Kasper Taczek PPF in conversation with the German Association for the Protection of Investors (Schutzgemeinschaft der Kapitalanleger e.V.)

Paul Petzelberger (Member of the Board, Schutzgemeinschaft der Kapitalanleger e.V.)

Mr. Taczek, thank you very much for joining us today on the YouTube channel of SdK, the Schutzgemeinschaft der Kapitalanleger (Association for the Protection of Investors). We really appreciate the opportunity to conduct this interview with you.

Kasper Taczek (Investment Director, PPF Group)

Thank you very much for the invitation. I am very pleased to be here.

Paul Petzelberger:

We want to talk about ProSiebenSat.1, of course. That's what today is all about, especially the takeover bids and the overall situation at ProSiebenSat.1.

But we also want to take this great opportunity to get to know PPF better. You are Investment Director at PPF, the second-largest shareholder in ProSiebenSat.1. You currently hold a 15 percent stake. It has to be said that German investors, myself included, had never heard of PPF before this situation arose. I only became aware of PPF for the first time in the context of ProSiebenSat.1. So let me start with the question: Who is PPF? Who is behind this name, behind this group?

Kasper Taczek:

PPF is a family-owned company. It is wholly owned by the Kellner family. We are a diversified, international industrial holding with four main investment pillars.

Firstly, media. In Central Europe, we own a company called CME, which operates in six countries, has 46 television stations, and reaches approximately 49 million people. We also have stakes in ProSieben and Viaplay in Scandinavia. Media is therefore one of our core investment pillars.

The second is telecommunications: we own O2 in the Czech Republic and other companies in Slovakia, Serbia, Bulgaria, and Hungary. These are genuine telecommunications companies—a key area of investment for us.

Thirdly, we are active in the financial and banking sector. We own two banks in the Czech Republic and hold further interests in the banking sector. These are our three main pillars. We also invest in the logistics sector, for example in the company InPost, which is listed in Amsterdam and focuses on Poland, but also operates in other Western European countries. We are also active in the real estate sector.

It is also important to emphasize that we are neither a private equity fund nor a family office, but rather an industrial investor that invests for the long term, without a fixed investment horizon, and holds companies for the long haul instead of quickly exiting. We are based in Prague, not far from Munich, and the company has been around for quite some time.

Our investment focus is increasingly shifting toward Western Europe. That is probably one reason why we have been less well known in Germany to date. But I am working to change that and create more transparency about us.

Paul Petzelberger:

You were also at the ProSiebenSat.1 Annual General Meeting and spoke there. And you're right: Prague and Munich aren't far apart. In summary: PPF is a large, family-owned industrial holding company. It currently holds a minority stake in ProSiebenSat.1. Is that typical for PPF, or do you generally seek majority stakes?

Kasper Taczek:

We are fundamentally an active investor. We like to have a say and support companies on their journey, which traditionally means that we often hold majority stakes.

But it must also be said that in listed companies, even with a minority stake, you still have influence, depending on the size of your stake. For example, we are a minority shareholder in InPost, but a relatively large one. The same applies to Viaplay in Scandinavia and ProSiebenSat.1.

As long as we feel we can have a say and exert influence and contribute our expertise, a majority stake is not absolutely necessary. You're right: traditionally, we often had majority stakes, but that has changed in recent years, especially in listed companies, where it is not necessary.

Paul Petzelberger:

ProSiebenSat.1 is listed on the stock exchange, which means that your main approach is to make your voice heard through the supervisory board without necessarily sending your own employees or intervening directly in operations?

Kasper Taczek:

Exactly. At ProSieben in particular, the Supervisory Board is the body through which we contribute our wishes and expertise. It then discusses the relevant issues and passes them on to management if necessary. We have no need to send our own employees or become involved in operations. That's not how we operate.

Paul Petzelberger:

Let's talk specifically about ProSiebenSat.1. It's a super exciting industry that has been undergoing a massive transformation and disruption process for over a decade. Linear television is clearly losing importance. Starting in 2020, with the coronavirus crisis, the digital transformation accelerated once again.

In general, how do you view ProSiebenSat.1 from PPF's perspective? What does this group mean to you? Where do you see its strengths and weaknesses?

Kasper Taczek:

We fundamentally believe in ProSieben's potential, otherwise we would not have made our initial investment there and would not be prepared to invest up to an additional €300 million in the company with our offer. We firmly believe in Germany as a business location.

The DACH region is a very important region for us overall, and one in which we would like to play an active role. ProSieben is a company steeped in tradition with high visibility in Germany. This is an opportunity for us. On the one hand, because we have a lot of experience in this sector, and on the other hand, because we want to get involved in this region.

The transformation we have undergone at CME, a company that faced the same challenges as ProSieben, shows us that change is possible.

The decline in linear television was offset at CME by digital platforms. Investments in local, proprietary content increased the company's appeal. We believe that we can now contribute this experience and expertise to ProSieben. We see great potential.

That is why we have identified ProSieben as a company in which we would like to invest. We want to contribute our insights and experience from neighboring countries to help overcome the current challenges. We believe that management is fundamentally pursuing the right strategy and communicating it well. Ultimately, however, it comes down to implementation, and that is precisely where the Supervisory Board can help with the appropriate support.

We believe that with a slightly larger stake, we can give the management more support. That is why we have decided on this strategy. We are convinced that we can support ProSieben on this path. Precisely because we have experienced this transformation process ourselves and implemented it successfully. CME is now a very professional and profitable company.

Paul Petzelberger:

The situation at ProSiebenSat.1 is particularly complex. There is a high level of financial debt resulting from a previous change in strategy. A few years ago, ProSiebenSat.1's strategy was to act as an investment holding company, i.e., to hold stakes in start-ups with which synergies could be created through advertising time. On the one hand, this would generate additional advertising time and, on the other hand, the start-ups would grow through the advertising.

Although there has since been a strategic realignment, most of the investments remain, as does the high level of debt.

From PPF's perspective, what are the most important milestones in the restructuring process in this situation? Where do you see key steps that ProSiebenSat.1 must take in the next one to two years in order to make progress with the transformation?

Kasper Taczek:

Firstly, the path taken is the right one: focusing on the core business and monetizing investments that are not directly related to it.

However, we have a different approach here than, for example, another ProSieben shareholder.

We believe that these investments should be sold, but not at any price. Fair valuations and a reasonable timing are needed. There is currently no such pressure to act that these companies need to be sold hastily or even squandered.

Of course, they should be put in a position where a reasonable sale is possible in order to reduce debt with the proceeds. At the same time, this will enable management to focus more strongly on the core business.

This means more management capacity and board attention for the entertainment business. In particular, for the digital platform Joyn. The goal is to bring it to a level that can offset the declining figures in linear TV.

Investments in the platform itself and in local content are important here. Our experience shows that local content in particular is the key to differentiating ourselves from large international platforms. Although these also invest in local content from time to time, we believe that a German company knows best what local target groups want to see. With the right infrastructure, this content can then be successfully brought to viewers.

In our view, the combination of investments in the platform, in local content, and well-thought-out monetization of non-core holdings are three key levers for positioning ProSiebenSat.1 for long-term success.

Paul Petzelberger:

The big thing we have in common with MFE, the largest shareholder, is, as you just emphasized: a focus on the core business, on the media business, the spin-off and sale of non-core holdings, and debt reduction.

But there is also a clear difference of opinion regarding the future direction of ProSiebenSat.1. I quote from your press release:

"PPF remains convinced that its strategy for ProSiebenSat.1 as an independent company is superior to MFE's vision of a pan-European broadcasting group."

"Pan-European broadcasting group" is MFE's approach. Why are you fundamentally critical of this approach?

Kasper Taczek:

Firstly, I find the term "pan-European" somewhat vague. What exactly does it mean? As I said at the beginning, we already operate in six neighboring countries with CME.

We operate 46 television stations in six European countries. I have looked into the matter in greater depth and also spoken to our management. There is only one contract that spans two countries, and that is in purchasing.

This means that we simply do not see any major synergies between the countries. Each country has its own specific characteristics and each population has its own preferences. The only two areas where we might see synergies in the very long term are:

Firstly, if you invest in a platform, it may be possible to roll it out across several countries.

Secondly, a company that is active in several markets may find it easier to attract international management or top talent.

But beyond these two points, we don't see any real advantage in a cross-border media alliance. That's why we're fundamentally critical of the concept.

When I look at MFE's presentations describing synergies, we find them too vague and not specific enough. I have studied the issue very closely, but we simply do not see these synergies.

That is why we are not in favor of this pan-European concept.

Paul Petzelberger:

So you are not opposed to a European vision per se, since you are implementing it yourself in a certain way with ProSiebenSat.1. What you are critical of, however, is MFE's integration concept, in which you do not see the synergies being sufficiently defined or specified.

Kasper Taczek:

Yes, exactly. Overall, we don't see the potential for synergies. And in the case of MFE in particular, the presentation is very vague. Looking at their offering, it's not clear how they intend to leverage synergies. To do so, they would need complete control over the company, for example through a control agreement or a squeeze-out. However, they have not commented on this.

ProSieben's management has also commented on this point in its reasoned statement. There, too, there is only speculation about what would be necessary to realize synergies. From an industrial perspective, we cannot make much sense of this concept. With regard to the MFE offer in particular, I find it difficult to understand how they intend to leverage real synergies without control.

That is why we say: Shareholders should take a close look at this, because even for us as professional investors, it is difficult to understand.

Paul Petzelberger:

It is a very complex situation. I think we can now talk specifically about the current takeover offers. You are being very clear and transparent: you are offering 7 euros in cash, a quick settlement, and a very clear offer. And at this point, I would also like to commend you: you have already caused the share price to rise significantly. MFE has increased its offer. These are fundamentally positive developments compared to the previous situation, in which MFE attempted to exceed 30 percent and collect shares with an absolute minimum price. How do you assess the current situation? I assume you are currently in talks with many investors.

MFE's offer is very complex: it consists only partly of a cash consideration, with a significant portion made up of shares, which is likely to be off-putting not only for private investors but also for institutional investors, or may not even be possible from a regulatory perspective.

Nevertheless, based on your discussions with investors, do you expect a significant acceptance rate for your offer, even though the price difference compared to the more complex MFE offer is significant?

Kasper Taczek:

It is of course very difficult for me to predict how investors will ultimately decide. But it is a significant decision that shareholders now have to make. They should take the time to compare both offers carefully. As you have indicated, the offers differ greatly.

Our offer is a partial offer with which we aim to acquire 29.99 percent. We are offering a full cash consideration, which should be particularly attractive to shareholders who want to exit in the short term. All regulatory requirements have already been met, so the money can be paid out at the end of August.

Even for shareholders who believe in our commitment and want to support us, it would make sense to tender at least part of their shares, for example half. They can keep the rest in order to continue participating in the transformation we want to support.

Ideally, to put it simply, all non-MFE and non-PPF shareholders would have to tender around 25 percent of their shares so that we can obtain the necessary additional 15 to 16 percent to reach 29.99 percent. Of course, we do not live in an ideal world, and everyone must decide for themselves.

Our offer is limited in terms of the number of shares, whereas the MFE offer is aimed at gaining control. Their cash component is significantly lower than ours, and they are offering MFE shares that have traditionally been very illiquid and are currently already under pressure.

It cannot be ruled out that these shares will come under even greater pressure after the offer period expires and that a sale will then be significantly more difficult for investors and possibly at a lower price.

It is therefore difficult for me to say how many shareholders will accept our offer. Our advice is to look at the offers carefully and make an informed decision. We have now reached a point where shareholders must make an active decision. Doing nothing is not an option. The offers and the strategies behind them differ significantly. Pan-European versus the independent digital company ProSiebenSat.1.

We believe our strategy is more effective and attractive. Ultimately, however, the decision lies with the shareholders. We have no influence over that. From my past as a banker, however, I know that in public offers, patience is required; you really have to wait until the very last moment to see how the shareholders have decided.

Shareholders should therefore carefully consider which offer is more appealing to them and how attractive MFE's offer really is.

Paul Petzelberger:

If I may summarize your view, you would urge shareholders to carefully consider the differences between the takeover offers. With MFE, the key question is: Do I want to hold MFE shares at all? Do I want to exchange? Am I satisfied with a low cash component?

At the same time, it's also about the future of ProSiebenSat.1 and about control.

It's about the strategic direction and whether the company can continue to operate independently.

They are also pursuing the goal of forming a counterweight to MFE via the supervisory board and giving management the necessary leeway for independent further development.

Kasper Taczek:

That's right. We have been very transparent from the outset: in what we want to achieve, what we offer, and what we stand for. We have not changed that to this day.

Our goal is to act in the interests of all shareholders. You mentioned at the beginning that MFE's improved offer was certainly also a reaction to our commitment. This shows that we are working in the right direction to protect the interests of all shareholders.

Of course, our strategic approaches differ from those of MFE. We are not seeking control. We are convinced that we can also play an effective role with 29.99 percent.

And I think it is important to emphasize once again that our commitment has already led to a significantly better offer. This should not be underestimated. MFE's initial offer did not reflect the true value of ProSiebenSat.1 in any way – it was completely inadequate.

Paul Petzelberger:

As SdK, we can only agree with that. We were very critical of MFE's original offer; there was a legitimate concern that MFE would further expand its control without paying shareholders a fair price. That is why the current situation, with a significantly higher share price and the commitment you are seeking, represents significant progress.

If I may ask a somewhat pointed question, even if it is hypothetical: Assuming that very few shares were tendered at the end of the offer period, while MFE was able to substantially increase its control.

Would that fundamentally call into question your commitment to ProSiebenSat.1? Or would you say: Even with 15 or 16 percent, we will remain invested in the long term and continue to support the management's strategy?

Kasper Taczek:

I understand your question. It is very difficult to answer that now. At the moment, we are fully focused on our offer. We must be patient and wait to see how the shareholders decide.

Once we have clarity on the shareholders' decision, we can talk about the next steps. But at this point, it is simply too early to speculate. We stand by our offer; everything else will become clear afterwards.

Paul Petzelberger:

A very exciting situation. Personally, I could actually imagine that you will receive a significant number of tenders, while MFE's offer is likely to be off-putting due to its complexity, especially for institutional investors. Of course, I could be wrong, but I think many investors have difficulties with this share option or are not in a position to accept it at all due to regulatory requirements. But you are absolutely right: we have to wait and see.

Finally, let's return to the operational side and back to Joyn.
Joyn is at the heart of ProSiebenSat.1's strategy. I asked a few critical questions at the Annual Shareholders' Meeting: How do you intend to compete in the long term against major streaming players such as Netflix, Amazon Prime, and Disney?

What is your view of Joyn? Can ProSiebenSat.1 develop the platform on its own, or do you expect that capital increases may be necessary in the coming years? How do you assess Joyn's competitiveness in the medium and long term?

Kasper Taczek:

Of course, I can't reveal all the details of how we would implement this exactly. But I agree with you: Joyn is the centerpiece.

On the one hand, we need to invest in the platform itself and, on the other hand, as already mentioned, in local content. That's what viewers really value: good, local content. Everything depends on good content. We have also seen this in our markets.

And we expect a company like ProSiebenSat.1 to select very carefully which local content is relevant for its audience and then invest in it in a targeted manner. It should not try to compete with the big global players with international content.

In addition, investment must be made in the platform itself, in user-friendliness, features, and technological development. I think you can go a long way with just these two areas of focus. There is still a lot to do here, and we would be very happy to contribute our experience and concrete data points from other markets.

We are convinced that by focusing on these two aspects, content and platform, we will remain competitive in the long term. We see this clearly in our markets:

Our Voyo platform, now called Oneplay, is about two to three times larger than Netflix in the Czech Republic, for example.

This shows that we are significantly stronger there than international providers. And I believe that this is not only due to the quality of the platform, but above all to the quality of the local content. This is precisely the path we want to support at ProSiebenSat.1. Because this is the only way to offset and reverse the decline in linear TV.

Paul Petzelberger:

I think this is also an important point for all shareholders who have decided against the MFE offer and want to continue on the path with ProSiebenSat.1. It is good to hear that PPF is not just interested in restructuring. Restructuring is undoubtedly important to clear the way, but if I understand you correctly, you want to accompany the company in the long term and, in particular, actively follow and support the development of Joyn.

Kasper Taczek:

Exactly. That's why we don't talk about "restructuring" internally, but deliberately use the term "transformation." I know that may sound like splitting hairs, but for us it's an important distinction.

Paul Petzelberger:

That sums it up nicely: great opportunities, but also risks, for example due to the high level of debt. There are important steps that need to be taken. But you're right: the opportunities are real. And Joyn plays a central role in this.

Kasper Taczek:

And because we typically have a long-term investment horizon, we also have the necessary staying power. Of course, shareholders must also decide for themselves how long their investment horizon is and how much risk they are willing to take.

But regardless of that, if you want us to be in a position to really get involved, then you have to offer us at least a significant portion of your shares. Otherwise, we won't have that opportunity.

Paul Petzelberger:

I believe we have addressed many key issues. It is very important to me, and also to Mr. Taczek, to emphasize once again that this is not, of course, investment advice or a recommendation. Our members and viewers on YouTube know this, but it is important to include it for the sake of completeness. We have presented our point of view, as well as the views of Mr. Taczek and PPF. No one knows what the shareholders will ultimately decide. This conversation is intended to be an additional source of information, among many others, that can help you form an informed opinion.