ITV surges as suitors said to be circling again

Shares in ITV surged on Monday following a report over the weekend that potential suitors have begun circling the broadcaster again after a prolonged period of share price weakness and renewed questions about its long-term strategic destiny.

According to Sky News, a number of possible bidders for parts or all of the company, whose biggest shows include Love Island, have in recent weeks held early-stage discussions about teaming up to pursue a potential transaction.

TV industry sources told Sky that CVC Capital Partners and a major European broadcaster - thought to be France's Groupe TF1 - were among those which had been starting to study the merits of a potential offer.

The sources also said that RedBird Capital-owned All3Media and Mediawan, which is backed by the private equity giant KKR, were on the list of potential suitors for the ITV Studios production arm.

One cautioned that none of the work on potential bids was at a sufficiently advanced stage to require disclosure under the UK's stock market disclosure rules, and suggested that ITV's board, which is chaired by Andrew Cosslett, had not received any recent unsolicited approaches.

That meant that the prospects of any formal approach materialising was highly uncertain.

The person added, however, that Dame Carolyn McCall, ITV's long-serving chief executive, had been discussing with the company's financial advisers the merits of a demerger or other form of separation of its two main business units.

Its main banking advisers are Goldman Sachs, Morgan Stanley and Robey Warshaw.

Sky said bankers and analysts believe that ITV Studios, which made Disney+'s hit show, Rivals, would be worth more than the entire company's market capitalisation in a break-up of ITV.

People close to the situation told Sky that under one possible plan being studied, CVC could be interested in acquiring ITV Studios, with a European broadcast partner taking over its broadcasting arm, including the ITVX streaming platform.

"At the right price, it would make sense if CVC wanted the undervalued production business, with TF1 wanting an English language streaming service in ITVX, along with the cashflows of the declining channels," one broadcasting industry veteran told Sky over the weekend.

"They would only get the assets, though, in a deal worth double the current share price."

At 1220 GMT, the shares were up 10% at 72.03p.

Russ Mould, investment director at AJ Bell, said: "A depressed valuation and relative weakness in sterling are the context for reports of bid interest in ITV - with the possibility of yet another domino falling in a UK market which has seen plenty of M&A in 2024.

"ITV has faced a difficult transition away from its reliance on linear TV advertising and its push into areas like streaming and TV production haven’t done enough, rightly or wrongly, to impress the market.

"Several names from private equity and within the industry have been suggested as potential suitors – although nothing has emerged yet which has reached the threshold required for ITV to make any disclosures. Whether ITV’s public service broadcasting remit might be an obstacle to any deal remains to be seen.

"There is further speculation that ITV might look to demerge the business on the basis that the individual parts might attract a better valuations as standalone entities - particularly its ITV Studios production arm.

"The latter has endured a lingering effect from the Hollywood writers’ strike last year, which pushed back many productions, and the more disciplined spending approach of the big global streaming giants. However, it has also enjoyed some notable successes this year including Rivals on Disney+ and Mr Bates vs The Post Office.

"ITV has made progress with ITVX - which received a mixed reception at launch but has built a sizeable audience and meaningful digital advertising revenue in the interim."