ITV said to be looking into spinning off production arm

Television company ITV was said to be reviewing its ITV Studio production arm, including whether or not to sell the unit as part of an effort to bolster the broadcaster's share price.

According to the Financial Times, ITV has fielded expressions of interest in ITV Studios after chief executive Carolyn McCall was said to have been weighing options for the group's Studios wing, which has been estimated to potentially be worth more than its parent company's £2.5bn market capitalisation.

While an unnamed ITV insider told the FT that a sale was still unlikely due to longstanding resistance of breaking up the group's integrated broadcaster-producer model, they also noted that the gap in valuations made the option "impossible to ignore".

Potential buyers were said to include private equity groups and other large independent producers - such as Freemantle or FL Entertainment.

AJ Bell's Russ Mould said: "Enormously frustrated with its stock market valuation, ITV appears to be looking for ways to put a spotlight on what it perceives as the company's true worth.

"It may also be in management's minds that thanks to weak sterling and a depressed valuation it is at risk of being bought up wholesale on the cheap. Virgin Media owner Liberty Global has long held a strategic stake in the free-to-air broadcaster so that is a name to watch."

Mould also noted that ITV faces short-term problems associated with its exposure to advertising, which he said was "likely to suffer" in any slowdown, and longer-term concerns over a structural shift away from analogue television.

"The market reaction to its ITVX digital platform plans were pretty savage, with significant concern over the costs involved. The expansion of the production division, which has been underpinned by acquisitions made by ITV itself, is all part of an attempt to make the business less reliant on volatile advertising revenue."

As of 0940 BST, ITV shares were up 6.47% at 65.69p.

Reporting by Iain Gilbert at Sharecast.com