Will ITV Get Bids Following Fox's Sky Play?

Courtesy of Sky

‘We expect the focus to be on other potential [European] media assets that, like Sky, are cheaper in U.S. dollar terms due to the decline of the pound," says one analyst in a report titled "ITV - The Next Bid Target?"

With European pay TV giant Sky, whose stock is listed in London, on Friday disclosing that 21st Century Fox, which already owns a 39 percent stake, was looking at buying full control of it, analysts immediately started discussing the possible fallout for other media and entertainment and companies.

‘We expect the focus to be on other potential [European] media assets that, like Sky, are cheaper in U.S. dollar terms due to the decline of the pound sterling versus the U.S. dollar [since the June Brexit vote] and which have been weak year-to-date,” Liberum Capital analyst Ian Whittaker wrote in a report.

U.K. TV giant ITV, in which John Malone's international cable giant Liberty Global owns a 9.9 percent stake, was repeatedly mentioned as a likely focus for deal speculation. 

"ITV would, in our mind, fit much of the criteria for an acquirer — it has attractive content, a market leading position, is cheap from a valuation perspective … and its largest shareholder Liberty Global has made the U.K. a prime focus for its European cable expansion and may feel the need to respond to the full takeover of Sky by one of its main rivals in the U.K.," Whittaker said in his report, which was titled "ITV – The Next Bid Target?"

He argued that Liberty Global “may be concerned other U.S. media entities will take a renewed interest in ITV,” adding that it “may feel it is better to pre-empt action by another party with a bid of its own.”

The Fox deal could also lead Liberty Global to worry that Sky “will compete more aggressively with [its U.K. cable giant] Virgin Media,” Whittaker added. Plus, “there is an increasing view that the U.K. economy is not being harmed yet by Brexit. In that case, consensus ITV TV advertising forecasts of minus 4 percent for 2017 are probably too pessimistic. Liberty may feel it best to make a full bid before any consensus upgrades come through.”

Peel Hunt analyst Alex DeGroote also said that the Sky deal would “definitely” lead to other deal chatter in the U.K. given its solid performance and management's focus on growing non-advertising revenue streams, including via acquisitions of TV production companies. “We always said this would be the last year of the U.K. broadcast sector,” he told The Hollywood Reporter.

DeGroote suggested that Liberty Global, various U.S. entertainment companies and U.K. telecom giant BT could all take a look at a possible ITV bid.

An ITV representative said: "We do not comment on speculation." Liberty Global also declined to comment.

Liberty Global CEO Mike Fries recently told THR that his team isn't planning to acquire a major content company despite a much-debated recent mega-deal, saying the company's content investments are done market-by-market, case-by-case. "In many ways, the Time Warner-AT&T deal validates our strategy, which is cross-platform, fixed and mobile and smart vertical integration," he said.

ITV CEO Adam Crozier earlier this year said: "I really do not think of us as a takeover target at all. Our business is growing very fast. If anything, we are a consolidator of companies."

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