Is ITV poised for takeover?

Shares in the British media company ITV rose by around 8% on June 28 as speculators latched on to the possibility that it will be one of the first victims of a takeover approach, as a result of the fall in Sterling and share prices in the light of Britain’s withdrawal from the EU.

Such speculation is hardly new. ITV has been a perennial takeover candidate for some time, but a 30% fall in the share price in the last week in conjunction with the fall in sterling has intensified the perception of value in the share price creating vulnerability. The most frequently named suitors are American, with Liberty Global and NBC Universal particularly mentioned in recent days.

At this price the shares sell on a prospective P/E of around 9.4x, falling to 8.3x in 2017. Ian Whittaker at Liberum is particularly credited for emphasising the value in the shares. Whittaker says that even if UK advertising suffers the magnitude of fall that it suffereed after Lehman’s collapse in 2008, the shares are still on barely 10x 2017 earnings. He goes on to emphasise that the the weakness in the online advertising market in the face of issues surrounding ad blocking and fraud only enhance the competitive position of TV advertising, where ITV holds 45% of the UK market.

None of the alleged suitors have made any comment, and England’s early exit from Euro 2016 is a short term headwind, but there seems ready acceptance of the view that at this price the company offers latent value to a predator.

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