FAIRNESS OPINION – RCS MediaGroup · FAIRNESS OPINION – RCS MediaGroup S.p ... directed at children with the Sfera Group as well as ... Termsheet containing the “Amendments

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



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 &



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.



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



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



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.



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.



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.



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.



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.



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



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


EBITDA ante non recurring cost

-150

-100

-50

0

50


Risultato netto

0

200

400

600


POSIZIONE FINANZIARIA NETTA




EBITDA before non recurring cost

Net Profit

Net financial position



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



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



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



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



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



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



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



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


Acceptance Countervalue Price

1 day 1 month 3 months 6 months 1 year


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



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



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,



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]

___________________

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