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ITV Named as Top M&A Target in Europe for Fourth Year in Row

William Canny
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ITV Named as Top M&A Target in Europe for Fourth Year in Row

(Bloomberg) -- The absence of a long-speculated bid for ITV Plc hasn’t deterred merger and acquisition desks from naming the U.K. broadcaster as Europe’s most likely takeover target for a fourth year in a row.

ITV appeared on the M&A watch lists of 6 out of 20 event-driven traders, analysts, brokers and fund managers surveyed by Bloomberg News. That follows a year in which the shares hit a multi-year low, before rallying to post a first annual gain in four.

The continued presence of John Malone’s Liberty Global Inc. as the company’s second-largest shareholder has kept takeover hopes alive, while increased clarity on Brexit after the outcome of Britain’s general election also provided a boost for the shares. At the same time, the battle for content that will win eyeballs has been heating up. ITV launched U.K. streaming service BritBox with the British Broadcasting Corp. last year in a bid to compete with the likes of Netflix Inc. and Amazon.com Inc. Walt Disney Co.’s new streaming service, Disney+, is also reported to be launching in the U.K. this March.

Despite the recent rally, ITV’s shares have been in the doldrums since 2016, with advertising sales under pressure from Brexit uncertainty as well as an industry shift in spending to digital companies such as Facebook Inc. and Alphabet Inc.’s Google. Chief Executive Officer Carolyn McCall, who has led the company since January 2018, has sought to cut costs while launching BritBox to reduce reliance on ad sales. Analysts have criticized the platform as being “too little, too late” in the streaming wars.

Recent acquisitions of Sky Ltd. and Entertainment One Ltd. by U.S. companies have also stoked speculation that ITV could be a target for an overseas firm, while back in 2017 a press report mentioned U.S. tech giants such as Netflix, Amazon and Apple Inc. as potential suitors. Among upcoming catalysts, investors will be watching ITV’s full-year results due at the beginning of March.

Luxury brand Moncler Spa and Dutch molecular-testing firm Qiagen NV also featured highly on trader watch lists. The former’s shares surged to a record last month on reports that rival Kering SA could be interested in a potential deal for the Italian ski-wear maker. Qiagen said in December it intended to pursue a stand-alone strategy, a month after announcing it received several indications of interest.

According to Louis Capital’s Ben Kelly, the pace of consolidation in Europe is likely to gain momentum this year. Companies aren’t expected to worry about leveraging up their balance sheets for M&A given the low interest-rate environment, while private equity still has a lot of money to put to work and activists are more present than before, he said.

“Increased political certainty in the U.K. and Europe and continued share-price strength could see companies looking to use their own paper to do deals, and bolstering that with cash where necessary,” Kelly said.

Despite last year’s geopolitical tensions, almost $3 trillion of global mergers and acquisitions were done in 2019, a 1.5% dip from 2018 but still the fifth-best year ever. Goldman Sachs remained the top-ranked deal-maker in 2019, advising on 281 transactions worth $1 trillion, according to data compiled by Bloomberg.

Survey participants named 75 companies as potential targets, including: Asos Plc and Smith & Nephew Plc in the U.K., Accor SA and Aeroports de Paris in France, and Norwegian Finans Holding ASA in Norway.

Several stocks included in last year’s predictions have since either been acquired or held merger talks. These include: Osram Licht AG, Scout24 AG, Inmarsat Plc, Entertainment One Ltd., Deutsche Bank AG and Commerzbank AG.

Click here for the complete survey results.

(Adds detail on share price performance, additional context on ITV.)

--With assistance from Kit Rees.

To contact the reporter on this story: William Canny in Amsterdam at wcanny3@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Paul Jarvis, Beth Mellor

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