ITV shares rise on renewed Liberty Global bid speculation
- Liberty said to be "forming alliances" with ITV shareholders
- US group already owns a 6.4% stake
- Substantial premium needed, says analyst
Shares in ITV were rising strongly on Monday on renewed speculation that Liberty Global could be preparing to launch a full-scale bid for the UK broadcaster.
According to The Telegraph over the weekend, Liberty, which already owns a 6.4% stake in ITV through its investment in July, is "forming alliances" with the latter's major institutional shareholders, such as Fidelity and Blackrock.
ITV's stock was up 3% at 217.5p by 13:32, giving the company a market capitalisation of nearly £8.8bn.
Run by media tycoon John Malone, Liberty, which paid £481m to BSkyB for its holding in ITV, is thought to be looking to build its exposure to the pay-TV in Europe.
However, at the time of the July investment it was forced to deny its intention to make an offer for the whole of ITV under UK Takeover Panel rules.
Analysts speculate on price
Analysts at Peel Hunt, who reiterated a 'buy' rating on ITV on Monday, said: "The sense is that Liberty Global is not sitting idly on its near-6% equity stake in ITV. Over time, Liberty has been very acquisitive in the cable/broadcast space; hence, this is no surprise to us."
Peel Hunt said that the stock's current valuation - trading at 15 times estimated earnings - is "very undemanding". They pointed out that the recent, albeit unsuccessful, attempted takeover offer of Time Warner by 21st Century Fox was struck at an implied exit multiple of 22 times earnings.
The Telegraph's article cited sources as saying that Liberty is canvassing support for a potential bid "at a price that would not put too large a premium on ITV shares".
However, analyst Garry White from Charles Stanley said that Malone would have to "dig deep" and pay a substantial premium for the UK group to agree a deal.
White explained that Liberty is already highly leveraged with debt in excess of $41bn so any potential deal would likely to be in shares. As such, a share deal would be less attractive than cash to ITV shareholders.
BC