ITV Becomes "Truly Global Force in Content" With Talpa Deal, Analyst Says

The U.K. TV giant's stock remains Ian Whittaker's top sector pick as he argues the acquisition will be "positive for several reasons."

U.K. TV giant ITV's deal to acquire The Voice producer Talpa Media for up to $1.17 billion is "positive for several reasons," Liberum Capital analyst Ian Whittaker said in a report.

First, "it makes ITV into a truly global force in content," he wrote. "This is positive strategically, but arguably should drive a re-rating" of the stock price. Second, "the financials for Talpa are probably better than the market" expected, Whittaker said.

Importantly, Talpa founder John de Mol "is locked in for eight years, while other key members are locked in for less but still substantial periods," said the analyst. "This should create stability and reduce fears that senior management could walk away."

Whittaker also highlighted the deal's mid-single digit percentage earnings benefits and said that "ITV has now demonstrated it can both make major acquisitions and return a significant chunk of cash to shareholders at the same time."

The deal weights ITV "more towards being a content business," Whittaker concluded. "While they may not switch The Voice to ITV in the U.K. (it sits with the BBC), there are plenty of other things they feel they can do. But, on a ratings perspective, ITV's rating should benefit from the increased perception that it is a truly global content business."

All this led him to reiterate his "buy" rating on the stock. ITV also remains his top sector stock pick.

Email: Georg.Szalai@THR.com
Twitter: @georgszalai

 

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