In a note titled, “Take advantage of Friday’s share price fall,” London-based Liberum analyst Ian Whittaker reiterated his position today on ITV stock as a “top pick.” Shares in the UK’s leading commercial broadcaster fell sharply as news of the UK’s vote to leave the EU hit in the early morning hours of June 24, and they continued to slide again today. Pre-Brexit, there was speculation that the company could be the subject of a takeover attempt, and those suggestions have reared up again in the wake of the historic vote.
With the British pound falling 10.5% against the U.S. dollar, and combined with the decline in ITV’s share price — to 155.4 pence, down 10.9% at the Monday close following a 20% drop on Friday — “This increases the chances of a bid by one of the major U.S. media companies where there is historical and present interest in the UK market not only from the established media giants but also from new media/tech companies,” said Whittaker’s note.
John Malone’s Liberty Global, which owns 9.9% of ITV, has been floated as a possible buyer, potentially alongside Discovery in which it is also a shareholder. NBCUniversal has also been mentioned by local media.
“The decline in the share price and the fall in sterling also potentially increases the chances of M&A activity,” Whittaker added.
But Claire Enders of Enders’ Analysis suggested that an ITV takeover by anyone in the short-term is “Not at all likely.” She told Deadline, “We are in a political crisis on the edge of a possible recession.”
Another analyst tells Deadline they’re not so sure. “I would expect them to show interest,” this person says. “The recession is not going to wipe that much money off. Liberty already has a strong presence in Europe… For the purposes of getting the best out of ITV Studios,” says the analyst, a buyer could “look to establish a tax center outside the UK,” which would help the free-flow of productions. Having Britain in the EU has been a benefit to global players, providing them access to European markets. Once Brexit is completed, the UK will no longer offer those privileges (unless it buys its way into single market status à la Norway).
When Liberty increased its stake in ITV last July it said it did not intend to take control of the company but reserved the right to look at all options in the future. It had no comment today.
An ITV spokesperson said, “We do not comment on speculation.” Boss Adam Crozier, who has helped turn the company around with a five-year plan that included its own acquisitions frenzy and growth in the advertising, sought to reassure staff on Friday. Broadcast got hold of an email he sent to all 5,500 employees which said ITV’s strategy “remained unchanged.” He allowed there would be a period of “uncertainty,” but wrote, “We will continue to do what we do really well every day — which is to create and broadcast great programmes and sell them around the world.”
ITV’s full-year 2015 results showed double-digit profit growth with production arm ITV Studios passing £1B in revenues for the first time. The international content business was strengthened by ITV’s continuing stream of acquisitions which in 2015 included Talpa Media, Twofour Group and Mammoth Screen. ITV Studios America is now the largest non-scripted producer there, with such indies as Leftfield Entertainment and Gurney Productions.
Liberum today maintained its forecasts for ITV of 3.5% advertising growth for the full year 2016. “However, even if we assume a catastrophic situation, ITV still looks cheap,” Liberum said.