With Liberty Global now busy concluding its huge asset sale of cable TV interests in Germany and Eastern Europe to Vodafone, it’s time to consider what might be next for John Malone’s voracious appetite for potential assets. While still very much a ‘rumour de jour’, it is ITV that – one way or another – might be in Dr Malone’s sights, and for solid reasons.
That’s certainly the view at investment bank Exane/BNPP, where analysts have re-examined Liberty Global’s anticipated ‘war chest’ (assuming the cable asset sale wraps and is approved by both EU and German regulators).
Key to what Malone might do next are the significant tax assets – linked to Virgin Media – that remain in the UK. “Following the sale of assets, Liberty Global becomes a very UK company,” says the bank. “Indeed, we estimate ~56 per cent of gross Operating Cashflow is originating from the UK, approximately a quarter from [Belgium’s] Telenet, 13 per cent from Switzerland and 5/6 per cent from CEE.”
The bank says: “Virgin has significant tax assets in the region and this also a reason why Liberty may also pursue ITV given their cash influx from the German & Eastern European cable sales.”
“While an imminent bid for ITV is not core to our buy thesis,” says the bank. “In the context of ongoing consolidation we view a potential bid as an important support for the share price, and underpinning the attractive risk reward of the ITV investment case. We see a solid strategic rationale for an acquisition by either Liberty or Discovery, with a joint bid (a la All3Media) a credible option – we note John Malone is no stranger to creative acquisition structures.”
“We see the strategic rationale for Discovery as stronger (Synergies with All3media / Eurosport / non-scripted content / Olympics) but post Scripps acquisition, leverage is likely too stretched for an imminent deal. We see the strategic rationale for Discovery as stronger (Synergies with All3media / Eurosport / non-scripted content / Olympics) but post Scripps acquisition, leverage is likely too stretched for an imminent deal,” suggests the bank.
“Given that US/UK Media is presently undergoing a period of rapid consolidation with a variety of high profile deals including AT&T/Time Warner, Disney/Fox, Comcast/Sky, this is something to watch now as content and distribution players seek scale and differentiation. ITV’s corporate history is punctuated with periods of intense speculation over its corporate future (Goldman, PE, Liberty Global etc),” concludes Exane/BNPP.