ITV will remain a takeover target and speculation about a sale will drive its share price ahead of any deal for the UK commercial broadcaster, according to analysts.
In the wake of interim results reported this week, investment bank Credit Suisse issued a note on ITV in which it said the broadcaster’s performance was solid, and that it was tracking slightly ahead of expectations, driven by improved audience share.
It added that following the acquisition by Liberty Global of UK pay TV operator BSkyB’s 6.4% stake in ITV, investors will factor in the possibility of a takeover, with a positive effect on ITV’s share price.
Credit Suisse noted Virgin Media’s failed attempt to acquire ITV in 2006. It added: “Ironically it was BSkyB acquiring a blocking stake in ITV that stopped this deal – and now BSkyB has sold its stake back. Besides, it would be odd for Liberty Global to buy a 6.4% stake and do nothing more with it.”
Another investment bank, Berenberg, said ITV’s stock “looks expensive”, and does not expect Liberty to move for control of the broadcaster. “Although ITV is in theory ‘in play’, we do not think Liberty will move on the company, given [the latter]’s relative size and its lack of balance-sheet headroom,” it noted.
Credit Suisse highlighted the “enhanced growth potential” of ITV’s content arm, ITV Studios, as a positive for investors. However, it also said that ITV Studios has registered “weak” performance in the first half of the year with ITV ordering less programming from the division as the football World Cup took precedence.
Over the full year, ITV CEO Adam Crozier (pictured) said ITV Studios will register healthy growth, although it will mostly come from acquisitions. It has been one of the most active M&A players in recent times, buying content companies including Thinkfactory, High Noon and The Garden.
Berenberg said that ITV’s heavy investment in the US gives it higher margin businesses, but also means it could face currency issues. It noted: “ITV Studios looks likely to show very limited organic growth this year, with the uplift coming from acquisitions, in particular Leftfield. [Currency issues] is becoming more of a headwind given the increased exposure of the group to the US dollar.”