ITV takeover rumours may be premature - bankers
Speculation ITV [LON:ITV] could be acquired by contract-TV providers could take several years to prove true, sector bankers and a source following the situation said.
ITV is seen as open to a sale, the source, a banker and a sector consultant said. ITV has spoken to US networks, such as Discovery [NASDAQ:DISCA], Viacom [NASDAQ:VIAB], NBC Universal about a sale, the banker said. ITV does not comment on speculation, a spokesperson said.
ITV is reaching the limits of its growth in TV production, the consultant and banker said. The acquisition of E.One [LON:ETO] would have helped. ITV withdrew an offer to acquire the production company last year.
But, rumours the UK broadcaster could be acquired by Amazon [NASDAQ:AMZN], Netflix [NASDAQ:NFLX] or Apple [NASDAQ:AAPL] do not make much sense, bankers said. There is a lack of strategic rationale in combining pay-TV and free-to-air channels, they said.
The growing importance of bringing content "in-house" may create an environment for such mergers and acquisitions to take place, but this is not expected in Europe for a few years, the bankers said. ITV’s content undoubtedly makes it an eventual target, but nothing is expected in the short term, the source agreed.
ITV’s content production arm is smaller than its channel platform, a second banker said. Netflix, Amazon and Apple are more interested in content than the platform, the bankers pointed out.
The rumoured bidders could just decide to invest more in their own content production and not expose themselves to the TV ad market, bankers said.
The economic uncertainty Brexit created is expected to result in a drop in TV ad revenues, an analyst said. Bidders would likely want to see the market stabilise before buying ITV, he added.
Liberty Global [NASDAQ:LBTYA], which owns just under 10% of ITV, could be waiting for the right environment – and for it to become financially viable – to acquire the company, bankers said. Equally it may only make a decision on its commitment to ITV if and when a bid is made by a third party, they said.
Liberty faces similar issues to the other pay-TV providers in that it would prefer to acquire contract-bound customers rather than a free-to-air audience, the bankers said. However, Liberty could grow its pay TV audience by advertising its content on ITV, the source said.
Liberty could also get efficiency savings by combining its UK asset Virgin Media with ITV, the first banker said.
Liberty’s investment in ITV has been seen as a blocking stake almost as much as a strategic one, the bankers said.
Companies who were once thought likely alternative bidders for ITV are currently out of the running, the bankers said. BT Group [LON:BT.A] suffered a huge share price drop last week when the extent of accounting troubles in Italy came to light, while Sky [LON:SKY] is pre-occupied with its sale to 21st Century Fox [NASDAQ:FOX], the bankers noted.
Once BT recovers it would be a contender again, and could do the deal using shares or by using the equity market, the bankers said.
