Mama Says No

British live music and management company Mama Group has knocked back a shareholder’s unsolicited bid valuing the company at £30 million.

International investment firm SMS Finance, acting on behalf of a Italian broadband entrepreneur Silvio Scaglia, who already holds a 30 percent stake of Mama, offered 3.7 pence per share.

That’s 15 percent below Mama’s Dec. 4 closing price of 4.375 pence and the London-based entertainment group turned it down.
The board released a statement describing the bid as “highly opportunistic” and that it “significantly undervalues” the company. It recommended that shareholders reject the bid.

It seems likely that Scaglia, former chief executive and major shareholder of Fastweb, the Italian broadband operator, will continue to stalk the company.

His stake in Mama has gone from nothing to about one-third of the company in the space of a year. SMS described the bid for full control was “a compelling opportunity” for Mama shareholders to realise value for their shares in cash at a time of continuing economic uncertainty, market volatility and low market liquidity for Mama shares.

It said it would have kept the existing management and employees but use its finances to build on this base.

Scaglia is believed to be the mystery investor who benefited when a finance house wanting to close its position with Mama dumped more than 30 million shares on the market Nov. 17, pushing the price down in the process.

They were snapped up at 3.7 pence a share and the price bounced back to 4.5 pence within a day.

SMS Finance bought a 26.3 percent stake in Mama from Pacific Capital, one of its subsidiaries, at the beginning of the year. Reuters and The Times reported that Scaglia upped that stake to 30 percent about a month ago.

Mama has made major acquisitions including buying some former Mean Fiddler Group venues from Live Nation-Gaiety Investments and then letting music retailer HMV take a 50 percent share in them for £18.245 million ($30 million).

Despite a 173 percent increase in revenues from £12.24 million to £44.51 million, year-on year net income has fallen from a gain of £531,000 to a loss of £1.27 million.

In 2008 Mama had negative cash flow and 2007 was the only one of the last five years the group showed a profit. It may have described the bid as “highly opportunistic” because SMS is obviously aware Mama has borrowed £2.5 million from Pacific Capital, which it must repay by the end of the month.

Mama co-chief exec Adam Driscoll says he’s confident the next end of year balance sheet will be more positive. The company has record label interests, a portfolio of about a dozen UK venues and a management company that reps Kaiser Chiefs and Franz Ferdinand.