehensive valuation process.
5.2
Description of the valuation methodologies selected by the Directors
The valuation methods used by the Directors to determine the Exchange Ratios are illustrated in the Report as follows.
(i)
Historical stock prices
This method is based on the market capitalization of Mediaset and Mediaset España. Historical stock prices reflect the economic value that a stock market attributes to a company.
The timeframe on which to calculate the price must balance any short-term volatility driven by events of exceptional nature, short-term fluctuations and speculative tension (therefore a longer time horizon is preferable) and the need to reflect the most recent market and company conditions, where recent prices should be taken into consideration. Thus, the volume weighted average prices (“VWAP”) for Mediaset and Mediaset España were considered by the Directors for 1 month, 3 months and 6 months prior to 5 June 2019 (included) and compared on a like for like basis. The volume weighted average prices for Mediaset España were adjusted by the Directors to take into account the payment of the Euro 0.31557917 dividend per share paid on 30 April 2019 (ex-dividend date as at 26 April 2019).
The Directors note that on 24 January 2019 Mediaset España announced a share buyback program up to Euro 200 million. As of the date of the Report, a total of 14,419,910 shares were purchased by Mediaset España, for an aggregate amount of Euro 95,532,864.96. Therefore the Directors believe it cannot be excluded that the recent and current trading of Mediaset España stock may have been affected by such buyback program.
(ii)
Research analyst target prices
Research analysts summarize their recommendations on listed companies identifying a “target price” of the stocks, offering an indication of an implicit value of the company. However, this method gives a useful indication for determining the value of companies whose shares are listed on a stock exchange, completing the framework of the references for the valuation.
For each of Mediaset and Mediaset España (i) only research reports published by research analysts after the publication of 2018 results and prior to 17 May 2019 (including those published after 1
st quarter 2019 results) were considered; (ii) equity research reports showing the highest and lowest EBIT 2020 projections were not taken into consideration.
(iii)
Discounted free cash flow
This valuation methodology was adopted by the Directors in order to take into account the specific features of Mediaset and Mediaset España, reflects a dynamic conception of the company’s activity and is based on the idea that the business value is determined by its capacity to generate cash flows in the future. In addition, this method reflects, inter alia, the business potential in the medium and long term, in terms of profitability, growth, risk level, capital structure and expected level of investments.
10
As stated in the Report, this method was based on the following estimates:
·
unlevered free cash flow estimates for each business. Unlevered free cash flows are a proxy to the business cash flow generation before financial income and expenses, after having applied the corporate tax and having considered capital expenditures (“capex”) and working capital swings;
·
net present value of the forecasted free cash flow estimates applying a discount rate (WACC). The discount rate takes into consideration the implicit business risk as well as the time value of money;
·
businesses terminal value, assuming a perpetuity growth at the end of the free cash flow annual projection period. The previously mentioned discount rate is applied to the terminal value to obtain the net present value.
The enterprise value can be estimated adding the net present value of the projected free cash flows and terminal value.
In particular, with reference to Mediaset only, the discounted cash flow valuation was on a “sum of the parts basis”, by performing two discounted cash valuations for Mediaset España and the Italian business (i.e. Mediaset business net of the stake held by Mediaset in Mediaset España.
The discounted free cash flow method leads to an enterprise value; hence, to compute the value of shareholders’ equity in order to determine the Exchange Ratios, typical adjustments including, but not limited to, net financial debt adjusted for the Euro 0.31557917 dividend per share paid by Mediaset España on 30 April 2019 and for the buyback executed by Mediaset España post 31 December 2018 and until 5 June 2019, minority interests, pensions liabilities and investments in associates and in other companies have been made to the enterprise value.
The implied per share equity value was calculated by dividing such equity values by the number of Mediaset and Mediaset España ordinary shares outstanding (i.e. net of the respective number of treasury shares held as of 5 June 2019).
6.
DIFFICULTIES ENCOUNTERED BY THE BOARD OF DIRECTORS IN THE VALUATION
Pursuant to Article 2501-
quinquies
, paragraph 2, of the Italian Civil Code, in their Report the Directors point out that the difficulties arising from the application of the valuation methodologies adopted to determine the Exchange Ratios were taken into account.
In particular, the Directors report that:
·
Mediaset issued (i) mid-term financial targets (2020) in January 2017 (limited to EBIT compared to 2016) and (ii) mid-term (2020-2021) guidelines in March 2019. Whilst Mediaset updates regularly the market on the guidance vis-à-vis targets and progress on previously communicated strategy, there is no full business plan for Mediaset and Mediaset España available for the purpose of the determination of the Exchange Ratios. Therefore, the valuation analysis, and the discounted cash flow methodology in particular were based by the Directors
11
on projections resulting from the application of the following approach as agreed by Mediaset and Mediaset España respective managements:
·
for the period 2019-2021: projections derived from an extensive number of equity research reports, representing all the research reports about Mediaset and Mediaset España published by equity analysts after the publication of full year 2018 results and prior to 17 May 2019 (including those published after 1
st
quarter 2019 results), and reporting projections for the whole 2019-2021 period, with the exclusion from such panel of two equity research reports having the highest and lowest EBIT 2020 projections;
·
for the period 2022-2024: extrapolations in line with the current long-term expectations that the Italian and Spanish managements have on their respective businesses. In particular, the two managements have indicated a long-term top-line growth of 0.5% for the last year of projections (2024) whereas most of the other cash-flow items have been assumed to be in line with 2021 projections, in terms of percentage on sales, for the whole extrapolations period;
·
the approach described above was the same for both Mediaset and Mediaset España and was agreed and validated by the respective managements of Mediaset and Mediaset España, who confirmed that the projections and extrapolations are broadly in line with their current long-term expectations, respectively, on the respective businesses. However, such forecasts are subject by nature to substantial uncertainty.
·
In consideration of the mechanics and timetable envisaged for the exercise of the right of withdrawal and creditor opposition, and since it is not possible to quantify their future impact in terms of cash outlay, the effects of the (potential) exercise of such rights by Mediaset shareholders who do not vote in favour of the Merger and by Mediaset España shareholders who vote against the Merger in their respective shareholders’ meeting were not taken into account by the Directors, also considering that its impact was estimated not material in the context of the overall processes leading to the determination of the Exchange Ratios.
·
The market prices of Mediaset and Mediaset España shares have been and are subject to volatility and fluctuations also as a result of the general trend in the capital markets; moreover is assumed that the market is sufficiently liquid and efficient. Therefore, the Directors cannot rule out that, while the Exchange Ratios remain fair based upon the methodologies used for their determination, the market value of the DutchCo Ordinary Shares to be assigned in exchange at the Merger Effective Date may result in a lower or higher market value as of the date on which the Exchange Ratios were set.
·
In relation to the share buyback program announced by Mediaset España, although the trading of Mediaset España shares might have been affected by the execution of such share buyback program, it is not possible to quantify the related impact and isolate it from other events that might have influenced the trading.
·
The Directors report that they applied different methodologies, both analytical and market- based, which required the use of different data, parameters and assumptions. In applying such methodologies, the Board of Directors of Mediaset and Mediaset España considered the
12
characteristics and limitations inherent in each of them, in accordance with professional valuation practice followed at national and international level.
·
The comparable companies trading multiples methodology was not considered relevant by the Directors given that both Mediaset and Mediaset España are listed on an EU regulated market. In particular, the utilization of the trading multiples of comparable companies, although a commonly used valuation methodology, has the limit of being based on sector average ranges rather than on the peculiarities of Mediaset and Mediaset España, which are known to the market and theoretically reflected in their own trading multiples and share prices.
·
Also the transaction multiples methodology was considered not relevant given the limit of being based on sector average ranges rather than on the peculiarities of Mediaset and Mediaset España. Precedent transactions and historical takeover
premia
were considered but not deemed relevant on the grounds that both Mediaset and Mediaset España shareholders would get MFE shares, hence they would participate in the value potentially created by the Merger via the shares they would get as consideration. Moreover, Mediaset is already the controlling shareholder of Mediaset España, hence no control premium would apply for a change of ownership.
·
A litigation between Mediaset and Vivendi S.A. is ongoing following the non-completion of a transaction involving Mediaset Premium activities. Should the outcome of the litigation be favourable to Mediaset, Mediaset may be recognized some monetary damage repair. Conservatively, the Board of Directors of Mediaset did not consider any proceeds from the litigation for the purpose of determining the Exchange Ratio.
·
In general, no evolution regarding any specific ongoing or potential litigations for both Mediaset and Mediaset España has been considered, given the uncertainty of their outcomes and timings.
·
Mediaset and Mediaset España tax losses carryforward and tax assets were taken into consideration by the Directors in the discounted cash flow valuation methodology. As far as Mediaset España tax losses carryforward utilization, they did not consider any limitation as per paragraphs 8.1.2 and 8.2.1. of the Report.
7.
RESULTS OF THE VALUATION PERFORMED BY THE BOARD OF DIRECTORS
The Report specifies that the Merger will entail the allotment of DutchCo Ordinary Shares to Mediaset and Mediaset España shareholders (other than Mediaset, as the shares held by Mediaset in Mediaset España will be cancelled by operation of law pursuant to Section 2:325(4) of the Dutch Civil Code) in exchange for Mediaset and Mediaset España shares, which will be cancelled.
On the basis of the assumption that, in accordance with Exchange Ratio I, Mediaset shareholders will receive one (1) DutchCo Ordinary Share for each Mediaset share owned, the Board of Directors of Mediaset analysed, in the context of the Merger, the relative valuation of Mediaset and Mediaset España, aimed at determining the Exchange Ratio II between Mediaset España shares and DutchCo Ordinary Shares or, equivalently (given Exchange Ratio I), between Mediaset España shares and Mediaset shares.
13
The following table in the Report sets forth a summary of the results achieved by the Directors through the application of the various valuation methodologies described above (Volume Weighted Average Prices, VWAP, for 1 month, 3 months and 6 months prior to 5 June 2019, research analyst target prices and discounted free cash flow) for the purpose of determining Exchange Ratio II, that is the number of DutchCo Ordinary Shares to be issued for each Mediaset España share.
|
Methodology
|
|
Range of Mediaset España Exchange Ratios
(Exchange Ratio II)
|
|
i)
1 month VWAP
|
|
2.19 – 2.68
|
|
i)
3 months VWAP
|
|
2.11 – 2.57
|
|
i)
6 months VWAP
|
|
2.05 – 2.50
|
|
v)
research analyst target prices
|
|
2.14 – 2.62
|
|
v)
discounted cash flow
|
|
2.16 – 2.64
|
The range of Exchange Ratio II was determined by the Directors applying a +/- 10% to:
·
as far as historical stock prices, the exchange ratio between the VWAP for each period of analysis;
·
as far as research analyst target price, the exchange ratio between the medians of the each analysts panels;
·
as far as discounted cash flow, the exchange ratio between the central values resulting from the application of the DCF methodology.
The overlapping area of the Exchange Ratios resulting from the comparison of the relevant methodologies is between 2.19 and 2.50 (the “Overlapping Range”).
Considering the results of the valuation methodologies applied, the Boards of Directors of Mediaset, DutchCo and Mediaset España, having examined the valuations set out in the fairness opinions issued by their respective financial advisors (in particular, as far as Mediaset is concerned, the Advisor’s Fairness Opinion), resolved to propose:
·
the Exchange Ratio I of 1 (one) DutchCo Ordinary Share (having a nominal value of Euro 0.01) for each Mediaset share (having a nominal value of Euro 0.52); and
·
the Exchange Ratio II of 2.33 (two/thirtythree) DutchCo Ordinary Shares (having a nominal value of Euro 0.01 each) for each Mediaset España share (having a nominal value of Euro 0.50).
The Directors point out that the Exchange Ratio II agreed among parties falls within the Overlapping Range.
Each holder of ADRs representing Mediaset shares shall be granted such number of DutchCo ADRs representing DutchCo Ordinary Shares as results from the Exchange Ratio I.
Based on the Exchange Ratios, as stated by the Directors in the Report, if the participation of Mediaset in Mediaset España remained unaltered, and provided that the number treasury shares held at the date of the Report by Mediaset (44,071,568) and Mediaset España (14,269,073) was maintained as
14
treasury shares and therefore such shares were cancelled upon effectiveness of the Merger, DutchCo would issue 1,472,925,998 DutchCo Ordinary Shares, with a nominal value of Euro 0.01 per share,
resulting in a total nominal value of Euro 0.01 each, resulting in a total nominal value of Euro 14,729,259.98. The exact amount of the share capital increase will depend,
inter alia
, on the number of treasury shares held by Mediaset and Mediaset España at the Merger Effective Date.
8.
WORK PERFORMED
For the purposes of our engagement, we reviewed critically the Report of the Directors of Mediaset and the additional documents relating to the Merger, as well as the working drafts made available to us in the weeks preceding the date of preparation of the various final documents.
The Merger Plan provides that, for the purpose of the Merger, the financial statements of Mediaset as of 31 December 2018 (approved by Mediaset shareholders in general meeting on 18 April 2019), the financial statements of Mediaset España as of 31 December 2018 (approved by Mediaset España shareholders in general meeting on 10 April 2019), and the financial statements of DutchCo as of 31 December 2018 (approved by DutchCo shareholders in general meeting on 17 April 2019) shall represent the merger balance sheets based on the applicable legislation. The aforementioned financial statements were audited by the respective auditors, belonging to the Deloitte & Touche network, who issued unqualified opinions thereon.
Considering that the DCF valuation method, used by the Directors and illustrated in paragraph 5.2 (iii) above, takes as a basis the Companies’ consolidated financial statements as of 31 December 2018, we met the Mediaset Group auditor, Deloitte & Touche SpA, to discuss the key audit matters referred to the Merging Companies.
Moreover, we held interviews of Mediaset management to identify the accounting policies applied and significant events concerning the preparation of the financial statements, and carried out critical analyses of the amounts reported. We collected information, specifically through discussion with
Mediaset management, about the events occurring after the reporting date that might have a significant impact on the determination of the values under analysis.
The above activities on the financial statements were performed to the extent necessary to achieve the purpose of our engagement, as set out in paragraph 3 above.
With reference to the methods used by the Directors to determine the Exchange Ratios, we performed the following activities:
·
we discussed with Mediaset management and the Advisor the overall work performed to identify the criteria for determining the Exchange Ratios and, specifically, the valuation approach and the methodologies adopted, in order to analyse their appropriateness in terms of their being, in the circumstances, reasonable, justified and not arbitrary;
·
we analysed the completeness and consistency of the valuation processes followed by the Directors in the determination of the Exchange Ratios and their application, considering the peculiarities of the Merging Companies;
15
·
we analysed in detail and discussed the reasons of the Directors of Mediaset for choosing the valuation methods adopted for the determination of the Exchange Ratios;
·
we examined the consistency of the inputs used in the valuation process with the sources and documents used, listed in paragraph 4 above;
·
in relation to the method of the discounted free cash flow of Mediaset and Mediaset España, based on projections arising from an extensive number of research reports by financial analysts for the period 2019-2021, with the addition of extrapolations for the period 2022- 2024, we discussed with Mediaset management and the Advisor the criteria used to identify the research, the development of the projections and their reasonableness, without prejudice to the inherent uncertainties and limitations of any forecast. We also obtained copies of the analysts’ research reports and compared a sample of them against the projections prepared by the Directors. Finally, we examined the arithmetical accuracy of the calculations underlying the projections;
·
in relation to the stock prices of Mediaset and Mediaset España shares, listed on the Mercato Telematico Azionario and on the Spanish Stock Exchanges, respectively, we obtained the calculations of the volume weighted average prices for 1 month, 3 months and 6 months prior to 5 June 2019, compared them with the actual historical stock prices and examined the mathematical accuracy of the calculations. We also collected additional information such as, for example, the characteristics of the floating stock, volatility of the stock price and average daily trading volumes;
·
we obtained a list of the target prices for Mediaset and Mediaset España shares, as reported in an extensive number of research reports by financial analysts, and obtained copies of the research reports, against which we compared the target prices;
·
we developed independent sensitivity analyses within the methods adopted by the Directors for the valuation of Mediaset and Mediaset España, for the purpose of examining to what extent results may be affected by changes in valuation assumptions and parameters;
·
we obtained a formal representation from the legal representative of Mediaset about the valuation elements made available to us and to the effect that at the date of this report there are no significant changes that should be made to the metrics of the Transaction or to the other elements considered such as to require adjustments to the valuations prepared by the Directors.
9.
COMMENTS ON THE APPROPRIATENESS OF THE VALUATION METHODS ADOPTED BY THE DIRECTORS TO DETERMINE THE EXCHANGE RATIOS
With reference to our engagement, we wish to point out that the main purpose of the Directors’ decision-making process was to estimate the economic values of the Merging Companies, through the application of consistent criteria in order to obtain comparable values.
The Directors, consistently with the purpose of the valuations performed, gave priority to the principle of consistency of the valuation criteria, required in merger transactions, opting for methodologies suitable to express comparable values for the Companies.
16
The Directors report that, in valuations for the purpose of mergers, the ultimate objective is not to calculate an economic value in absolute terms for each company involved in a transaction, but rather to determine consistent and comparable values for the purpose of determining the Exchange Ratios.
The final determination of the Exchange Ratios by the Directors was (i) 1 DutchCo share for each Mediaset share (Exchange Ratio I) and (ii) 2.33 DutchCo shares for each Mediaset España share (Exchange Ratio II).
On the basis of Exchange Ratio I, on the assumption that Mediaset shareholders will receive one DutchCo Ordinary Share for each Mediaset share, the Board of Directors of Mediaset, in the context of the Merger, analysed the relative valuations of Mediaset and Mediaset España, aimed at determining Exchange Ratio II between Mediaset España shares and DutchCo shares or, equivalently (given Exchange Ratio I), between Mediaset España shares and Mediaset shares.
The Report prepared by the Directors of Mediaset to describe the Merger indicates the methodologies adopted by them, with the support of the Advisor, and the ranges of Exchange Ratio II obtained through the application of the methodologies selected.
In this connection, we set out below our considerations on the appropriateness, in terms of their being reasonable and not arbitrary, of the valuation methods adopted by the Directors to determine the Exchange Ratios, as well as on their correct application.
·
The overall methodological approach adopted by the Directors is in line with valuation practice and prevailing professional techniques. The valuation of the economic capital of Mediaset and Mediaset España was performed by the Board of Directors for the specific purposes of the transaction, using criteria that are commonly accepted and widely shared in professional practice as principal or control methodologies.
·
In applying the selected valuation methodologies the Directors appropriately considered the characteristics and inherent limitations of each, based on the professional, national and international, valuation methodologies normally applied.
·
Mediaset and Mediaset España were valued using a plurality of methods, under an approach widely shared in professional practice because it makes it possible to check the relative values estimated for each entity. In particular, the adoption by the Directors of a plurality of methods enabled them to achieve a considerable coverage in their analysis for the purpose of determining the Exchange Ratios.
·
In the case at hand the Directors decided to use, for Mediaset and Mediaset España, three methods (stock prices analysis, research analyst target prices and DCF) that were given equal prominence, under an approach that did not require the identification of relative importance criteria.
·
The Directors’ decision to adopt for their valuations both market-based criteria (stock prices analysis and research analyst target prices), and analytical criteria (the DCF method) appears to be in line with the best literature. Market-based and analytical methods are indeed those most widely used today, in consideration both of the solidity and consistency of the underlying theory, and of the greater familiarity they enjoy with investors, experts and international observers.
17
·
The valuations developed by the Directors were performed considering Mediaset and Mediaset España as separate, stand-alone entities. They thus reflect the current conditions of Mediaset and Mediaset España without taking into account any potential economic and financial impacts of the Merger, including cost efficiencies and savings. Consequently, according to best practice in such circumstances, any synergies as may be achieved from the Merger, while capable of generating incremental value, do not impact on the definition of the relative values of Mediaset and Mediaset España for the purpose of determining the Exchange Ratios. This choice is appropriate and in line with well-established guidance from the most authoritative business management literature and common practice in transactions of this nature.
·
The method of stock prices analysis identified by the Directors is commonly accepted and used both nationally and internationally and is in line with the approach constantly applied in professional practice, being Mediaset and Mediaset España shares listed on regulated markets. Indeed, stock prices cannot be disregarded as a valuation parameter for listed entities since normally, in an efficient market, stock prices express the value attributed by the market to the shares in questionand consequently provide significant indications on the value of the issuer, because they reflect the information available to analysts and investors, as well as their expectations for the entity’s performance. In this context, an entity’s stock prices are considered significant when the relevant markets are characterised by a high degree of efficiency, the stock is highly liquid and the time horizon is sufficiently long as to neutralise possible exceptional events that may generate short-term fluctuations or speculative tension. We examined the choices made by the Directors, also on the basis of the detailed documents made available by them, and found that they were, in the circumstances, appropriate from a technical perspective and reasonable.
·
In applying the stock prices analysis method to the case at hand the Directors used values recorded over different intervals. In detail, the Directors used time horizons of one month, three months and six months prior to 5 June 2019. Also taking into account the characteristics of the Transaction, the Directors’ decision to use average stock prices for periods preceding the date of the meeting of 7 June 2019 when the Board of Directors approved the start of the Transaction, which therefore were not affected by the announcement of the Transaction, is reasonable and in line with valuation practice.
·
The Directors’ decision to use average stock prices, which minimises the risks arising from significant short-term fluctuations, appears to be in line with the positions of literature on the subject. With reference to the calculation of the average stock prices, the Board of Directors decided to use volume weighted averages, thus attributing greater importance to the prices obtained for larger volumes traded: also this decision therefore appears reasonable.
·
Equity analyst target prices are estimates of the prices that may be obtained in the market over a predefined time horizon, on the occurrence of certain events or on the sharing by other market participants of certain assumptions that are not reflected in the current stock prices. Those estimates are the summary results of the application of several valuation methodologies by a plurality of parties and, from a theoretical perspective, represent an indication of a potential value. This approach can be found in valuation practice, also in connection with mergers, therefore the Directors’ decision to use it is acceptable in the circumstances.
18
·
In the specific circumstances, the Directors decided, with reference to both Mediaset and Mediaset España, specifically to use financial analysts’ reports issued after the publication of full year 2018 results and prior to 17 May 2019, which include those published after the publication of the “Interim Financial Report as at 31 March 2019” of Mediaset and the “First Quarter 2019 Results” of Mediaset España: the Directors’ decision appears reasonable and not arbitrary, as it takes into account the most recent information provided to the market for both entities. Moreover, when identifying the average target prices, the Directors decided not to consider the reports having the highest and lowest EBIT 2020 projections: also in this connection the approach adopted by the Directors appears reasonable and appropriate from a technical perspective.
·
The application of the DCF method is in line with professional technique, as this method is broadly used in international valuation practice and is one of the methods based on prospective cash flows, acknowledged by the most influential literature and generally accepted valuation standards. The Directors developed the DCF method determining the Enterprise Value of Mediaset and Mediaset España by discounting the operating cash flows the two entities are estimated to be able to generate in the future, using as a basis the stand-alone projections developed by research analysts for Mediaset and Mediaset España. The prospective operating cash flows were discounted using discount rates that take into account the financial structure of both entities and the time value of money. The effect of the tax benefit currently enjoyed by Mediaset and Mediaset España was added to the present value of cash flows. The Directors deducted net financial debt from the enterprise value thus determined and made additional adjustments for,
inter alia
, minority interests and investments in associates and in other companies, in order to determine the equity value of Mediaset and Mediaset España. In this context, net financial debt was adjusted also to take into account (i) the Euro 0.31557917 dividend per share paid by Mediaset España on 30 April 2019, and (ii) the amount of Euro 95,532,864.96 relating to the buyback of 14,419,910 shares by Mediaset España. In this respect, the Report briefly illustrates the theoretical characteristics of the valuation method in question, but does not illustrate the choices made for its actual application or the parameters identified and used. We examined the choices made by the Directors, also on the basis of the detailed documents made available by them, and found that they were, in the circumstances, appropriate from a technical perspective and reasonable.
·
With reference to projections of Mediaset and Mediaset España necessary to develop the DCF method, the Directors expressly explained the manner in which those data were prepared, in consideration of the fact that there is no full business plan for Mediaset and Mediaset España available for the purpose of the determination of the Exchange Ratios. In particular, the Directors expressly state that the valuation using the DCF method was based: (i) for the period 2019-2021, on projections derived from an extensive number of equity research reports published by equity analysts after the publication of full year 2018 results and prior to 17 May 2019 (including those published after the publication of the “Interim Financial Report as at 31 March 2019” of Mediaset and the “First Quarter 2019 Results” of Mediaset España), with the exclusion of two equity research reports having the highest and lowest EBIT 2020 projections; (ii) for the period 2022-2024, on extrapolations in line with the long-term expectations that the Italian and Spanish managements have on the businesses. This approach was applied uniformly to Mediaset and to Mediaset España: it was agreed and validated by the respective management, who confirmed that the projections and extrapolations are substantially in line with their respective long-term expectations, and used by the respective boards of directors for
19
resolutions proposed to shareholders. of the adoption of this approach, while not in line with a more common approach which assumes the availability of a full business plan prepared by management and formally approved and endorsed by the board of directors of the entity being valued, appears acceptable and not arbitrary in the circumstances.
·
The sensitivity analyses that we developed to assess the impact of changes in valuation assumptions and in the parameters used within the methodologies adopted by the Directors, as well as our analysis of the accuracy, including the mathematical accuracy, of their application, confirm that the results obtained by the Directors are reasonable and not arbitrary.
·
The Report illustrates additional methodologies providing the reasons why the Directors considered them not relevant in the case at hand, i.e. the comparable companies trading multiples and the precedent transactions multiples. In particular, with reference to those methods, the Directors justified their choice arguing that, although commonly used valuation techniques, they have the limit of being based on sector average ranges rather than on the peculiarities of Mediaset and Mediaset España, which are known to the market and theoretically reflected in their own trading multiples and share prices. In light of the information provided by the Directors in their Report, the decision not to use the above-mentioned methodologies appears, in the specific circumstances, justified and not arbitrary.
·
Based on the ranges resulting from the various methodologies developed, which were given the same relevance, the Directors, on completion of negotiations that usually characterise transactions of this nature, defined the Exchange Ratios that will be proposed to the shareholders at the Shareholders’ Meetings.
·
The ranges identified by the Directors through each methodology for the Exchange Ratio II are summarised in the following chart:
Exchange ratio range
20
·
In detail, having regard to Exchange Ratio I between DutchCo shares and Mediaset shares, determined as 1 to 1, Exchange Ratio II between DutchCo shares and Mediaset España shares substantially corresponds to the median value of the Overlapping Range, i.e. the range in which the Exchange Ratios resulting from a comparison of the various methodologies overlap. The ranges set out above for each methodology were determined by the Directors through the application of +/- 10% to the specific values resulting from each valuation method. The sensitivity analyses we conducted show that Exchange Ratio II is in any case also fully comprised in the range from the lowest (2.28) to the highest (2.43) of the implicit median values in the intervals mentioned above. This represents an additional confirmation of the appropriateness in the circumstances, in terms of their being reasonable and not arbitrary, of the considerations set out in this paragraph.
10
SPECIFIC LIMITATIONS ENCOUNTERED BY THE AUDITOR AND ANY OTHER SIGNIFICANT MATTERS EMERGING DURING THE PERFORMANCE OF THE ENGAGEMENT
(i)
With regard to the difficulties and limitations encountered during the performance of our engagement, we wish to draw attention to the following:
·
Valuations based on methods that use market variables and parameters, such as stock prices analysis and equity analyst target prices, are subject to the performance of financial markets. The performance of Italian and international financial markets has shown a tendency to present significant fluctuations over time, especially in relation to uncertainties of the general economic environment. Stock prices may also be influenced by speculative upward or downward pressure which is wholly unrelated to the economic and financial prospects of the individual entities. The application of market-based methods may therefore result in the identification of values that differ, to a larger or smaller extent, depending on the timing of the valuation. In the case at hand, moreover, Mediaset shares and Mediaset España shares are listed in different regulated markets and, consequently, the respective stock prices may in principle be affected by the peculiarities of the specific market in which they are traded.
·
The valuations carried out by the Board of Directors using the DCF method are based on financial projections developed, in the case at hand, on the basis of research by financial analysts using an approach commented on in paragraph 9 above. In any case it should be noted that forecasts are based on a series of assumptions relating to future events that will not necessarily materialise. It should also be noted that forecast data, by their very nature, contain elements of uncertainty and are subject to changes that may be significant, in the event of changes in the market environment and macroeconomic scenario. It should also be borne in mind that, due to the uncertainty associated with the occurrence of any future event, both in terms of occurrence and of the amount and timing of occurrence, variances between actual and forecast data may be significant, even if the events forecast in the assumptions used actually materialise.
·
The prospective financial information consisting in the cash flows on which the application of the DCF method is based has been derived from a consensus of financial analysts defined on the basis of several observations, as pointed out above. Consistency between market data and the information base necessary to develop the
21
valuation method in question is therefore implicit in the manner in which the future cash flows are calculated. However, given the approach mentioned above, no details are available of the financial and performance figures used for the purpose of the valuation, because they are essentially summary quantitative indications on specific metrics which, while validated by management of the entities in their overall magnitude, cannot be disaggregated into specific components.
·
During the performance of our activities it was not possible for us to obtain the reports prepared by Grant Thornton S.L.P., the expert appointed in Spain pursuant to Article 34 of the LME, and by Deloitte Accountants B.V., the expert appointed in the Netherlands pursuant to Sections 2:328, paragraph I, and 2:333g of the Dutch Civil Code. Anyhow, we were able to discuss and broaden the work performed by them and their conclusions in separate meetings.
(ii)
We also draw the attention of the addressees of this report to the following significant matters:
·
The Report of the Directors does not illustrate directly details of the different parameters used to develop the various valuation methods adopted, nor the unit share prices used to determine the Exchange Ratios. In any case, those details were made available to us by the Directors in the documents we obtained and used in the course of our work, listed in paragraph 4 above, and are summarized in the Appendices to the Report.
·
The Directors report that Mediaset, Mediaset España and DutchCo are related parties, because Mediaset España and DutchCo are subsidiaries of Mediaset, but the Merger transaction benefits from the exemption set forth in Article 14, paragraph 2, of the Regulation approved by Consob with Resolution No. 17221 dated 12 March 2010 and Article 7, letter d), of the “
Procedures for transactions with related parties
” adopted by Mediaset. By virtue of that exemption, the Directors report that Mediaset will not publish the relevant information document (
documento informativo
) pursuant to Article 5 of the Regulation: we also note that by virtue of that exemption, the Transaction was not submitted for prior approval to the committee of independent directors set out pursuant to the above-mentioned procedures. Moreover, as reported by the Directors, the Board of Directors of Mediaset España entrusted the analysis of the envisaged Transaction, the corresponding decision-making process and the preparation of the Merger Plan to an internal committee (the “Merger Committee”) composed by four members: three independent directors and one “other external” member of the Board of Directors of Mediaset España. Along the same lines, the proprietary and the executive directors of Mediaset España refrained from participating in the discussions, negotiation and voting on the Merger Plan, which was therefore approved with the votes cast by the “other external” and independent directors of the Board of Directors of Mediaset España.
·
The Directors report that a litigation between Mediaset and Vivendi S.A. is ongoing following the non-completion of a transaction involving the Mediaset Premium project and that should the outcome of the litigation be favourable to Mediaset, Mediaset may be recognized some monetary damage repair. The Directors report that conservatively,
22
they did not consider any proceeds from the litigation for the purpose of determining the Exchange Ratios.
·
The Report also states that, in general, no evolution regarding any specific ongoing or potential litigations for both Mediaset and Mediaset España has been considered, given the uncertainty of their outcomes and timings
·
Management confirmed that Mediaset and Mediaset España have not issued any financial instruments entitling holders to subscribe newly issued shares (convertible bonds and/or bonds
cum warrant
and/or
warrants
and/or other convertible financial instruments) and that the share-based incentive plans currently in place do not entail any capital increase, including through a bonus issue, servicing those plans.
·
We point out that the Directors state that Mediaset shareholders are entitled to exercise their withdrawal rights pursuant to Article 2437, paragraph 1, of the Civil Code and Article 5 of Legislative Decree No. 108/2008. Therefore, Mediaset shareholders who do not participate in the adoption of the resolution on the Merger are entitled to receive cash consideration for their shares at a redemption price based on the arithmetic average of the daily closing prices of Mediaset shares during the six-month period prior to the date of publication of the notice for convening the Mediaset Extraordinary Meeting, pursuant to Article 2437-ter, paragraph 3, of the Civil Code (8 June 2019). Based on the above, the Directors of Mediaset report that the redemption price of Mediaset shares payable to withdrawing shareholders will be equal to Euro 2.77.
·
The Directors also report that the completion of the Transaction is subject to a series of conditions precedent set out in detail in paragraph 1.2 of the Report. In particular, it should be noted that the Transaction is conditional on the circumstance that the amount of cash, if any, to be paid by Mediaset and Mediaset España to
(i)
Mediaset and Mediaset España shareholders exercising their withdrawal rights under Article 2437-quater of the Civil Code and under Article 62 of the LME and other applicable Spanish regulations and/or (ii) creditors of Mediaset and Mediaset España exercising their right of opposition to the Merger according to applicable law shall not exceed the amount of Euro 180 million.
·
Any considerations about the decisions taken by the Directors on the structure of the Transaction, the related filings (including legal and tax filings), the timeframe, start and execution of the Transaction are out of the scope of our engagement.
·
The Report of the Directors does not mention any time restrictions on the disposal of the DutchCo shares allotted in exchange to Mediaset and Mediaset España shareholders, with the consequent full ability of the latter, following delivery of the DutchCo shares, to trade them in the market.
23
11
CONCLUSION
Based on the documents we examined and the procedures described above, having regard to the nature and scope of our engagement as illustrated herein, as well as the matters reported in paragraphs 9 and 10 above, we believe that the valuation methods adopted by the Directors of Mediaset SpA are appropriate, in the circumstances, in terms of their being reasonable and not arbitrary and that they were applied correctly for the purpose of determining the Exchange Ratios equal to:
·
1 ordinary share in Mediaset Investment NV for each share in Mediaset SpA;
·
2.33 ordinary shares in Mediaset Investment NV for each share in Mediaset España Comunicación SA.
Milan, 18 June 2019
PricewaterhouseCoopers SpA
Signed by
Francesco Ferrara
(Partner)
This report has been translated into English from the Italian original solely for the convenience of international readers
24
Exhibit 99.16
Mediaset España
Comunicación, S.A.
Independent Expert Report relating to the tripartite Common Cross-Border Merger Plan for the merger by absorption of Mediaset, S.p.A. and Mediaset España Comunicación, S.A. (absorbed companies) by Mediaset Investment, N.V. (absorbing company) in relation to articles 34, 54 et. seq. of Law 3/2009 of 3 April 2009 on structural modifications to business companies
Table of Contents
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Content
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1.
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Introduction
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3
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2.
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Description of the analysed transaction
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4
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3.
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Valuation methodologies to determine the exchange ratio
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10
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4.
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Scope and procedures
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11
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5.
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Particular difficulties and relevant aspects of our work
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13
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6.
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Conclusions
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15
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Appendix I: Common Cross-Border Merger Plan
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16
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Appendix II: Directors’ Report
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17
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This document is a non-binding and unofficial translation merely for informative purposes of the corresponding document prepared in a foreign language. In case of divergence, the version of the document prepared in its original language shall prevail.
1
To the Boards of Directors of Mediaset España Comunicación, S.A. (“Mediaset España”, “MSE” or the “absorbed company”), Mediaset, S.p.A. (“Mediaset”, “MSI” or the “absorbed company”), and Mediaset Investment, N.V. (DutchCo or the “Absorbing Company”).
Further to our appointment as independent expert by Ms Carmen de Grado Sanz, Commercial Registrar number XVII of Madrid and its province, to issue the independent expert report, in relation to the provisions of 34, 54 et. seq. of Law 3/2009 of 3 April 2009 on structural modifications to business companies (“LME”), and in accordance with articles 338, 340 and 349 of the Commercial Registry Regulations (the “Regulations”), we issue this report (the “Report”), with the contents provided in paragraph 3 of article 34 of LME.
2
1.
Introduction
For the purposes envisaged in articles 34, 54 et seq. of the LME, and articles 338, 340 and 349 of the Regulations, and according to our appointment by Ms Carmen de Grado Sanz, Commercial Registrar number XVII of Madrid and its province, corresponding to case file 412/19, we issue this independent expert report on the tripartite Common Cross-Border Merger Plan (the “Common Cross-Border Merger Plan”) for the merger by absorption of Mediaset and Mediaset España by DutchCo (the “Companies” or the “Merging Companies”), approved by their respective Boards of Directors on 7 June 2019.
3
2.
Description of the
analysed transaction
Identification of the Participating Companies
Absorbing Company:
Mediaset Investment, N.V
.
(“DutchCo”)
, is a public limited company (
Naamloze vennootschap
) incorporated under the laws of the Netherlands, with registered office in Amsterdam (the Netherlands) and headquarters on Viale Europa 46, 20093 Cologno Monzese (Italy), registered with the Dutch Commercial register (
Kamer van Koophandel
) under number 70347379 (“DutchCo” or the “Absorbing Company”). The share capital of DutchCo is of 90,000.00 euros, fully paid up by Mediaset, divided into 90,000 shares each with a nominal value of 1 (one) euro, in relation to which no receipt of deposit has been issued with the cooperation of DutchCo. On the Merger Effective Date, DutchCo will change its name to MediaForEurope N.V (“MFE”). As a result of the merger, DutchCo will keep its legal form and current registered office.
absorbed companies that will cease to exist after the Merger:
Mediaset, S.p.A. (“Mediaset” or “MSI”)
is a listed public limited company (
società per azioni
) incorporated under the laws of Italy, with registered office at Via Paleocapa 3, 20121 Milan (Italy), and registered with the Milan Commercial Registry (
Registro delle Imprese di Milano
) under number 09032310154. The share capital of Mediaset is 614,238,333.38 euros, fully subscribed, divided into 1,181,227,564 shares each with a nominal value of 0.52 euros, listed on the
Mercato Telematico Azionario
.
Mediaset España Comunicación, S.A. (“Mediaset España” or “MSE”)
is a listed public limited company incorporated under the laws of Spain, with registered office at Carretera de Fuencarral a Alcobendas 4, 28049 Madrid (Spain), registered with the Commercial Registry of Madrid under volume 33,442, page 122, section 8, sheet M-93.306, and holder of Spanish tax identification number A-79.075.438. The share capital of Mediaset España is of 163,717,608.00 euros, fully subscribed, divided into 327,435,216 shares each with a nominal value of 0.50 euros, listed on the
Sistema de Interconexión Bursátil Español
.
Description of the transaction
The Common Cross-Border Merger Plan has been prepared by the boards of directors of the Companies (the “Boards of Directors”) for purposes of the envisaged tripartite cross-border merger of Mediaset and Mediaset España with and into DutchCo, in accordance with the Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to certain aspects of company law, the provisions of which relating to cross-border mergers of corporate apply (i) for the purposes of Dutch law under title 2.7 of the Dutch Civil Code, (ii) for the purpose of Italian law under Legislative Degree no. 108 of 30 May 2008 (“Legislative Decree 108”), and (iii) for the purposes of Spanish law under chapter II of title II of LME.
By virtue of the abovementioned tripartite crossborder merger, Mediaset and Mediaset España will be merged with and into DutchCo and will cease to exist as independent companies, and DutchCo will acquire all the assets and assume all liabilities and other legal relationships of Mediaset and Mediaset España (the “Merger”).
The companies participating in the Merger are part of the Mediaset group. In particular, (i) DutchCo is a wholly owned subsidiary of Mediaset, and (ii) Mediaset España is a direct subsidiary of Mediaset, which owns approximately 51.63% of the share capital of Mediaset España (and 53.98% of the voting rights, considering the treasury shares of Mediaset España).
The Merger is part of a broader transaction (the “Transaction”), which also envisages the following activities designed to maintain the operating activities and business of Mediaset and Mediaset España in Italy and Spain, respectively, and which will be completed before the Merger takes place:
·
the incorporation of an Italian wholly-owned direct subsidiary of Mediaset (
NewCo Italia
);
·
the transfer by Mediaset to NewCo Italia, by means of a contribution in-kind regulated by the Italian civil code, of substantially all of its business and certain shareholdings (the
Mediaset Reorganization
); and
·
the segregation (
segregación
) by Mediaset España, in accordance with Title III of the LME, of all its assets and liabilities, including its shareholdings in other companies, to Grupo Audiovisual Mediaset España Comunicación, S.A. (
GA Mediaset
) — a Spanish wholly-owned direct subsidiary of Mediaset
4
España — in exchange for the allotment to Mediaset España of all the new shares in GA Mediaset that will be issued on the occasion of its share capital increase triggered by the segregation (the
Mediaset España Segregation
and, together with the Mediaset Reorganization,
Preliminary Reorganizations
).
Therefore, before completion of the Merger, Mediaset and Mediaset España will not have any business activities of their own.
The Preliminary Reorganisations, the completion of which is a condition precedent of the Merger, will have no impact on the Exchange Ratios.
Simultaneously to the Merger, all of Mediaset España’s assets and liabilities transferred to DutchCo —namely the GA Mediaset shares— will be allocated to a branch of DutchCo located in Spain and registered with the Commercial Register of Madrid (the “Spanish Branch”). The Spanish Branch is required in order to apply the tax neutrality regime foreseen under Spanish law to the Merge.
Subject to the satisfaction or waiver (as the case may be) of the conditions precedent and the completion of the pre-Merger formalities and steps, the Merger will become effective on the Merger Effective Date, i.e. at 00.00 am CET on the day following the day on which the Merger Deed is executed in the Netherlands (the “Merger Effective Date”). The Dutch Commercial register will subsequently inform the Milan commercial register and the Madrid commercial register of the Merger Effective Date.
Upon completion of the Merger, and based on the Exchange Ratios:
·
each Mediaset shareholder, including the depositary bank under the Mediaset American Depositary Receipts (“
ADRs
”) program, shall be granted 1 (one) DutchCo Ordinary Share for each share held in Mediaset as per Exchange Ratio I;
·
the holders of the corresponding ADRs representing Mediaset shares will be granted such number of ADRs representing DutchCo Ordinary Shares as per Exchange Ratio I and
·
each Mediaset España shareholder shall be granted 2.33 DutchCo Ordinary Shares for each share held in Mediaset España as per Exchange Ratio II..
Without prejudice to the withdrawal rights, and aside from the DutchCo Ordinary Shares given in exchange for shares in Mediaset and Mediaset España, DutchCo, Mediaset and Mediaset España will not pay any additional consideration in the form of cash or any other, to shareholders of Mediaset and Mediaset España in relation to the Merger.
The Mediaset shares are currently listed on the
Mercato Telematico Azionario
, which is organised and managed by Borsa Italiana S.p.A., (the “
Mercato Telematico Azionario
”) and the Mediaset España shares are currently listed on the Barcelona, Bilbao, Madrid and Valencia stock markets, which are organised and managed by the stock market management companies (the “Spanish Stock Markets”) and are traded through the Spanish Stock Markets’ Interconnection System (the “SIBE”), organised and managed by Sociedad de Bolsas, S.A.U.
The completion of the Merger is subject,
inter alia
, to the admission to trading of the DutchCo Ordinary Shares on the Mercato Telematico Azionario. Likewise, DutchCo will request the admission to trading of the DutchCo Ordinary Shares on the Spanish Stock Markets for trading through the SIBE.
The listing and trading of the DutchCo Ordinary Shares on the
Mercato Telematico Azionario
and the Stock
Markets (through the SIBE) is planned to take place on the Merger Effective Date or a date near to it.
In order that the DutchCo Ordinary Shares are admitted to trading on the
Mercato Telematico Azionario
, DutchCo will submit the corresponding requests to Borsa Italiana S.p.A.
In order that the DutchCo Ordinary Shares are admitted to listing on the Spanish Stock Markets for trading on the SIBE, DutchCo will submit the corresponding requests to the companies managing the Spanish Stock Markets and to the Spanish Securities Market Commission (the “CNMV”), respectively.
Likewise, DutchCo will prepare a prospectus to submit to the Dutch regulator (
Autoriteit Financiële Markten
— the “AFM”); the prospectus will be passported to Italy and Spain, following its approval by the AFM under applicable regulations.
Therefore, once the Transaction is completed, all business activities, interests in other companies and other assets and liabilities belonging to Mediaset and Mediaset España will be consolidated into (or controlled by, as the case may be) a single legal entity (DutchCo), whose ordinary shares will be admitted to listing and will be traded on the
Mercato Telematico Azionario
and admitted to listing on the Spanish Stock Markets for trading through the SIBE.
5
Purpose of the transaction
According to the Common Cross-Border Merger Plan and the Mediaset España directors’ report (the “Directors’ Report”), from a strategic, operational and industrial perspective, the Transaction is intended to create a pan-European media and entertainment group, a leader in local markets, with a larger scale and a more balanced and diversified business structure geographically and commercially.
The creation of a new holding company in the Netherlands represents the perfect and neutral ground for such an ambitious project (as proven by other companies that have adopted the same structure) and constitutes an important step in the development of a fully integrated media powerhouse, which would become a leader in linear and non-linear entertainment, leveraging tech and data to compete on an equal footing in the evolving media space.
The Transaction seeks to create a pan-European group that will be one of the largest players in Europe, leading in its benchmark markets and a scale that allows it to compete better and potentially to broaden its reach through greater expansion into Europe. Combined sustainable capital structure and strong cash flow generation profile provide MFE with the required firepower to play a pivotal role in the context of a possible future consolidation scenario in the European video media industry.
Bases of the Merger
The Merger will take place if approved by the respective General Shareholders Meetings as a merger by absorption where Mediaset and Mediaset España will be merged with and into DutchCo and will cease to exist as independent companies, and DutchCo will acquire all the assets and assume all liabilities and legal relationships of Mediaset and Mediaset España.
The completion of the Merger by executing Merger Deed is subject to fulfilment of the following conditions precedent, without prejudice to the fact that Mediaset and Mediaset España may jointly waive the condition set out under (iv) and (v) below:
i.
the Preliminary Reorganizations shall have been consummated, for which purposes, among others, the SEAD shall have authorized the transfer of the audiovisual media licenses currently held by Mediaset España to GA Mediaset.
ii.
the DutchCo Ordinary Shares, which are to be issued and allotted to Mediaset and Mediaset España shareholders upon effectiveness of the Merger, shall have been admitted to listing on the Mercato Telematico Azionario and the decision to admit to trading shall have been released. The admission will be conditional upon the obtaining of the necessary authorizations by the AFM and/or other competent authorities.
iii.
no governmental entity of a competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any order which prohibits the consummation of the Transaction or makes it void or extremely burdensome.
iv.
the amount of cash, if any, to be paid by Mediaset and Mediaset España to (a) Mediaset and Mediaset España shareholders exercising their withdrawal right in relation to the Merger under Article 2437-
quater
of the Italian civil code and under Article 62 of the LME and other applicable Spanish regulations, respectively, and/or to (b) creditors of Mediaset and of Mediaset España exercising their right of opposition to the Merger according to applicable law (or alternatively, to financial entities for purposes of sufficiently guaranteeing the credits of such creditors of Mediaset and of Mediaset España) (
Amount of Withdrawal Rights and Oppositions
), shall not exceed in the aggregate the amount of Euro 180 million, provided, however, that, for clarity, the Amount of Withdrawal Rights and Oppositions will be calculated net of the amount of cash payable by Mediaset shareholders or third parties for the purchase of Mediaset shares pursuant to Article 2437-
quater
of the Italian civil code, and of the amount of cash payable (or paid) by third parties pursuant to any purchase or commitments to purchase the withdrawn Mediaset and/or Mediaset España shares; and
v.
there shall not have been nor occurred at any time before the date of execution of the Merger Deed, at a national or international level, (a) any extraordinary event or circumstance involving changes in the
6
legal, political, economic, financial, currency exchange or in the capital markets conditions or any escalation or worsening of any of the same or (b) any events or circumstances that, individually or taken together, have had, or are reasonably likely to have, a material adverse effect on the legal situation, on the business, results of operations or on the asset, economic or financial conditions (whether actual or prospective) of Mediaset and/or of Mediaset España and/or the market value of the Mediaset and/or Mediaset España shares and/or that could otherwise materially and negatively affect the Transaction (
MAC Clause
)
In addition to the fulfilment of the foregoing conditions precedent, before the Merger Effective Date:
a.
Deloitte shall have delivered to DutchCo a report, in accordance with applicable legislation, ruling that the Exchange Ratios are fair.
b.
PwC shall have delivered to Mediaset a report, in accordance with applicable legislation, ruling that the Exchange Ratios are fair.
c.
Grant Thornton shall have delivered to Mediaset España a report, in accordance with applicable legislation, ruling that Exchange Ratio II is fair.
d.
a declaration shall have been issued by the local district Court in Amsterdam (the Netherlands) (and received by DutchCo) stating that no creditor has opposed to the Merger pursuant to Section 2:316 of the DCC or, in case of the opposition pursuant to Section 2:316 of the DCC, such declaration shall have been received within one month after the withdrawal or the discharge of the opposition has become enforceable.
e.
the 60-day period following the date on which the resolution of the Mediaset Extraordinary Meeting has been registered with the Companies’ Register of Milan shall have expired and no creditor of Mediaset whose claims precede the registration of the present Common Cross-Border Merger Plan shall have opposed the Merger pursuant to Article 2503 of the Italian civil code or, should the Merger be opposed, (i) such opposition shall have been waived, settled or rejected, and/or (ii) Mediaset shall have deposited the necessary amounts to satisfy its opposing creditors with a bank, and/or (iii) the competent Court — provided that the risk of prejudice to creditors is deemed ungrounded or that adequate guarantees have been given by Mediaset in order to satisfy its creditors — shall have nonetheless authorized the Merger despite the opposition, pursuant to Article 2503 of the Italian civil code in conjunction with Article 2445 of the Italian civil code.
f.
the one-month period following the publication of the resolution of the Mediaset España General Meeting approving the Merger shall have expired and no creditor of Mediaset España — whose unsecured credits have arisen before the publication of the Common Cross-Border Merger Plan on the Mediaset España corporate website and are not due and payable before such date — shall have opposed the Merger in accordance with Article 44 of the LME or, should the Merger be opposed (i) such opposition shall have been waived, settled or rejected, and/or (ii) Mediaset España shall have (directly or through a credit institution) sufficiently secured such credits; and
g.
all the pre-merger formalities shall have been completed, including the delivery (i) by the Italian public notary selected by Mediaset and (ii) by the Commercial Register of Madrid to the Dutch civil law notary of the respective certificates conclusively attesting to the proper completion of the pre-merger acts and formalities within the meaning of Article 127 of the Directive.
Merger balance sheets and accounting
As detailed in paragraph 13 of the Common Cross-Border Merger Plan, the conditions of the Merger have been established based on:
·
The annual financial statements of Mediaset as at 31 December 2018, as approved by the shareholders’ meeting of Mediaset on 18 April 2019, is the merger balance sheet (
situazione patrimoniale
) for purposes of Article 2501-
quater
, paragraph 1, of the Italian civil code (the
Mediaset Balance Sheet
).
·
The audited annual financial statements of Mediaset España as at 31 December 2018, as approved by the shareholders’ meeting of Mediaset España on 10 April 2019, include the merger balance sheet (
balance de fusión
) for purposes of Article 36 of the LME (the
Mediaset España Balance Sheet
). The Mediaset España Balance Sheet, together with the rest of the documents comprising the Mediaset España annual financial statements as at 31 December 2018, has also been used for purposes of establishing the conditions of the Merger pursuant to Article 31.10 of the LME.
·
The financial statements of DutchCo as at 31 December 2018, as adopted by the general meeting of shareholders of DutchCo on 17 April 2019 is the merger balance sheet for purposes of Section 2:314
7
of the DCC (the
DutchCo Balance Sheet
and, together with the Mediaset Balance Sheet and the Mediaset España Balance Sheet, the
Merger Balance Sheets
).
Any material changes in the assets or liabilities arising between the date of this Common Cross-Border Merger Plan and the date(s) of the shareholders meetings of the Merging Companies that have to decide on the Merger, shall be reported to the relevant shareholders meeting and to the boards of directors of the other Merging Companies in accordance with the provisions of Article 39.3 of the LME and Article 2501-
quinquies
, paragraph 3, of the Italian civil code.
Furthermore, the assets and liabilities of Mediaset and Mediaset España (and as regards Mediaset España, for purposes of Article 31.9ª LME) will be recognized by DutchCo in its individual accounts for their net accounting value according to applicable accounting consolidation rules and within the limits of the carrying amounts detailed in the consolidated financial statements of Mediaset prior to the execution of the Transaction. Following the Merger, DutchCo will prepare its consolidated financial statements and its company only financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the DCC
As the Merger is accounted on the basis of the net accounting value, there will be no goodwill impact other than that the amount of goodwill recorded in the books of Mediaset and Mediaset España will be equally represented in the books of DutchCo.
As a result of the Merger, the freely distributable reserves (
vrij uitkeerbare reservesk
) of DutchCo shall increase in the amount equal to the difference between the value of: (A) the assets, liabilities and other legal relationships of Mediaset and Mediaset España being acquired and assumed by DutchCo on the occasion of the Merger and (B) the sum of the nominal value of all DutchCo Ordinary Shares, equal to Euro 0.01, for each DutchCo Ordinary Share in issue immediately after the Merger becoming effective, and the reserves DutchCo must maintain pursuant to Dutch law as of the Merger Effective Date.
Exchange Ratios
Exchange Ratio I: each Mediaset shareholder, including the relevant depositary bank under the Mediaset’s ADR program, will receive 1 (one) DutchCo Ordinary Share (with a nominal value of 0.01 euros) for each share held in Mediaset (with a nominal value of 0.52 euros). Each holder of ADRs representing Mediaset shares will receive such number of ADRs representing DutchCo Ordinary Shares as results from the Exchange Ratio I.
Exchange Ratio II: Each Mediaset España shareholder (other than Mediaset, as the shares held in Mediaset España will be cancelled by operation of law pursuant to section 2:325(4) of the Dutch Civil Code) will receive 2.33 DutchCo Ordinary Shares for each share held in Mediaset España (with a nominal value of 0.50 euros).
No fractional DutchCo Ordinary Shares shall be allotted to any holders of shares of the absorbed companies. Those shareholders who hold a number of Mediaset España shares such as to enable them to receive, in accordance with the Exchange Ratio II, a non-whole number of DutchCo Ordinary Shares, shall receive such whole number of DutchCo Ordinary Shares which is immediately below said non-whole number. The Mediaset España shares (or fractions thereof) in excess of those required, pursuant to Exchange Ratio II, to receive a whole number of DutchCo Ordinary Shares (i.e. Mediaset España shares or any fractions thereof representing fractional entitlements to DutchCo Ordinary Shares) shall be transferred on behalf of the Mediaset España shareholders, through their depositaries, to an agent appointed for these purposes by Mediaset España (the “
Fractions Agent
”).
The Fractions Agent, acting at its own risk and for its own account, shall pay in cash to these shareholders, in consideration for each of the Mediaset España shares (or any fractions thereof) so transferred, their market value. The Fractions Agent will, in turn, exchange the Mediaset España shares (and any fractions thereof) arising from the aggregation of such fractions so purchased and exchange them, in its own name and on its own behalf, for the relevant whole number of DutchCo Ordinary Shares resulting from the Exchange Ratio II, with any remainder fractional entitlements to DutchCo Ordinary Shares corresponding to the Mediaset España shares (or fractions thereof) held by the Fractions Agent being disregarded.
The treasury shares held by Mediaset and Mediaset España as at the Merger Effective Date, if any, will not be exchanged and will be cancelled pursuant to Article 2504-
ter
of the Italian civil code and Article 26 of the LME, respectively, and with section 2:235 (5) of the DCC.
DutchCo share capital increase
Based upon the Exchange Ratios, if the participation of Mediaset in Mediaset España remained unaltered, and provided that the number of treasury shares held at the date of the Common Cross-Border Merger Plan
8
by Mediaset (No. 44,071,568) and by Mediaset España (No. 14,269,073) was maintained on the Merger Effective Date and therefore such shares were cancelled upon effectiveness of the Merger, DutchCo would issue No. 1,472,925,998 DutchCo Ordinary Shares, with a nominal value of Euro 0.01 per share, resulting in a total nominal value of Euro 14,729,259.98. The exact amount of the share capital increase will depend on the treasury shares of Mediaset and Mediaset España, including those acquired as result of the exercise of any withdrawal rights and the shareholding of either of the absorbed companies in the other absorbed company, at the Merger Effective Date.
Aspects to consider upon exchange
On the Merger Effective Date, each share of Mediaset and Mediaset España will be cancelled by operation of law and will thereafter represent only the right to receive such number of DutchCo Ordinary Shares as results from the applicable Exchange Ratio. DutchCo shall increase its share capital and allot the necessary DutchCo Ordinary Shares to shareholders of Mediaset and Mediaset España.
The treasury shares held by Mediaset and Mediaset España as at the Merger Effective Date, if any, will not be exchanged and will be cancelled pursuant to Article 2504-ter of the Italian civil code and Article 26 of the LME, respectively, and with section 2:235 (5) of the DCC.
Likewise, any shares in either of the absorbed companies held by the other absorbed company will not be exchanged, but will be cancelled on the Merger Effective Date pursuant to Article 2504-
ter
of the Italian Civil Code and article 26 of the LME, respectively, as well as pursuant to section 2:235 (5) of the DCC.
The 90,000 DutchCo shares, with a nominal value of Euro 1.00 each, currently held by Mediaset, and any additional DutchCo shares issued to or otherwise acquired by Mediaset after the date of the Common Cross-Border Merger Plan that are held by Mediaset at the Merger Effective Date, in part will be cancelled, in accordance with section 2:325, paragraph 3, of the DCC, and in part will be split (and will have a nominal value of Euro 0.01 each) and will become DutchCo Ordinary Shares held as treasury shares.
The Merger will not trigger any withdrawal rights for the shareholders of DutchCo. The Mediaset España shareholders who vote against the Merger in the Mediaset España General Shareholders Meeting (“Withdrawing ME Shareholders”) will be entitled to exercise a withdrawal right (see paragraph 15 of the Draft Common Cross-Border Merger Plan attached as Appendix I), pursuant to article 62 of the LME. The Mediaset España shareholders may exercise their withdrawal right within one month of the publication in the Official Gazette of the Commercial Register (BORME) of the approval of the Merger by the Mediaset España General Meeting, by means of a written notice to the relevant depositaries with which the Mediaset España Withdrawing Shareholders have their shares deposited.
The resolution to enter into the Merger does not require the prior approval of any third party. However, Mediaset has started the process to obtain consent or waivers, as the case may be, in relation to the Merger from lenders participating in certain of its loan agreements. Although Mediaset is confident to be able to obtain any consent or waiver that may be required in relation to financing agreements, there is no guarantee that all necessary consents or waivers will be given, or that they will be given in a timely manner, and, as a consequence, early repayment of certain financing may be required prior to the respective scheduled maturity. In any case, as at the date of the Common Cross-Border Merger Plan, Mediaset has the financial resources necessary to proceed with such potential repayments.
Approval of the Merger
The Common Cross-Border Merger Plan was approved by the Boards of Directors of the absorbed companies and the absorbing company on 7 June 2019. The Merger must be subsequently approved by the General Meeting of Shareholders of the participating companies according to current legislation.
Paragraph 17 of the Cross-Border Merger Plan details a number of conditions precedent, which are described in the Bases of the Merger section of this report.
9
3.
Valuation methodologies
to determine the
exchange ratio
As stated in the Directors’ Report, Exchange Ratio II has been calculated by using generally accepted methodologies that are more fully explained and developed in the Directors’ Report issued by Mediaset España’s board of directors. We have become aware, based on the information with which we have been provided, of the methodologies used to determine Exchange Ratio II.
The main methodologies applied for Mediaset and Mediaset España to determine the exchange ratio include discounted cash flows (“DCF”) and 6-month, 3-month and 1-month historical share prices. Likewise, as disclosed in the Directors’ Report alternative valuation methodologies have been used to verify that Exchange Ratio II agreed is consistent with the ranges resulting from these alternative valuation methodologies.
The following table shows a summary of the results of each of the methodologies described to obtain Exchange Ratio II:
|
Methodology
|
|
Range of the Exchange Ratio II
|
|
(i)
Discounted Cash Flow
|
|
2.27x- 2.50x
|
|
(ii)
6-month historical share prices
|
|
2.28x
|
|
(ii)
3-month historical share prices
|
|
2.34x
|
|
(ii)
1-month historical share prices
|
|
2.43x
|
We should stress that the directors of the absorbed companies engaged their respective financial advisors to determine the Exchange Ratio II provided in the Directors’ Report and the Cross-border Common Merger Plan:
·
J.P. Morgan Securities plc., acting as financial advisor to Mediaset España, has provided to the board of directors of Mediaset España an opinion, as of 7 June 2019, on the basis of and subject to the factors, assumptions, limitations and procedures specified therein, on the fairness from a financial point of view, to the holders of ordinary shares in the capital of Mediaset España (other than Mediaset and its affiliates), of the Exchange Ratio II in the proposed Merger.
·
Citibank, acting as financial advisor to Mediaset, has provided to the board of directors of Mediaset and to the board of directors of DutchCo an opinion, as of 7 June 2019, on the basis of and subject to the factors, assumptions, limitations and procedures specified therein, on the fairness from a financial point of view, to the holders of shares in the capital of Mediaset, of the Exchange Ratio II (which —as indicated above— is predicated on Exchange Ratio I) in the proposed Merger.
The Fairness Opinions do not constitute a recommendation as to how any director or shareholder should vote or act with respect to the Merger or any other matter and does not give rights to any third parties other than the relevant client.
Based on the conclusions of the Fairness Opinions, the Exchange Ratios proposed are fair, from a financial point of view, based on the factors, assumptions and limitations contained therein.
We have analysed and assessed the results of applying the various valuation methodologies used in the Cross-border Common Merger Plan and the Directors’ Report, together with the rest of the information provided. Likewise, we have considered the same valuation methodologies for the absorbed companies with a consistent approach and, as a result of our analysis, we have reached scenarios for the exchange ratio which comprise that proposed by the directors of the company.
10
4.
Scope and procedures
Scope
The scope of our professional engagement, as established in paragraph 1 above, is limited as per article 34, 54 et. seq. of the LME and articles 338, 340 and 349 of the Commercial Registry Regulations, as professionals in charge of preparing the independent expert report on the Cross-border Common Merger Plan detailed in paragraph 2 above.
Grant Thornton accepts no responsibility for the use of this Report outside of the foregoing context.
Work procedures
We have performed our work by using the following procedures:
·
Sourcing and review of the following information:
·
Application for the appointment of an independent expert in relation to the Transaction submitted to the Madrid Commercial Registry by Mediaset España.
·
Cross-border Common Merger Plan approved by the boards of directors of Mediaset España, Mediaset and DutchCo.
·
Directors’ Report of Mediaset España.
·
Financial projections of Mediaset España and Mediaset, validated by their management, which combine market expectations (according to the group of research analysts who cover both stocks and having released research reports following the publication of Q1 2019 results) and the internal long-term perspective of their respective businesses.
·
Research reports on Mediaset España and Mediaset
·
Individual and consolidated audited annual financial statements of Mediaset España and Mediaset as of 31 December 2018 and 2017.
·
Consolidated condensed interim financial statements as of June 2018 of Mediaset España and Mediaset, reviewed by the auditor.
·
Financial statements published by Mediaset España and Mediaset as of 31 March 2019.
·
Public information on listed media companies with similar features to Mediaset España.
·
Minutes of the meetings of the Board of Directors and Shareholders Meeting of Mediaset España held in 2018 and 2019.
·
Relevant facts sent to the Spanish Securities Market Commission (Mediaset España) and relevant facts sent to the Italian stock market (Mediaset) during 2018 and 2019.
·
Fairness Opinion by J.P. Morgan.
·
Other information considered of interest in the course of our work.
·
Conversations with the Senior Management of Mediaset España, the Senior Management of Mediaset, the independent expert appointed by the Italian Commercial Registry for the Transaction executed in Mediaset, S.p.A. and the independent expert appointed by the Dutch Commercial Registry, with the purpose of collecting further information that has been considered useful in the course of our work.
·
Review and overall comparison of whether the valuation methodologies used by the Boards of Directors of Mediaset and Mediaset España that were used to determine the Exchange Ratios are appropriate, considering the context and features of the Merger. Some of the procedures undertaken include:
·
Analysis of the most appropriate way of performing the valuation work.
11
·
Review of the public financial projections contained in the research reports on Mediaset España and Mediaset to which we have had access, as well as the financial projections validated by their management.
·
Preparation of a discounted cash flow financial model based on those financial projections and other public information as is relevant to our work for Mediaset España and Mediaset.
·
Review of the historical share price of Mediaset España and Mediaset.
·
Analysis of the Exchange Ratio II, taking into account Exchange Ratio I established in the Cross-border Common Merger Plan.
·
Identification of the main difficulties in valuation exercises.
·
Assessment of the impact on the value of shareholders equity of Mediaset and Mediaset España of events having occurred after the date of the audit report on the consolidated financial statements of Mediaset España and of the audit report of the consolidated financial statements of Mediaset. We have received information from Senior Management of Mediaset España about the absence of significant events that could have affected the value of the shareholders equity of Mediaset España and Mediaset in the period between the date of those financial statements and the date of the report.
·
Receipt of the following formal confirmations, in the terms indicated therein:
·
Letter signed by the legal representatives of Mediaset España, representing that there is no new litigation not included in their audited financial statements that could have a bearing on the fairness of the value of their Shareholders Equity.
·
Letter signed by representatives with sufficient powers to represent Mediaset España confirming that the Cross-Border Common Merger Plan provided and the hypotheses used to prepare it represent their best estimate in view of the current circumstances and their anticipated future development, that they have provided all necessary information and everything we may have requested to prepare this Report, and we have not been made aware of anything that could have a major effect on the outcome of our work.
·
Understanding of the information detailed above, and application of the procedures considered appropriate, with the sole purpose of fulfilling the requirement established in article 34 of LME.
12
5.
Particular difficulties and
relevant aspects of our
work
To correctly interpret the outcome of our work, we believe it is important to highlight the following:
The scope of our work has been primarily based on analysing the relative value of Mediaset and Mediaset España and, therefore, our work is not an opinion on the absolute values used to determine the exchange ratio, nor should it be considered as such. The reference values used by Mediaset and Mediaset España have been calculated by those companies and their financial advisors, applying various valuation methodologies and, as such, they could vary considerably depending on the methodology used.
Estimates of value are based on commonly accepted valuation methodologies in the profession. Although we have performed our analysis reasonably, based on information available and provided by Senior Management, we must stress that business valuation is not an exact science but an exercise based on experience and the use of hypotheses on future scenarios and which, as such, contain a certain degree of subjectivity. In these circumstances, we cannot assure that third parties would necessarily agree with our conclusions. The main difficulties that arise in the analysis and review of the exchange ratio are precisely those referring to the future behaviour of economic variables and the logical uncertainty that that involves.
In addition, in this case there is no full business plan for Mediaset and Mediaset España available and prepared by the senior management of each company to determine the exchange ratio. Therefore, the valuation analysis described in the Directors’ Report and in the discounted cash flow methodology in particular for both companies has been based solely on public information; accordingly, such valuation analysis is based on projections obtained from the combination of research analyst’s forecasts and extrapolations from 2022 onwards. However, the approach described above has been the same for Mediaset and Mediaset España, and has been agreed and validated by the respective senior management teams of Mediaset and Mediaset España which, in the terms indicated in the report of the board of directors, have validated the projections that combine the market (financial analysts covering both stocks that published post-2018YE results) and internal long-term perspective of their respective businesses.
Our work has been based on the audited information and public information of Mediaset España, Mediaset and DutchCo. In the course of our work we have assumed that the information is complete and accurate, and that it reflects the absorbed companies’ best estimations of the Mediaset España and Mediaset shares in respect of the operational and financial situation and outlook. Our work is not that of an audit of the financial statements, therefore the procedures considered necessary by generally accepted professional rules of financial auditing. Therefore, we do not express a professional opinion on the financial information included in this document.
The scope of our work does not include verifying any of the conditions precedent detailed in the Cross-border Common Merger Plan or and assessment of Mediaset’s capacity to repay its debts early if certain financial creditors do not approve the Merger.
The scope of our work does not include any independent verification, audit, due diligence, review or evaluation of the accounting, tax, legal, employment or environmental situation of the Cross-border Common Merger Plan or the Directors’ Report and, therefore, is not any audit opinion or any other opinion or confirmation of the financial statements of the same.
Our work has been based on public information and other sources. Our work has not entailed cross-checking that information with external sources. However, where applicable, we have cross-checked the information obtained with other information we have been provided in the course of our work.
The market prices of Mediaset and Mediaset España shares have been and continue to be subject to volatility and fluctuations as a result of general market trends. In relation to prices, it is assumed that the market is sufficiently liquid and efficient. Therefore, it cannot be ruled out that, although the exchange ratios would continue to be consistent with the methodologies used to determine them, the specific market value of DutchCo Ordinary Shares that will be allocated on the Merger Effective Date may be lower or higher than that established from the exchange ratios.
13
The scope of our work refers to Exchange Ratio II, taking into account Exchange Ratio I described in this Report. We must state that any major variation to the composition of the Shareholders Equity of Mediaset and Mediaset España may affect the conclusions of our work.
Mediaset and Mediaset España have performed an exercise to determine the cost and efficiency synergies that would be obtained after the merger, which have not been considered when determining the exchange ratios. Mediaset España has represented to us that those synergies would be obtained as a result of the merger and not by the larger contribution by anyone of the companies involved in generating them, for which reason it is considered not to have an impact on the exchange ratio.
In the letter of representations it is confirmed that there have been no events after the date to which the base financial information refers that could have a material impact on our conclusions, which we have taken into account.
We have assumed that all authorisations and filings that are pertinent in Spain, Italy and the Netherlands for the effectiveness of the Merger and that have a material impact on our analysis will be obtained with no adverse effect.
We must stress that our work is independent and, therefore, it makes no recommendations to the senior management teams of Mediaset España, Mediaset Italia or DutchCo, to their shareholders or to third parties in relation to the position they should take in the Merger or other potential transactions with shares of the companies. Our work does not seek to analyse the suitability of the current or past business strategies of Mediaset España, Mediaset Italia or DutchCo or the rationale of the Merger in relation to other business strategies or transactions that the companies could have choose to pursue. Likewise, it does not purport to analyse the business decision they have taken to proceed with the planned Merger. The scope of our work should not be considered, in the context of this transaction or in any other context, as a fairness opinion or any other opinion on the current or future value of Mediaset España or Mediaset Italia.
The foregoing does not restrict or undermine our work, duties and mission pursuant to articles 34. 54 et. seq. of the LME or the conclusions reached in our report.
14
6.
Conclusions
According to the work undertaken, which is described in paragraph 4, with the sole purpose of complying with article 34, 54 et. seq. of the LME and articles 338, 340 and 349 of the Commercial Registry Regulations and other applicable legislation, and taking into account the features of the Crossborder Merger proposed, as well as paragraphs 2, 3 and 4 above, and subject to the relevant aspects described in paragraph 5 above, we find that:
·
Exchange Ratio II, taking into account Exchange Ratio I, established in the Cross-border Common Merger Plan, is appropriately justified.
·
We have set out the methodologies followed by directors to establish this share exchange ratio. The methodologies followed to establish Exchange Ratio II, taking into account Exchange Ratio I, are considered appropriate.
·
The fair value of the equity contributed by Mediaset España Comunicación, S.A. and Mediaset, S.p.A., which will cease to exist, is at least equal to the amount of the share capital increase planned for the Absorbing Company, which is 14,729,259.98 euros, under the conditions detailed in section 2 of this Report (“DutchCo Capital Increase”), so long as Mediaset’s share in Mediaset España remains unchanged, and the number of treasury shares held by Mediaset and Mediaset España on the date of the Cross-border Common Merger Plan remain as such and, therefore, those shares are cancelled when the Merger becomes effective.
This report has been prepared exclusively to comply with the provisions of articles 34, 54 et. seq. of the LME and article 338, 340 and 349 of the Commercial Registry Regulations, therefore it cannot be used for any other purpose. Our conclusion must be interpreted in the context of the scope of our verifications; therefore, we do not accept any liability other than those regarding the description and fairness of the methodologies used and them having been applied in an equitable and consistent way, since the responsibility for the projections and elements used in the hypotheses and the conclusions drawn from them has been assumed by the Directors of the companies participating in the Merger.
15
