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FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 1
Fairness Opinion
to the
Board of Directors of
RCS MediaGroup S.p.A.
relating to the
PUBLIC TENDER OFFER
for the common shares of
RCS Media Group S.p.A.
Bidder
International Media Holding S.p.A.
16 June 2016
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 2
Milan, 16 June 2016
Board of Directors RCS MediaGroup S.p.A.
Via Angelo Rizzoli 8 20132 Milan
SUBJECT: Fairness Opinion on the concurrent, voluntary public tender offer on all shares made by
International Media Holding S.p.A. pursuant to Articles 102 and 106, paragraph 4 of Legislative
Decree no. 58 of 24 February 1998 and the Consob Regulation approved by resolution 11971 of 14
May 1999.
Introduction
RCS MediaGroup S.p.A. (“RCS”, the “Issuer” or the “Company”), headquartered at via Angelo Rizzoli
8 in Milan, engaged the undersigned, Prof. Roberto Tasca, Full Professor of Economics of Financial
Intermediaries at the University of Bologna, with an office at via Circo 7, Milan, to prepare a
Fairness Opinion (or the “Fairness”) on the Public Tender Offer on all RCS shares pursuant to
Articles 102 and 106, paragraph 4 of Legislative Decree of 24 February 1998 and Article 37 of
CONSOB Regulation No. 11971/1999, as amended.
The Fairness will assist RCS’s Board of Directors in evaluating the fairness of the Voluntary Public
Tender Offer on all RCS shares (the “Offer” or the “PTO”) concerning No. 403,937,789 common
shares of the Company, which was launched on 16 May 2016 by International Media Holding S.p.A.
(“IMH” or the “Bidder”).
Although certain details about the Offer are summarised in this document, the terms and
conditions thereof are set forth in more detail in the Offer Document approved by CONSOB on 10
June 2016 with resolution No. 19627.
Specifically, the details of the PTO as to which this Fairness Opinion is requested are as follows:
Issuer: Rizzoli Corriere della Sera MediaGroup S.p.A., with registered office in Milan, Via
Angelo Rizzoli 8. RCS indicated in the financial statement for the period ended in December
2015 as: “one of the leading European groups in the publishing sector, is leader in the printed
newspaper sector in Italy and Spain and is active in the magazine sector, in TV, radio and
new media, as well as being among the leading operators in the advertisement revenues &
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 3
distribution market". In Italy, RCS publishes Il Corriere della Sera and La Gazzetta dello Sport,
as well as numerous other weekly and monthly magazines. RCS is present in Spain with
Unidad Editorial, which publishes the second largest national newspaper El Mundo, the
sports magazine Marca and the economic information newspaper Expansion, as well as
numerous other magazines. It is also present in the multimedia communications sector
directed at children with the Sfera Group as well as in the organization of sports events with
RCS Sport, and in mass events with Last Lap in Spain. It additionally operates in the online
gambling sector and in the radio and television media, both in Italy and in Spain. The group
originated from the activity of the publishing house Rizzoli, which became Holding di
Partecipazioni Industriali in 1997, and then assumed its current name in 2003.
The structure of the RCS Group and its shareholders are shown in Table 1.
Table 1 – Structure of the RCS Media Group and its major shareholders
Bidder: International Media Holding S.p.A., headquartered at via Pietro Mascagni 14 in
Milan. The company was incorporated on 23 May 2016 and has a fixed duration until 31
December 2050.
Azionista %
Della Valle Diego 7,325
Mediobanca S.p.A 6,247
Cairo Urbano Roberto * 4,616
Finsoe S.p.A. 4,601
China National Chemical Corporation 4,433
Intesa Sanpaolo S.p.A. 4,176
Rotelli Paolo 3,486
Fortress Investment Group LLC 3,066
Vanguard International Explorer Fund 2,299
Dati forniti dalla Società, giugno 2016
* Nel documento di offerta Cairo è indicata una quota detenuta attraverso U.T. Communication pari al 4,724%.
RCS Media Group S.p.A.
Pubblic ità ed
Eventi
Funzioni Corporate
e altre attiv itàRCS Media SpagnaRCS Media Ital ia
Shareholder
Diego Della Valle
Urbano Roberto Cairo *
Paolo Rotelli
Data provided by the Company, June 2016
RCS Media Italy RCS Media Spain Advertising and Events
Corporate Functions and other activities
* Cairo’s offer document indicates a 4.724% stake held through U.T. Communication.
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 4
IMH’s corporate structure is shown in Table 2.
Table 2 – IMH’s corporate structure
Subject: a total of 403,937,7891 common shares of RCS, listed on the MTA (Mercato
Telematico Azionario - Electronic Stock Market) organised and managed by Borsa Italiana
S.p.A., representing 77.40% of the share capital of RCS.
The consideration of the Offer is EUR 0.70 (zero point seventy) for each RCS common share
tendered in the PTO.
The tender period is from 20 June 2016 to 22 July 2016.
The Bidder will satisfy its commitments arising from the Offer through a capital increase
described in the Co-Investment Agreement entered into by all of IMH’s shareholders. The
capital increase is divided into four tranches, which will be implemented in relation to the
number of shares tendered in the PTO, until the entire stake of 77.40% is covered, in such a
manner as to preserve the current equity holdings.
The Bidder has stated that it will not incur financial debt in connection with promoting the
Offer, which will financed entirely by the Co-Investors’ subscription for its capital.
The request for this Fairness Opinion by RCS was made pursuant to Article 39, paragraph 1, letter d)
of the Issuers’ Regulation handed down by Consob resolution No. 11971 of 14 May 1999, as
amended, and it relates to the fairness for all the Company’s shareholders of the cash consideration
provided under the Offer.
1 Note that the Company holds 4,575,114 treasury shares.
Azionisti %
Diego Della Valle & C 6,876%
DI. VI. Finanziaria 6,874%
Mediobanca 13,750%
UnipolSai Assicurazioni 13,750%
Pirelli 13,750%
International Acquisitions Holding SA 45,000%
Documento di Offerta pag. 36
International Media Holding S.p.A.
Shareholders
Offer Document p. 36
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 5
Documentation consulted and working assumptions
In order to perform the duties entrusted to him, the undersigned relied upon the documents
provided by the Company, as well as other public information. The evaluations produced are thus
closely dependent on the information made available at the time this document was drafted.
The supporting information is represented by:
Voluntary Public Tender Offer document of 11 June 2016;
Individual and Consolidated Financial Statements of RCS for the years 2014 and 2015;
RCS’s 1Q 2016 quarterly report;
2016-2018 Business Plan, presented to the market on 21 December 2015;
Termsheet containing the “Amendments to the loan executed on 14 June 2013”;
RCS press release of 14 April 2016;
RCS press release of 1 June 2016;
statements of members of the RCS management interviewed by the undersigned;
discussions with the independent members of the Board of Directors of RCS;
Bloomberg, Capital IQ and InFinancial databases relating to companies’ share prices, market
multiples and target prices prepared by financial analysts from 1 January 2015 to 13 May
2016.
Regarding to the financial documents and information made available, the undersigned declares
that he relied upon them as they were prepared and provided, on the assumption that they are
correct, complete and truthful. No investigations or independent evaluations of such information,
reports and statements were carried out. No expert opinion on the legal or accounting,
environmental, tax, social security aspects were provided, obtained or reviewed on behalf of the
Company, nor was any internal audit document produced.
Therefore, the Fairness Opinion was prepared on the basis of the following assumptions and
limitations:
a. The business continuity and the absence of any short term plans or preliminary agreements
already in place to discontinue business areas and, more generally, a substantial change of
the current structure of the RCS group, with the exception of the agreement for the sale of
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 6
RCS Libri, which has already been finalised,2 and the forecasts provided for in the 2016 - 2018
Business Plan, approved by the Company on 21 December 2015;
b. The signing of the loan agreement, after the approval of the Termsheet by all of the lending
banks,3 through which the Company will renew a new syndicated loan for EUR 352 million and
the bilateral facilities for at least EUR 85 million;
c. The fairness of the Bidder’s proposed consideration is assessed in reference to the date of 13
May 2016, which is the last open stock market day prior to the Bidder’s Communication, with
the exception of what is reported in the following section 2 of the Results chapter, where the
“historical series of market prices weighted by traded volumes that are not conditioned” are
determined in the time frame 29 January 2016 - 30 January 2015.
d. The Fairness is necessarily based on the macroeconomic conditionsì as well as the financial
and market conditions on the date of issuance. Any change in the volatility and uncertainty of
the macroeconomic and institutional framework, specifically those regarding the Euro
Monetary Zone, may impact the two companies. The expressed evaluations are entirely
independent of any consideration regarding the change of the current conditions and its
impact on the Company.
It is hereby disclosed that the undersigned, for the performance of this task, will receive a flat fee
from the Company, regardless of the outcome of the Offer.
2 See RCS Press release from 14 April 2016;
3 See Communication of the Company issued on 1 June 2016.
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 7
Assignment’s execution and issues in the analysis process
The purpose of the fairness opinion is to develop a judgment on the merits of the proposal offered
by the Bidder.
In this case, because the PTO provides for monetary consideration in cash, it is essential to compare
the price offered with the fundamental value of the Issuer’s shares.
The determination of the fundamental value is based on the construction of future cash flows,
defined on the basis of the multi-year plans approved by the administrative bodies of the Company
whose securities are subject to the Offer. This fundamental value can be determined with different
methods, although the most frequently used calculation process in the theory and in professional
practice is the “Discounted Cash Flow” or “DCF”.
Following the approval of its administrative body, RCS presented the “2016-2018 Business Plan" on
21 December 2015 to the market.
A valuation based on the DCF method was prepared on the basis of this Plan. Residual components
were added to the financial value of the capital that resulted therefrom. These residual
components in RCS’s case consist primarily of tax shields arising from the Company’s deferred tax
assets. The pro-forma4 net financial position as of 31 March 2016 was subtracted from that
valuation, and was determined the value per share net of the treasury shares held by the Company.
The Bidder referenced the following methods to justify its determination of the proposed monetary
consideration:
1. The official price per RCS common share on the stock market trading day preceding the date
of the Bidder’s Notice. That price was EUR 0.598.
2. The consideration for the Cairo Communication Offer, determined on the basis of the
official price of the Cairo Communication common shares recorded on 13 May 2016. That
price was EUR 0.532.
3. The weighted averages of the official prices over 1-, 3-, 6- and 12-month intervals. Those
prices were EUR 0.592, 0.560, 0.558 and 0.685, respectively.
4 Thus considering the net consideration resulting from the sale of RCS Libri of EUR 98 milion.
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 8
4. The official price per RCS common share on the stock market trading day preceding the date
the Cairo Communication Offer was announced. That price was equal to EUR 0.416.
The Bidder then described the trailing multiples in the consideration offered in relation to a series
of amounts derived from RCS’s 2014 and 2015 Financial Statements and compared those multiples
with those derived from a sample of listed companies for the same years.
Even in the absence of fundamental valuations of RCS provided by the Bidder, the offering of cash
consideration to shareholders allows the Expert to compare that value with his own determinations
of fundamental value constructed on the Company’s Business Plan for the 2016-2018 period.
The results obtained will then be subjected to a validation procedure using empirical methods
commonly used in the financial markets.
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 9
Valuation methodology
As previously indicated, the Bidder states the methods used to determine the consideration in the
Offer Document chapter “Unitary consideration for financial instruments and its justification”.
Because the Bidder primarily uses market prices taken from historic series of Stock Exchange
quotations and taking into account the significant difference between values and prices,5 the Expert
based his fairness judgment on a method broken down into three steps:
1. the determination of the interval of fundamental values using the unleveraged version of
the DCF method, based on the 2016-2018 Business Plan the Company presented to the
market on 21 December 2015. This interval constitutes the primary method on which the
fairness judgment is based, because it represents the value that the shareholders hold
when the Offer was launched, which they would have to implicitly waive in exchange for a
certain value of EUR 0.70 for each share tendered in the PTO.
2. The results obtained with the DCF were then checked: first, based on the average and the
median of the leading multiples of a sample of comparable companies for the 2016-2018
period, and second, based on the target prices shown by Bloomberg, borrowing from the
indications provided by the analysts who covered the RCS security during the period 13
May 2016–14 May 2015 in “blind” version.6
3. Lastly, also for the purpose of confirming the Bidder’s statements in chapter E of the Offer
Document, based on the historic series of stock exchange prices for the period 14 May
2015 to 13 May 2016 (identified as “Historic series of weighted market prices for pre-
announcement volumes traded”), the weighted market price for an RCS common share was
determined over 12-, 6-, 3- and 1-month and 1-day time horizons. The values determined
for each interval were “checked” based on the historic series of weighted market prices for
the period 30 January 2015 to 29 January 2016 (identified as Historic series of weighted
market prices for unconditioned volumes traded). This second time interval was chosen
based on statistical tests performed on the daily yields of RCS common shares
5 Cfr. p. 19 in Italian Valuation Principles, which states in that regard: “1) the price is the consideration requested,
offered or paid to purchase the actual or financial business to be valued. It is an empirical amount, influenced by all the variables that affect demand and supply and which, therefore, can diverge from the value of the business; [...] 3) the value is not an empirical amount but the result of an estimate […]” 6 Namely, without going into the merits of identifying the analysts and companies that produced the indication.
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 10
for the period 1 January 2015–16 May 2016, with the purpose of isolating a time interval
that would show prices “unconditioned” by anomalous movements in the normal yield of
the RCS security, estimated on the basis of a market model that assumes the FTMIB 30
Total Return Index. The goal is to show a time period in which the yield on the Company’s
equity security confirms “extreme” movements that can be explained in light of “price-
sensitive” events and to validate, on the other hand, on the “unconditioned” historic series,
the weighted market prices for each of the time intervals indicated in the pre-
announcement period. In fact, if the unconditioned weighted market prices are higher than
those shown in the pre-announcement historic series, one could conclude that the latter
prices are not penalising for the Bidder and, as such, shall be considered in the following
valuations.
Indeed, the weighted market prices determined for each of the time intervals defined on
the basis of the two indicated historic series of prices (pre-announcement and
unconditioned) were compared to the Offer price of EUR 0.70 to determine the implicit
premium (discount) between the two. This premium (discount) was compared to the
results of an examination of a voluntary PTOs sample launched from January 2010 to
February 2016 for companies with capitalisation less than 500 million euros, which were in
turn considered on the basis of “pre-announcement” prices and “unconditioned” prices, to
valuing the difference.7 This comparison was made necessary due to the fact that the goal
of the PTO is to achieve legal, or alternatively de facto, control over RCS.
The comparable transactions method was not instead considered, because the only similar
operation, which has produced a memorandum of understanding signed by the parties that have
agreed the non - definitive economic and financial conditions disclosed to the market, will then be
concluded upon the submission of this Fairness opinion. 8
7 The standard for determining whether prices are unconditioned is the same as explained in relation to point 2 of the
full Fairness Document filed with the company for the Public Exchange Offer of [Cairo]. In this case, only the RCS shares were considered and the same time intervals applied in the case of the Public Exchange Offer in question were shown. 8 Reference is made in this case to the operation between the Gruppo Editoriale l’Espresso and ITEDI, which, in any
case, occurred in the investigations conducted by the undersigned, prior to choosing the methodological approach to be followed.
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 11
Results
Phase 1: Discounted Cash Flow
As mentioned above, the determination of the fundamental values of a company is based on the
construction of the future cash flows, defined in terms of the multi-year plans approved by the
relevant administrative bodies; this method is the main tool used by the financial market to
determine the fundamental values of the economic capital of a company.
The valuation process by resorting to the DCF (discounted cash flow) method is of a sequential kind,
starting from the Company’s Plan and ending with the determination of the discounting of the
operating cash flows, and the results obtained are very often compared with other “secondary”
methodologies that neither validate nor refute the amounts obtained.
The 2016 - 2018 Business Plan of RCS:
• was provided by the Company, and communicated to the market on 21 December 2015 and
has a time horizon of three years (2016 - 2018).
• is composed by the Income Statement and the Balance Sheet and is accounted for in
consolidated form.
Table 3 - 2016 - 2018 Plan Total Revenues
1.000
1.020
1.040
1.060
1.080
1.100
Bilancio 2015 Piano 2016 Piano 2017 Piano 2018
TOTALE RICAVITotal Revenues
Financial statement 2015 2016 Plan 2017 Plan 2018 Plan
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 12
Table 4 – 2016 Plan – 2018 EBITDA before non recurring cost
Table 5 - 2016 Plan - 2018 Net profit
Table 6 - 2016 Plan - 2018 Net financial position
Cash Flow:
• An “Asset Side” valuation is carried out, then the discounting of the Operating Cash Flows,
aimed at quantifying the Enterprise Value.
0
50
100
150
Bilancio 2015 Piano 2016 Piano 2017 Piano 2018
EBITDA ante non recurring cost
-150
-100
-50
0
50
Bilancio 2015 Piano 2016 Piano 2017 Piano 2018
Risultato netto
0
200
400
600
Bilancio 2015 Piano 2016 Piano 2017 Piano 2018
POSIZIONE FINANZIARIA NETTA
Financial statement 2015 2016 Plan 2017 Plan 2018 Plan
Financial statement 2015 2016 Plan 2017 Plan 2018 Plan
Financial statement 2015 2016 Plan 2017 Plan 2018 Plan
EBITDA before non recurring cost
Net Profit
Net financial position
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 13
The Weighted Average Cost of Capital (Wacc):
• The weighted average cost of capital is the cost of capital provided both by way of debt or
by way of equity capital. It is a measure that reflects the riskiness of all of the business
operations, and therefore its total investments. It is therefore the benchmark against which
the return on investment is to be assessed.
• The cost of the share capital is generally calculated by the use of the CAPM (Capital Asset
Pricing Model), which provides that: Cost of equity capital = risk free rate + (Beta x Premium
for the market risk).
Table 7 - Assumptions for the calculation of the weighted average cost of the capital of RCS
Results
On the basis:
1) of the Plan provided by the Company,
2) of the weighted average cost of capital amounting to 8.89% (assuming a +/- 0.50% interval),
3) a g growth rate of 0% (assuming a interval of +/- 0.50%),
the use of the Discounted Cash Flow has led to the following quantifications:
RCS MediaGroup Minimum Average Maximum
Enterprise value 702 777 871
Equity value 416 491 585
Value per share 0.80 0.95 1.13
Beta Unlevered 0,730 Serie Bloomberg
Aliquota fiscale 27,7% Aliquota 2015 media ESP e ITA
Beta Relevered 1,36 βUL × [1 + (1 - tc) × D/E]
COSTO DEL CAPITALE PRO PRIO (Ke) 11,40% ERP + BTP + ARP
COSTO DEL DEBITO (Kd) 3 ,01% Kd × (1 - tc )
% debito netto su totale (Kd) 30,00% Uscita del piano 2018
% capitale proprio su totale (Ke) 70,00% Già ponderato
COSTO MEDIO PONDERATO CAPITALE 8,89% WACC
ESP and ITA Average 2015 Rate
Cost of equity capital (Ke)
Tax Rate
Cost of debt
.
% net debt on total (Kd)
% Equity capital on total (Ke)
Output from 2018 plan
Already weighted
CAPITAL WEIGHTED AVERAGE COST
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 14
Phase 2.1: Trailing multiples
As mentioned above, the results obtained by using the DCF method are compared with other
valuation methods, for control purposes.
The first comparison is made between the trailing multiples obtained with the DCF method, in
relation to the intermediate valuation, and the multiples derived from a sample of comparable
companies. The sample chosen is the following:
Arnoldo Mondadori Editore S.p.A.,
Il Sole 24 Ore S.p.A.,
Gruppo Editoriale L'Espresso S.p.A.,
Vocento, S.A.,
Cairo Communication S.p.A.,
Promotora de Informaciones SA.
The valuation process is based on the following steps:
1) calculation of the trailing multiples on revenues, EBITDA before the non-recurring cost and
EBIT;
2) comparison of the trailing multiples deriving from the intermediate value of the DCF with
the average multiples of the comparable companies;
3) comparison of the trailing multiples with the minimum and maximum multiples deriving
from the intermediate value of the DCF of the comparable companies;
Table 8 - Multiples of comparable companies
PANIERE PER RCS EV/SALES EV/EBITDA EV/EBITCompany Name 2016e 2017e 2018e 2016e 2017e 2018e 2016e 2017e 2018e
Arnoldo Mondadori Editore S.p.A. 0,37x 0,36x 0,36x 5,23x 4,64x 4,49x 7,40x 6,36x 6,01x
Il Sole 24 Ore S.p.A. 0,27x 0,26x 0,26x 11,35x 8,26x 6,99x nm nm nm
Gruppo Editoriale L'Espresso SpA 0,64x 0,64x 0,65x 6,39x 6,09x 5,36x 8,64x 8,09x 6,98x
Vocento, S.A. 0,57x 0,57x 0,57x 6,15x 5,03x 4,66x 11,48x 8,28x 6,94x
Cairo Communication S.p.A. 0,87x 0,84x 0,81x 8,97x 7,73x 7,24x 12,93x 10,51x 9,46x
Promotora de Informac iones SA 1,64x 1,60x 1,55x 8,07x 7,38x 6,92x 14,31x 11,48x 9,39x
Media multipl i comps 0,73x 0,71x 0,70x 7,69x 6,52x 5,94x 10,95x 8,94x 7,76x
Multipl i implic iti RCS sul la base del DCF 0,75x 0,74x 0,71x 7,77x 6,46x 5,54x 16,85x 11,26x 8,88xImplicit RCS Multiples on the basis of the DCF method
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 15
Table 9 - Comparison of the trailing multiples with the multiples of comparable companies
Two findings emerge from examining Table 8:
- the trailing multiples in the intermediate value of the DCF valuation of the 2016 - 2018 Plan
are aligned with the multiples calculated with reference to the average values of the
comparable companies in relation to the variable EBITDA, instead they show a minor
improvement in revenues volumes and greater enhancement of profitability in 2016 which
will normalise during the course of 2018, the time horizon when the Company’s Plan will be
completed;
- the trailing multiples on Revenues, EBITDA before the non-recurring cost, determined using
the DCF method, are always included among the minimum and maximum multiples of the
comparable companies.
Therefore, the results obtained support that derived from the application of the main method.
0,27x 0,26x 0,26x
1,64x 1,60x 1,55x
0,75x 0,74x 0,71x
0,00x
0,50x
1,00x
1,50x
2,00x
2016E 2017E 2018E 2019E
Confronto su multiplo EV/Ricavi
Min multipli comps
Max multipli comps
EV/Ricavi implicito RCS
2016E 2017E 2018E
5,23x 4,64x 4,49x
11,35x
8,26x7,24x7,77x
6,46x5,54x
0,00x
2,00x
4,00x
6,00x
8,00x
10,00x
12,00x
2016E 2017E 2018E 2019E
Confronto su multiplo EV/Ebitda ante NR
Min multipli comps
Max multipli comps
EV/EBITDA ante NRimplicito RCS
2016E 2017E 2018E
7,40x 6,36x 6,01x
14,31x 11,48x9,46x
16,85x
11,26x 8,88x
0,00x
5,00x
10,00x
15,00x
20,00x
2016E 2017E 2018E 2019E
Confronto su multiplo EV/Ebit
Min multipli comps
Max multipli comps
EV/EBIT ante NR implicitoRCS
2016E 2017E 2018E
Comparison of EV/Revenues
Comparison of EV/Ebitda before NR
Comparison of EV/Ebit
Min Multiples comps
Max Multiples comps
RCS Implicit revenues/EV
Min Multiples comps
Max Multiples comps
EV/EBITDA before implicit
NR to RCS
Min Multiples comps
Max Multiples comps
EV/EBIT before implicit NR
to RCS
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 16
Phase 2.2: Financial Analysts’ Target Price
The findings highlighted above require further verification. Having used the trailing multiples
methodology as the method for comparing with the DCF, it was considered appropriate to note,
without any subjective intervention, the target price indicated by the analysts and collected by the
Bloomberg database. The time interval of measurement goes from 14 May 2015 until 13 May 2016.
The data collected are presented in Table 10.
Table 10 – Analyst Consensus
These target prices determined in this way were compared with the minimum and maximum values
of the RCS shares obtained by using the DCF method. The results are shown in Table 11.
Table 11 - Comparison of RCS share values obtained by using the DCF with analysts’ target price
The results obtained show that the interval of values of the RCS shares, obtained by using the DCF
method, represents the minimum and maximum point in relation to the observations of the
analysts at 3, 6 and 12 months. It must then be noted that the intermediate value of the DCF
method coincides with the target price data at 12 months.
Periodo DA A Total Buys Holds Sells Target Price
12 mesi 14-mag-15 13-mag-16 6 2 4 0 0,95
6 mesi 16-nov-15 13-mag-16 6 2 4 0 0,82
3 mesi 15-feb-16 13-mag-16 6 2 4 0 0,81
1 mese 14-apr-16 13-mag-16 6 3 3 0 0,78
1 giorno 13-mag-16 13-mag-16 6 3 3 0 0,77
0,77 0,78 0,80 0,81 0,82
0,95
1,13
0,00
0,20
0,40
0,60
0,80
1,00
1,20
1 giorno 1 mese Valoreminimo
dell'azioneRCS con
DCF
3 mesi 6 mesi 12 mesi Valoremassimo
dell'azioneRCS con
DCF
FROM TO
1 day 1 month Minimum 3 month 6 months 12 months Maximum
value value
of the RCS of the RCS
share with share with
DCF DCF
12 months
6 months
3 months
1 month
1 day
14 May 2015
16 Nov 2015
15 Feb 2016
14 Apr 2016
13 May 2016
13 May 2016
13 May 2016
13 May 2016
13 May 2016
13 May 2016
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 17
Phase 3: Weighted average prices and PTO premiums/discounts
In order to also include the profiles examined by the Offer to justify the consideration proposed in
the evaluation opinion, it seemed appropriate to approach what was done in the previous two
phases, including an analysis based on the historic weighted average prices of the RCS shares,
reaffirming in any case the difference that exists between them and the fundamental value of a
share. The analysis of the historic weighted market prices is prodromal to the valuation of the
premiums (discounts) found in the Public Tender Offer sample which are similar to the one in
hereby examined.
To that end, the weighted average prices at 1 day, 1, 3, 6 and 12 months are calculated, on the
basis of the historic series of the prices from 13 May 2016 (which can be identified as “Historic
series of weighted market prices for pre-announcement volumes traded").
Table 12 - Historic series of weighted market prices for pre-announcement volumes traded
In addition, to support the opinion expressed on the basis of the historic series of pre-
announcement prices, it was deemed appropriate to carry out a statistical check in order to
understand whether the trend of the cumulative returns measured from 14 May 2015 to 13 May
2016 caused by the RCS shares presented “anomalous” elements which could reflect the
extraordinary conditions arising from publicly available events9 and highlighted by the graphic in
table 12.
9 In the document filed with the Company, an analytical explanation was given of the methodology used and the results
reached, which, in any case, are statistically significant.
Periodo DA A PMP Volumi Turnover
12 mesi 14-mag-15 13-mag-16 0,685 895.505.241 173%
6 mesi 16-nov-15 13-mag-16 0,558 582.578.626 113%
3 mesi 15-feb-16 13-mag-16 0,560 236.807.879 46%
1 mese 14-apr-16 13-mag-16 0,591 97.391.888 19%
1 giorno 13-mag-16 13-mag-16 0,598 3.492.166 1%
12 months
6 months
3 months
1 month
1 day
14 May 2015
16 Nov 2015
15 Feb 2016
14 Apr 2016
13 May 2016
13 May 2016
13 May 2016
13 May 2016
13 May 2016
13 May 2016
Period From To WMP Volumes Turnover
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 18
Table 13 - Common share yield of RCS, Cairo and FTMIB 30
The results obtained allow us to define two periods in which anomalous trends can be recognized.
The first coincides with the interval from September 2015 - November 2015, which is to be linked
to the news concerning the changes in the management of RCS and a second period from March
2016 to April 2016, in which there has been a continuation of the renegotiation process of the loan
signed on 14 June 2013 and the announcement of 2 March 2016 on the distribution of the RCS
shares to its shareholders by FCA, which involved approximately 16% of the RCS’s share capital.
(1,00)
(0,80)
(0,60)
(0,40)
(0,20)
-
0,20
0,40ge
n-1
5
feb-
15
mar
-15
apr-
15
mag
-15
giu
-15
lug-
15
ago
-15
set-
15
ott-
15
nov-
15
dic-
15
gen-
16
feb
-16
mar
-16
apr-
16
mag
-16
Rendimenti cumulati da inizio 2015
rcumrcs rcumftse
-
0,01
0,02
0,03
0,04
0,05
0,06
0,07
0,08
Dev st 30 gg rendimenti cumulati
sdrcs sdstse
Cumulative Revenues from the beginning of
2015
30 Day Cumulative returns
Jan
Feb
Mar
Ap
r
May
Jun
Jul
Au
g
Sep
Oct
Feb
Dec
Jan
Mar
Ap
r
May
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 19
Consequently, in order to enrich the wealth of information available to the expert, the same
analysis shown in the Table 12 is reproduced using “unconditioned” prices for the period 30 January
2015 - 29 January 2016. That period shall run from the middle month of the “normality” interval
from December 2015 - February 2016. The results are presented in Table 13.
Table 14 – Historic series of weighted market prices for unconditioned volumes traded
The results obtained from the comparison allow it to be concluded that the use of the series of pre-
announcement prices is the most favourable to the Bidder for the purpose of calculating the
premium (discount) than the price offered by IMH. Therefore, in order to always allow the
comparison of the successive results, we will proceed with binary logic, using both of the series, but
taking the second for the sole purpose of control.
Periodo DA A PMP Volumi Turnover
12 mesi 30-gen-15 29-gen-16 0,874 918.685.997 178%
6 mesi 30-lug-15 29-gen-16 0,673 550.325.753 106%
3 mesi 30-ott-15 29-gen-16 0,579 372.225.866 72%
1 mese 30-dic-15 29-gen-16 0,593 123.318.190 24%
1 giorno 29-gen-16 29-gen-16 0,562 1.573.299 0%
12 months
6 months
3 months
1 month
1 day
Period From To WMP Volumes Turnover
30 Jan 2015
30 Jul 2015
30 Oct 2016
30 Dec 2015
29 Jan 2016
29 Jan 2016
29 Jan 2016
29 Jan 2016
29 Jan 2016
29 Jan 2016
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 20
Having determined the historic series of pre-announcement weighted market price and
“unconditioned price”, we compare the results obtained by using the DCF method with a sample of
voluntary Public Tender Offers concluded in Italy in the period 2010 - 2016 for counter values of
less than EUR 500 million. The sample is shown in Table 15.
Table 15 - Voluntary Public Tender Offers in Italy from 2010 to February 2016
On the basis of Table 15, the median premiums on the Public Tender Offers are easily identifiable
both with pre-announcement prices and unconditioned prices summarized in Table 16.
Premi pagati in Ital ia nel le OPA Volontaria - Prezzi pre annuncio
4-mar-14 SAT Corporacion America 73% 35% 102 14,22
27-mag-10 Gewiss Bosatelli Domenico 24% 47% 120 4,20
16-giu-14 COBRA Automotive Vodafone 100% 97% 145 1,49
1-feb-12 Benetton Group Edizione 25% 70% 211 4,60
14-mag-12 Buongiorno OOCOM O 100% 94% 224 2,00
8-set-10 Fastweb Swisscom 18% 72% 256 18,00
4-mar-14 SAT Corporacion America 7% 11% 17% 22% 36%
27-mag-10 Gewiss Bosatelli Domenico 17% 28% 36% 45% 44%
16-giu-14 COBRA Automotive Vodafone 50% 54% 50% 72% 112%
1-feb-12 Benetton Group Edizione 16% 45% 35% 18% 6%
14-mag-12 Buongiorno OOCOM O 16% 22% 33% 46% 57%
8-set-10 Fastweb Swisscom 35% 43% 44% 34% 18%
M ED IA N A 16% 36% 35% 40% 40%
Premi pagati in Ital ia nel le OPA Volontaria - Prezzi non condizionati
4-mar-14 SAT Corporacion America 73% 35% 102 11,09
27-mag-10 Gewiss Bosatelli Domenico 24% 47% 120 3,28
16-giu-14 COBRA Autorro live Vodafone 100% 97% 145 0 ,99
1-feb-12 Benetton Group Edizione 25% 70% 211 3,28
14-mag-12 Buongiorno DOCOM O 100% 94% 224 1,47
8-set-10 Fastweb Swisscom 18% 72% 256 11,26
4-mar-14 SAT Corporacion America 28% 28% 31% 39% 49%
27-mag-10 Gewiss Bosatelli Domenico 28% 27% 33% 42% 40%
16-giu-14 COBRA Autorro live Vodafone 51% 52% 49% 72% 111%
1-feb-12 Benetton Group Edizione 40% 48% 36% 18% 4%
14-mag-12 Buongiorno DOCOM O 36% 44% 57% 73% 72%
8-set-10 Fastweb Swisscom 60% 60% 50% 32% 15%
M ED IA N A 38% 46% 42% 41% 45%
1 annoA nnuncio Emittente Offerente
C o ntro valo re
1 gio rno 1 mese 3 mesi 6 mesi
A nnuncio Emittente Offerente T argeted Stake A ccettazio ne P rezzo
A nnuncio Emittente Offerente T argeted Stake A ccettazio ne
3 mesi 6 mesi 1 anno
C o ntro valo reP rezzo no n
co ndizio nato
A nnuncio Emittente Offerente 1 gio rno 1 mese
Premiums paid in Italy in the Voluntary Tender Offers – Pre – announcement prices
4 Mar 2014
27 May 2010
16 Jun 2014
1 Feb 2012
14 May 2012
8 Sep 2010
4 Mar 2014
27 May 2010
16 Jun 2014
1 Feb 2012
14 May 2012
8 Sep 2010
Announcement Issuer Offerer
Announcement Issuer Offerer
Acceptance Countervalue Price
1 day 1 month 3 months 6 months 1 year
Announcement Issuer Offerer
Announcement Issuer Offerer 1 day 1 month 3 months 6 months 1 year
Acceptance Countervalue Unconditioned
Price
Premiums paid in Italy in the Voluntary Tender Offers – Unconditioned prices
4 Mar 2014
27 May 2010
16 Jun 2014
1 Feb 2012
14 May 2012
8 Sep 2010
4 Mar 2014
27 May 2010
16 Jun 2014
1 Feb 2012
14 May 2012
8 Sep 2010
Median
Median
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 21
Table 16 - Median premiums in the Voluntary Public Tender Offer s in Italy from 2010 to February 2016
It is possible to determine the premium (discount) offered by the Public Tender Offer, by comparing
the weighted market price with the price of 0.70 provided for in the offer, and to compare this
result with that shown by the Public Tender Offer sample detected.
Table 17 - Calculation of the weighted market prices (PMP) with Public Tender Offer (OPA) premiums pre-announcement prices and unconditioned prices
Based on the findings contained in Table 17, it can be observed that:
1) on the basis of the pre-announcement weighted market price, the premium subsequent to
the IMH Offer is higher than that recorded by the Public Tender Offer sample only in
relation to the last stock market trading day before the announcement of the Offer;
2) on the basis of the unaffected weighted market price, the premium subsequent to the IMH
offer remains below what emerges from the Public Tender Offer sample considered.
From this it can be concluded that the price offered by IMH discounts, on the basis of the PMP pre-
announcement, premiums that are on average lower than the figure recorded for the Public Tender
Offer sample considered.
Premi MEDIANI pagati in Italia OPA Volontaria
1day 1months 3months 6months 1year
Pre-annuncio 16,25% 35,75% 35,25% 39,60% 39,85%
Prezzi non condizionati 38,25% 46,15% 42,05% 40,60% 44,65%
Offerta IMH 0,70
QUANTIFICAZIONI SULLA BASE DI PREZZI PRE-ANNUNCIO
12 mesi 14-mag-15 13-mag-16 0,685 2,19% 39,85% 37,66%
6 mesi 16-nov-15 13-mag-16 0,558 25,55% 39,60% 14,05%
3 mesi 15-feb-16 13-mag-16 0,560 25,08% 35,25% 10,17%
1 mese 14-apr-16 13-mag-16 0,591 18,36% 35,75% 17,39%
1 giorno 13-mag-16 13-mag-16 0,598 17,06% 16,25% -0,81%
QUANTIFICAZIONI SULLA BASE DI PREZZI NON CONDIZIONATI
12 mesi 30-gen-15 29-gen-16 0,874 -19,94% 44,65% 64,59%
6 mesi 30-lug-15 29-gen-16 0,673 4,06% 40,60% 36,54%
3 mesi 30-ott-15 29-gen-16 0,579 20,92% 42,05% 21,13%
1 mese 30-dic-15 29-gen-16 0,593 18,09% 46,15% 28,06%
1 giorno 29-gen-16 29-gen-16 0,562 24,60% 38,25% 13,65%
Scarto premio OPA
IMH su premi storici
Periodo Data da Data a PMPOPA IMH vs
PMPPremio OPA
Scarto premio OPA
IMH su premi storici
Periodo Data da Data a PMPOPA IMH vs
PMPPremio OPA
Median premiums in the Voluntary Public Tender Offers in Italy
Pre-announcement prices
Unconditioned prices
IMH Offer
Quantifications on the basis of pre-announcement prices
Quantifications on the basis of unconditioned prices
Period Date From Date to
Period Date From Date to
14 May 2015
16 Nov 2015
15 Feb 2016
14 Apr 2016
13 May 2016
13 May 2016
13 May 2016
13 May 2016
13 May 2016
13 May 2016
29 Jan 2016
29 Jan 2016
29 Jan 2016
29 Jan 2016
29 Jan 2016
30 Jan 2015
30 Jul 2015
30 Oct 2015
30 Dec 2015
29 Jan 2015
12 months
6 months
3 months
1 month
1 day
12 months
6 months
3 months
1 month
1 day
IMH PTO premium variance
on historic premiums
IMH PTO premium variance
on historic premiums
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 22
Conclusions
The fairness opinion to be expressed in relation to the IMH Offer is based on the determination of
an interval of fundamental values for the RCS security. This interval was obtained by applying the
DCF method to the 2016 - 2018 consolidated Business Plan, presented by the Company on 21
December 2015 and is included between:
min EUR 0.80 – max EUR 1.13
The result that has been achieved on the basis of the DCF method has been corroborated in light of
the checks carried out with the trailing market multiples method, taken on the basis of a sample of
companies comparable to RCS, and with reference to the method of the target prices derived from
the historical series of the values produced in the interval between 14 May 2015 - 13 May 2016.
It follows that the consideration offered under the Public Tender Offer is at discount both on the minimum
value (-12.5%) and on the maximum value (-38.1%) of the interval of values determined by using the DCF
method.
Alternatively, since the Bidder has used the pre-announcement market prices to justify the
consideration of its offer, the weighted market price in the interval from 1 day to 12 months of the
RCS shares were investigated and the premiums (discounts) are measured in relation to the price
offered. These premiums (discounts) were compared with those derived from a sample of voluntary
public tender offers on all shares concluded in the Italian market, involving companies with a
capitalization of less than 500 million euros. This comparison comes from the conditions of the
Offer, which includes the legal or de facto control of the Issuer and, in any case, is intended to
reduce its degree of contestability compared to the current conditions.
By reason of the findings achieved, it can be seen that the implicit premium in the consideration
offered by the Bidder to the pre-announcement weighted market price is on average lower than
that of the sample examined.
Therefore, on the basis of the findings and control checks outlined in the course of the analysis,
verified that the consideration offered for each RCS share by IMH (equal to € 0.70) in the Voluntary
Public Tender Offer authorized by Consob with resolution No. 19627, is lower than the minimum of
the interval of fundamental values determined using the DCF method,
FAIRNESS OPINION – RCS MediaGroup S.p.A.
Prof. Roberto TASCA Page 23
it is concluded that such consideration is to be deemed NOT FAIR for all shareholders of the RCS
MediaGroup S.p.A.
Milan, 16 June 2016
In witness whereof,
Prof. Roberto Tasca
[signature]
___________________