ITV Acquisition of eOne Would Expand Reach for Broadcaster, Analysts Say
"This would fuel ITV's next phase of growth as a content player," writes Jeffries analyst Lisa Hau about the U.K. broadcaster reportedly pursuing the 'Peppa Pig' owner.
Entertainment One may have officially denied it is in takeover talks with Downton Abbey broadcaster ITV, but analysts on Thursday said the Canadian-based studio is a worthwhile acquisition target.
"ITV has the financial capability to do this deal, and acquiring eOne's business would significantly build ITV's content reach," Ian Whittaker, an analyst at Liberum, wrote after media reports pointed to the British broadcaster having approached eOne over a possible sale.
Jeffries analyst Lisa Hau said ITV has been expanding its ITV Studios production arm to offset a reliance on a soft advertising market, which follows the acquisition of The Voice creator Talpa and picking up stakes in production houses in both the U.K. and the U.S.
That would make a possible acquisition of eOne by ITV "strategic and opportunistic," she added. "This would fuel ITV’s next phase of growth as a content player, which is attractively positioned given the anticipated consolidation in the European media space led by distributors and telcos," Hau wrote.
A question mark remains over whether ITV, after possibly acquiring eOne, would still be able as a U.K.-controlled company to tap Canadian tax credits that allow the Toronto-based studio to finance and limit its risk on TV series production. "EOne would have to be Canadian-controlled to continue to obtain the tax credits, so if ITV buys them, that's problematic," David McFadgen, an analyst at Cormark Securities, told The Hollywood Reporter.
Despite that hurdle, market watchers point to an acquisitive ITV being able to structure eOne so that it retains a Canadian boardroom and corporate control, a move often made when indie Canadian distributors are bought up to be de facto controlled by foreign entities.
ITV as a broadcaster also is expected to spin off the Canadian and U.K. Hunger Games distributor's film group. eOne has distribution operations in Canada, the U.K., the U.S., Australia/New Zealand, Spain and Benelux.
Entertainment One's film business is being valued at north of $200 million, given the 2013 valuation when Alliance Films was acquired from affiliates of Goldman Sachs Capital Partners and Investissement Québec for around $228 million. Possible bidders for eOne's movie distribution arm include Elevation Pictures, which has backing from Teddy Schwarzman's Black Bear Pictures and former Alliance Films head Victor Loewy as its chairman, and Media SPAC, which is aligned with former Alliance Atlantis Communications principal Peter Sussman.