The Next Big Thing

While market watchers are looking for signs that Italian broadband entrepreneur Silvio Scaglia and HMV are about to battle for Mama Group, the UK’s leading independent music business has just announced profits are 10 times up on last year.

For the 12 months ending July 31, profit before interest and tax was £6.03 million ($9.8 million) compared with £600,000 ($974,000) last year.

“Strategically, our combination of strong live venues married to both a growing artist management roster and significant positions in ticketing, sponsorship and digital environment is, we believe, the model for the industry of the future,” co-chief execs Adam Driscoll and Dean James said in a statement, possibly to underline their contention that Scaglia’s bids for control have undervalued the business.

Scaglia, working through his investment vehicle SMS Finance, has accumulated a near 30 percent stake in Mama since the beginning of the year.

The former chief exec and major shareholder of Italian broadband operator Fastweb has made two bids for the rest of the company since the beginning of the month.

He offered 3.7 pence per share Dec. 9, which was quickly knocked back, followed by an offer of 4.5 pence per share Dec. 11.
The second offer was also rejected, as music and games retailer HMV, which paid Mama £18.2 million to take a 50 percent stake in the 11 Mean Fiddler Group venues in January, appeared to be trying to block Scaglia by buying Mama stock. It now has nearly 10 percent of the company.

Mama clearly considers Scaglia to be a hostile bidder, but it’s not so easy to gauge the nature of the relationship with Mama – or even HMV’s intentions.

The two announced a new joint venture Dec. 16, an annual showcase festival called Next Big Thing. It will run Feb. 5-14 in three Mama-HMV London venues – The Borderline, Heaven and the Relentless Garage.

It may be that Driscoll and the Mama board, in understandably bullish mood on the back of the yearly results, may prefer the company carries on as it is.

HMV may feel it will perform better if the top players continue to have the incentive of owning part of it.